Lina Sandmark, lawyer at Kompass Advokat and specialist in financial regulation, answers questions about the new Real Estate Brokers Act (Fastighetsmäklarlagen).
A brief introduction
The government has proposed a new Real Estate Brokers Act, that intends to replace the current law from 2011. The law is expected to enter into force on the 1st of July and aims to contribute to increased security in connection with real estate transactions, with the help of a comprehensive supervision of the real estate industry. One of the biggest news is that the law will cover real estate companies, not just individual real estate brokers.
How does the new law affect the industry?
An important update in the new regulation is, as said, that it also includes real estate companies, in addition to the individual brokers. This means that the real estate companies will be covered by registration obligation and be under the supervision of the Real Estate Inspectorate (Fastighetsmäklarinspektionen). Real estate companies also includes office hotels, co-working space rental and commercial real estate, besides the private real estate brokerage firms.
Breaking the new law can result in disciplinary sanctions (warning etc.) and penalty fees. The Real Estate Inspectorate can also intervene if there are people in the company's management team or owners who have committed serious crimes.
In addition, the overall responsibility of ensuring "good real estate brokerage practice", is transferred to the companies, as well as the brokers responsibility to carry out general assessments and introduce documented guidelines in accordance with the Money Laundering Act.
About money laundering
Money Laundering involves measures taken to conceal or turn money or the origin of assets into criminal activity. For example it could be money from drug offenses, tax offenses or fraud that is "laundered" in order to be used in the legal economy.
Financing terrorism means financially supporting terrorsim by collecting, providing or receiving or other property to finance terrorism.
With regard to real estate brokers, brokers with special registration for rental agency will also be required to register and be supervised in accordance with the new regulations. Even if parts of the legal requirements are imposed on real estate companies, real estate brokers will still have an independent liability for damages. In addition, the ban on the transfer of objects to related parties is extended. The circuit is also proposed to include mediation to another broker operating within the same real estate company or under the same brand.
What should you keep in mind when working with anti-money laundering?
Both internationally and in Sweden, the real estate industry is singled out as an area where money laundering occurs frequently. The industry is used in schemes for money laundering and that criminals turn criminal money through cash purchases or under- and overvaluations of real estate.
According to the current law, only real estate agents with full registration were covered by the Money Laundering Act. It is now also proposed that real estate companies and certain other real estate agents be covered by the Money Laundering Act. As real estate companies are proposed to have obligations under the Money Laundering Act and are under supervision, the special obligation for real estate agents who are employed by a legal entity to make a general risk assessment and establish documented guidelines shall be removed.
This means that the real estate company, is now responsible for the general assessment and establishment of routines and guidelines regarding customer knowledge (KYC), monitoring and reporting.
What else does the real estate broker needs to keep in mind?
It is important to remember that a real estate broker still needs to follow "good real estate brokerage practice", but the real estate company will be the one who has the overall responsibility for compliance. It is also important to continue to inform buyers and sellers if real estate brokers run any side business. This is to prevent suspicions that the brokerage is affected by other interests and thereby jeopardizes the broker's impartial position.
Read more on compliance requirements in real estate.