Disclosure requirements for real property intermediation purposes

I. Background

Real estate transactions are among the most common transactions nowadays, whether they involve renting or leasing/buying real estate.

Due to the complexity and rapid evolution of the real estate market, individuals and legal persons usually conclude real estate intermediation contracts with real estate agencies to identify the buildings expected to be traded. Such contracts are also commonly referred to as real estate service contracts, real estate sales contracts, Commission contracts, etc.

Regardless of the name attributed to the contract, its qualification as a real estate intermediation contract derives from the fact that the real estate agent acts as an expert in the field and adviser to the parties.

II. Theoretical aspects of the real estate intermediation contract

The legal framework applicable to real estate intermediation contracts is laid down in Articles 2.096 to 2.102 of the Civil Code. The provisions of Government Ordinance No 21/1992 on consumer protection, as well as the Law 193/2000 on unfair terms in agreements between professionals and consumers are also relevant in this area.

The Civil Code clearly defines the notion of intermediation as "the obligation of the intermediary toward the customer to link it with a third party in order to conclude a contract".

In return for the intermediation activity, the client owes the price in the form of a commission, assuming the conclusion of the pre-arranged contract.

In relation to real estate services, intermediation takes the form of one or more of the following activities(1) :

• Promoting in order to sell, buy or rent real estate;
• Advice/information for the sale, purchase, or rental of real estate;
• Real estate intermediation;
• Property management;

Among these activities, we will briefly discuss below the issue of advice/information provided by the real estate expert, as this is the one that raises the most debates.

For example, if a tenancy agreement is concluded on a place for business use, it may not be used by the customer, because it is not possible to obtain the consent of the building's neighbors to authorize the activity to be carried on.

While lease contracts can be denounced in a relatively easy way, respecting notice periods, the extent of proper information to the client by the intermediary is much more important in sales contracts. In particular, if the client wishes to acquire land for building purposes, issues such as the existence of utility networks underground or at the property boundary may prevent the obtaining of planning permission or may affect the planned building project.

It is precisely in this context that providing additional information on the properties subject to the transaction is essential, justifying the payment of the commission by the client.

Therefore, in our opinion, the real estate intermediary's the obligation/advisory activity is an essential obligation upon him and its non-performance or non-compliance creates the ground for termination of the contract.

III. Real estate intermediation in relation to legal persons

It is the obligation of the real estate intermediary (hereinafter referred to as the "Intermediary") to provide information or advice, both to individuals and to legal persons. Thus, even if the intermediation contract concluded mentions only in outline the obligation of the Intermediary to inform/advise the legal entity client, often using pre-formulated contracts, it is important to circumscribe the extent of this obligation.

As a preliminary remark, it should be noted that, with the repeal of the GO 3/2000 on the organization of real estate agencies in 2003, the activity of real estate agents was no longer specifically regulated. Consequently, the provisions of common law enshrined in the Civil Code will apply.

In the absence of legal circumstances, the diligence of the intermediary in the enforcement of the contract, given the onerous nature of the intermediation contract, must be that of a good professional. Moreover, Article 2100 of the Civil Code provides that the intermediary is obliged to communicate to the client all information concerning the advantages and advisability of concluding the intermediated contract.

From this point of view, the intermediary's obligation to inform is essential, because in its absence, third parties and customers cannot assess the interest of being put in touch and conclude the eventual contract.

We point out that the real estate intermediary's obligation to provide information is not the same as the general pre-contractual obligation to provide information. The obligation to provide information or advice in the intermediation activity is a complex one, requiring specific knowledge of the real estate market and real estate (from the point of view of real rights and town planning). The purpose of the obligation is precisely to meet clients' wishes.

However, although the informational formalism in contracts concluded by professionals is not subject to special consumer protection legislation, we consider that, including in relation to corporate clients, the existence of a contractual imbalance that may foreshadow the client's right to damages can be considered.

To be precise, even if professionals' obligation to provide information was initially recognized only in relation to natural persons who are consumers, it has subsequently been extended to any situation where one of the contracting parties cannot have access to relevant information in real-time.

However, the Intermediary, as a professional in the field, holds or should have held that information. In this case, it is not an absolute impossibility for a client who is a legal person to have access to the information, but he might encounter a serious problem and a high cost.(2)

IV. Real estate intermediation in relation to individuals

The activity of real estate intermediation in relation to individuals is governed by the GO no. 21/1992 regarding consumer protection, Law no. 193/2000 on unfair terms in commitments concluded between professionals and consumers, and Directive 93/13/EEC on unfair terms in consumer contracts.

Article 9 of GO 21/1992 expressly regulates the content of the obligation to provide information on real estate intermediation services, requiring that the natural person (consumer) must be informed in writing, correctly, completely, and precisely, from the pre-contractual phase, about:

• market prices for the type of property subject to the real estate intermediation, according to the information in the real estate agency's database;
• deficiencies and other inconveniences are known to the estate agent or which he could reasonably have been aware of, including sources of noise, damp, pollution, odour, the danger of flooding or subsidence, the holding of regular popular events nearby, the history of the land or building, possible disadvantages of the neighborhood;
• the level of commission charged by the estate agent;
• the legal situation of the property;
• the estimated level of costs to be borne by the consumer for obtaining the documents and drawing up the paperwork required to conclude the contract.

Then, the same normative act also stipulates the minimum content of the Real Estate Intermediation Contract which must include at least the following elements:

• the identification data of the parties;
• the subject matter of the contract/nature of the service provided;
• the price requested by the owner/which the buyer is willing to pay;
• the validity of the contract;
• the conditions under which the contract may be denounced unilaterally;
• conditions under which the contract may be terminated;
• the maximum level of commission payable by the consumer to the estate agent for the contract to be concluded;
• the exclusivity clause, if accepted by the parties;
• the situations in which the consumer owes commission to the estate agent;
• the rights and obligations of the parties;
• situations of force majeure;
• the conclusion date of the contract.

With regard to real estate intermediation contracts in which the consumer is a potential buyer, Article 95 of GO 21/1992 also requires the inclusion of the following specific clauses:

• the general characteristics of the property, which may influence the purchase decision, including the level of polish, size, age, and positioning in relation to the points of reference;
• charges for services provided.

Certainly, the provisions of GO 21/1992 complete the provisions of common law on intermediation, but it should be noted that the obligations imposed on real estate intermediaries in this type of contract express the need for increased information/advice to consumers.

V. Failing to comply with the information obligation

While the minimum content of the Intermediary's duty to inform has been set out in sections 3 and 4 of this article, the question remains as to the identification of potential remedies for non-performance or non-compliance with the duty to inform or advise.

More specifically, what is the option for a client who has entered into a sale-purchase agreement for a property on the basis of the representation that it is buildable, to subsequently be informed that it does not have, for example, its own access road, a legally constituted pass-through servitude, or is burdened by public utility charges which make it impossible to build or which foresee increased additional costs?

In this regard, for the hypothesis in which legal or natural persons have concluded agreements or contracts of sale/purchase/lease on real estate, and these have deficiencies or limitations that have not been presented by the real estate intermediary, we consider that there is the possibility:

• To invoke the exception of non-execution of the intermediation contract under Article 1556 of the Civil Code with regard to the payment of the commission stipulated in favor of the intermediary;
• Termination of the intermediation contract under Art. 1549 and following Civil Code for the hypothesis that the contract has not ceased to have effect;
• The contractual liability of the Intermediary under Article 1350 of the Civil Code;

With a view to filing a legal action, we consider that two essential aspects should be pointed out:

• The fact that the obligation to inform is an essential obligation of the Intermediary;
• The fact that the Intermediary qualifies as a professional in the field;

VI. Conclusions

Although the activity of real estate intermediation is not expressly regulated by national legislation, we believe that the complete and accurate fulfillment of obligations by the Intermediary is supported by the provisions contained in the Civil Code or specific consumer protection legislation.

Therefore, the Intermediary's obligation to inform or advise is central to the economics of real estate transactions concluded by clients, and the non-compliant or superficial execution may entail the liability of the real estate professional, including for damages that may be claimed by the client.

MAXIM/ Associates

Av. Ardelean Talida

[1] V. Nemeș, G. Fierbințeanu, The law of civil and commercial contracts, Hamangiu Publishing House, Bucharest, 2020, page 491
[2] D.Chirică, Civil Law Treaty. Special contracts, Vol I, Sale and exchange, Hamangiu Publishing House, Bucharest, 2017, page 250