Making honest brokers out of them all


For any market to be dynamic and healthy, the regulation of the intermediary is essential.

It is the intermediary that on the one hand inspires confidence, and on the other instils doubt and reservation in the mind of the investor, if the code of conduct is not properly regulated.

While there is always a role to be played for self regulation of any industry, the regulatory architecture is of paramount importance in determining the rate of sustainable growth of the sector.

Real estate agents in Dubai are regulated by bylaw No 85 of 2006 regulating the Real Estate Brokers Register in the Emirate of Dubai (the “Real Estate Agent Law”). This framework spells out the duties of the intermediary in an all encompassing framework from rentals to sales to mortgages. In a series of subsequent amendments, it further spells out what is permitted in terms of marketing (for instance, brokers are not permitted to market overseas properties except under a strict framework).

Critical to the law is the spirit that is highlighted. Under Article 21 of the Real Estate Agent Law it states: “A real estate broker will be deemed the trustee of any amounts, securities, bonds or any other items delivered to him by any of the parties for safekeeping or for delivery to the other party. The broker must deliver such items as agreed and will be bound by the relevant trusteeship rules.”

Specifically, it clarifies the role of the broker as of a trustee not only in terms of financial amounts that may be kept in custody with the said party (security deposits in the case of rental contracts), but also in terms of any information that may be in possession of the intermediary that may be considered material for either the buyer and/or the seller.

Dubai Courts have had to face many instances where the role of the broker has been called into question and have declared the broker liable even where the intermediary has not passed along the information deemed material to either or both parties.

This framework, along with the rulings, provides ample comfort to the investor in terms of the rights and obligations that the intermediary is obliged to fulfil in every transaction. From a practical perspective, it is clear that even for routine transactions such as the collection of security deposit for an Ejari contract, the broker is obliged to merely act as a trustee of the amount and is compelled to either hand over the monies to the landlord at the initiation of the contract and return them at its conclusion.

There have been instances (some of them publicised through the press) where intermediaries have refused under some pretext to return the said security deposit to the tenant. In these cases, there is a clear recourse whereby the tenant can approach the Real Estate Regulatory Agency (Rera) and the Rental Dispute Centre to file a complaint.

Article 39 of the Real Estate Agent Law is clear when it stipulates: “Without prejudice to any penalty prescribed by applicable laws, the committee may impose any of the following penalties on any real estate broker who violates this bylaw or the resolutions or instructions issued – notice, warning, suspension of activities for up to six months, or blacklisting.” Similar laws are in place when it comes to the handing over of the token deposit that is given at the time of each sale.

From the above extracts, it is clear that the framework that has evolved for real estate intermediaries is not only rigorous, but also at par, if not superior to, developed markets’ standards. Since the inception of freehold in Dubai, laws have been steadily refined and introduced in response to market dynamics that have kept the rights of the investor foremost.

Accordingly, information dissemination has been widespread and across all forums to ensure that all parties to a transaction are aware of the regulatory architecture that is in place. Any participants in the real estate market would be advised to approach such centers for any clarity that is needed.

In the final analysis, it is comforting to note that the regulatory architecture in place all but assures the continued maturation of the market. And instils confidence, in turn leading to sustainable growth.

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