The professional liability of estate agents with an emphasis on the pre-contractual stage of sale and rental agreements

Abstract

Before the entry into force of the ‘Real Estate Agents, Property Brokers and Property Consultants Act’ (‘Chapter 615’), intermediaries were not regulated. Buying property is for many consumers the most important financial transaction of their lifetime and therefore, intermediaries must exercise due diligence and act in good faith throughout. However, special importance is to be given to the pre-contractual stage, which is the most delicate stage for consumers to make informed transactional decisions. This study first seeks to analyse the most common shortcomings of the real estate profession by analysing Maltese jurisprudence, including, but not limited to, conflict of interest, information asymmetries and offenses such as fraud and fraudulent concealment. The study then proceeds to address the extent of consumer protection vis-à-vis intermediaries under general protection consumer law, namely the Unfair Commercial Practices Directive (‘UCPD’) and the Unfair Contract Terms Directive (‘UCTD’) as transposed in the Consumer Affairs Act. The third section tackles Chapter 615 first hand, by analysing the twofold reason of the imposition of a licence, namely the crucial importance of regulating the profession and the need to uphold international obligations, in light of money laundering and terrorist financing. In fact, the 5th Money Laundering Directive has placed intermediaries under the umbrella of ‘obliged entities’, known as ‘subject persons’ under national legislation. The above, outlines the importance of the need to regulate the profession itself. Whilst the imposition of a licence is a step in the right direction for all the key players in the industry, the need for a set of ethical guidelines regulating the conduct of intermediaries is the necessary second step for the proper functioning for the real estate industry.