Real Estate Brokers Obligations in UAE
Bylaw 85 of 2006
Dubai’s real estate brokers are governed by RERA pursuant to Bylaw 85 of 2006, regulating the registration of real estate brokers in the Emirate of Dubai. According to Bylaw 85, brokers are prohibited from engaging in real estate brokerage activities unless they are properly licensed and registered in the broker registry maintained by RERA. Additionally, it specified the types of license categories and requirements that must be met by individuals and companies in order to operate as brokers in Dubai.
It is mandatory for every registered brokerage company to maintain a registration certificate containing the brokerage license number, registration expiration date, and approved brokerage activities. Furthermore, each individual broker must register with RERA, possess a broker identity card that identifies his/her registration number, validity period, and employer brokerage firm.
Brokers are required to comply with the following obligations:
- Verification of the validity of the client’s property title deed (as stated in RERA circular number 8/2016 dated 3 August 2016);
- All transactions conducted by the broker, along with supporting documentation, shall be kept in a private record (Article 15);
- A broker shall disclose to his client all details of the negotiation and the brokerage process (Article 17);
- To refrain from facilitating any transaction deemed to be in violation of the applicable laws and regulations in Dubai (Article 18);
- Disclosure of transaction details and conditions to the best of the broker’s knowledge and in good faith (Article 19);
- Not to represent himself as a broker for the benefit of another party without express authorization (in the absence of such authorization, the broker will not be entitled to any remuneration) (Article 20);
- To act as trustee for any amounts, securities, bonds or other items received from a party, whether for safekeeping or delivery to the other party (Article 21).
- In the event that a broker breaches its contract with its client or fails to act in good faith, it forfeits the right to claim fees or reimbursement of expenses incurred (Article 23).
- A broker may be held jointly liable if more than one broker participates in the same transaction unless expressly authorized to act separately (Article 24).
Brokerage license cancellation
A registered broker must adhere to the RERA code of conduct in order to avoid liability for any loss caused by either buyer or seller due to a fraudulent act or failure to adhere to the rules defined in Bylaw 85 or the code of professional ethics.
The Permanent Real Estate Brokerage Committee (“Committee”) is referred to in article 39 of Bylaw 85. The Committee has the authority to resolve disputes, suspend or cancel the brokerage license should the broker fail to comply with the Bylaw 85 or any related resolutions or instructions. It is at the discretion of the Committee to issue a caution to a broker by the means of notice or warning, or to suspend the broker’s activities for a period up to six months, or to place the broker on a blacklist. A resolution of the Director General of the DLD in consultation with the Committee may result in the cancellation of the broker license.
In addition, Article 41 of Bylaw 85 also provides grounds for loss of broker status and registration in the event of either of the following:
(a) closing the brokerage business and notifying DLD of the closure.
(b) suspending the brokerage business without any valid cause for more than twelve successive months.
(c) failure to comply with Bylaw 85 and its corresponding regulations and instructions.
(d) the registration of the broker is proven to have been granted on the basis of false information provided to DLD.
(e) the cancellation of the brokerage license resolution issued by the Committee as a result of a violation of the code of professional ethics or applicable laws and regulations in Dubai.
Agreement and remuneration for brokers
An agreement between the broker and client must be recorded in writing and should include the details of the contracting parties, the property details, and the terms of the agreement. The brokerage commission amount must be agreed upon and specified in the agreement, otherwise, the commission amount will be determined in accordance with market practice.
The broker is required to register the signed brokerage agreement along with the execution of the DLD standard form contract, namely Form A (contracted by broker and seller) or Form B (contracted by broker and buyer). The same must be registered with the Dubai Land Department.
According to Article 28 of Bylaw 85, any payment of commission to a broker is subject to the terms and conditions set forth in the duly registered and signed brokerage agreement. A broker is entitled to his commission if the purchase and sale agreement between buyer and seller stipulates that certain conditions must be satisfied before payment of the broker commission will be made. Furthermore, Article 28 should be read in conjunction with Article 30 of Bylaw 85, which states that the broker is not entitled to any compensation or expenses if the negotiations between the buyer and seller do not result in the conclusion of a contract. In light of the above, it is recommended that the brokerage amount payable to the broker and the timing of such payment always be recorded within the brokerage agreement or the sale and purchase agreement in order to avoid any potential dispute regarding payment.
Furthermore, pursuant to Article 32 of the Bylaw 85, if several brokers are appointed by the client in connection with a potential property transaction, the broker who can successfully complete the transaction becomes the exclusive beneficiary of the full brokerage fee. Nevertheless, if the same broker is appointed by both the potential buyer and seller for the same transaction, both parties become severally responsible for paying the brokerage fees, regardless of whether one party agrees to pay the entire brokerage fee under Article 33 of Bylaw 85.
About the Author: