Council of Ministers’ Resolution to Issue Regulations of Real Estate offices
The Council of Ministers’ resolution No. 334 dated 07/03/1398
The Council of Ministers,
Within its authority,
upon perusal of the file attached to the letter of the Minister of Commerce No. 322 dated 23/3/96 AH, containing the draft regulations of the Real Estate offices;
And upon perusal of the memorandum of the Bureau of Experts No. 239/17 and 02/12/1396;
Decides as follows:
Approving the Regulations of Real Estate Offices as per the attached form.
For this it has been issued.
Deputy Prime Minister.
Regulations of Real Estate Offices
Real estate offices that deal in selling or leasing of properties, are commercial offices in nature and therefore are subject, as of its establishment, to the provisions contained in the Commercial Court Law, issued in 1350 AH and the Commercial Registration Law, issued in 1375, in addition to the following provisions:
Opening a real estate office is not allowed, unless it is registered in the Commercial Registration, which requires:
- It to be wholly owned by a Saudi national or Saudi company wholly owned by Saudis and the manager in charge, shall be of Saudi nationality.
- Both the owner and manager in charge of the office shall be of good conduct and not be previously convicted with a breach of honor and honesty.
- Neither the owner nor the manager in charge, should have been declared bankruptcy, unless either or both have been rehabilitated.
- The real estate office shall not be engaged in any other activity.
Any real estate office should not do any business other than its real estate activity set forth in the commercial registration.
In case of multiple owners, a real estate office owners are collectively responsible towards others in fulfilling the obligations arising from the activities carried out by the office.
A real estate office is not allowed to sell or broker in the sale of any property unless it is in possession of copies of the official property’s ownership documents provided that ownership is not under dispute. The office shall be held responsible for all damages incurred on the seller or the buyer as a result of its violations.
- Sales commissions will be agreed upon by the owner of the real estate office, the seller and the buyer, and the party or parties to pay the commission should be stated. In all cases, the total commission should not exceed 2.5 per cent of the contract total value.
- The leasing contract should specify the real estate office commission and the party to pay it, provided that the commission should not exceed 2.5 per cent of a year lease, even if the contract is set for a longer period and/ or even if it is renewable.
Funds received by a real estate office from buyers or tenants, may not be used of purposes other than those designated and received for.
Without prejudice to the requirements of other laws of violations, whoever violates the provisions of this regulation shall be punished by one of the following:
- A fine not exceeding twenty-five thousands SR
- Closing the office for a certain period not exceeding one year
- The permanent revocation of the license of the office.
These penalties or fines shall be issued by a ruling of the Minister of Commerce and may be appealed against it, before the Bureau of Grievances, in a period not exceeding thirty days.
Currently existing real estate offices shall adjust their activities, in accordance with the provisions of this regulation, within a period not exceeding three months, from the date of its promulgation.
The Minister of Commerce shall issue the necessary decrees for the implementation of these regulations.
This regulation shall be published in the official Gazette, and shall enter into force on the date of its publication.
Ministerial Resolution To Issue Regulations Of The Law
Ministerial Resolution No. 1704 dated 05/16/1398,
Resolution of the Minister of Commerce,
Upon perusal of the system of the commercial registration, based on the Council of Ministers’ Resolution No. 54 dated 26/04/1375 AH supported by Resolution No. 112 dated 14/10/1375 AH, its executive regulations and the regulation organizing real estate offices issued by the Council of Ministers’ Resolution No. 334 dated 7/3 / 1398, and the requirements of the public interest;
Decides as follows:
Regulations of real estate offices shall be issued as attached.
This Resolution shall take effect from the date of issuance, and relevant authorities shall implement it and issue the necessary instructions thereof.
Minister of Commerce
Executive Regulations of Real Estate Offices
First: Enrolling Real Estates Offices in the Commercial Registration
Whoever wants to open a real estate office shall enroll in the related commercial registration following the stated procedures and bringing the required documents for enrollment, in accordance with the commercial register terms and its executive regulations.
An applicant shall attach, in addition to the aforementioned documents required by the CR, the following documents:
- A true copy of the owner’s ID and the director’s in charge, if there is any.
- A testimonial of good conduct for the owner and director in charge from their mayor.
- An undertaking supported by two tradesmen, at least, to certify that neither the owner nor the director have been declared bankrupt, or they have been rehabilitated.
- A true copy of the office’s deeds or the leasing contract.
- An undertaking to lead business with faith and integrity and as per regulations.
- An undertaking not to lead any business other than the real estate activities stipulated in the commercial registration.
Following enrolment of the real estate office in the commercial registration, a statistics form is made for each office, in accordance with the attached form and then the pertinent commercial registration offices shall send regularly copies of these forms to the ministry general register section.
In case of multi- ownership of the real estate office, the office must take the form of a Saudi corporate company, according to the terms of the Law of Companies, with a capital fully owned by Saudi nationals and a Saudi national director.
Secondly: Duties of a Real Estate Office
An office owner should provide a designated and suitable place to lead his activity.
In addition to duties stipulated in both the regulations of the Commercial Court and the regulations of the Commercial Registration, the office shall abide by the following:
- Inscribing the phrase (Real Estate Office) on the signs and all printouts and documents related to it, along with the name and the No. of the commercial registration.
- Keeping regular paginated records accredited by the related commercial registration office, to write down information relating to the office’s customers, their addresses, activities done for them by the office with dates, thorough information on deeds related to each transaction, sums of money received from buyers or lessees (leaseholders) and also commissions received.
- Keeping a sound safe to keep documents and deeds of transactions or their copies.
- Keeping correspondence relating to the office on a regular and easy basis, to refer to them when it is deemed necessary.
The office, in its transactions, shall abide by the following:
- Maintaining classified information related to customers, in accordance with the established norms.
- Returning documents and title deeds to their holders, upon request, and refraining from handing them out to other customers, without a legitimate justification.
- Informing the related commercial registration of any change in previously recorded information, in the register.
The office shall obtain from the owner of the property offered for sale its title deed in exchange for a receipt. The office shall also ascertain both the validity of the property ownership and that it has not been confiscated for public utility.
A real estate office is not allowed to receive over a 2.5% commission of the value of the sold property nor shall it receive over 2.5% as a leasing commission of a year rent, even if the contract duration, is longer or renewable.
In case the office receives commissions exceeding the percentage set forth in this provision, it shall refund the excess to the payers, without prejudice to the penalties prescribed.
Owners of real estate offices are collectively responsible for carrying out duties assigned to the office and its proper functioning, according to the instructions prescribed and they are accountable, prior to a third party, for paying damages resulting from the work of the employees of the office.
Thirdly: Violations & Penalties
Whoever violates the provisions of the first, second, fourth, fifth and sixth articles of real estate offices regulations will be punished by one of the following:
- A fine not exceeding twenty-five thousands SR.
- Closure of the office for a certain period not exceeding one year.
- The permanent revocation of the license of the office.
Multiple penalties shall be applied for multiple violations.
Penalty decisions are issued by the Minister of Commerce, based on the recommendation of the relevant division , upon reviewing documents and investigations conducted by the relevant commercial registration office.
The punishment may not be inflicted before hearing the offender or his attorney and the arguments of his defense. In case of failure of any of them to appear, in a timely manner, without an acceptable excuse, he shall be informed by the police.
Punishment decisions shall be reasoned and informed to the person concerned by a registered letter, and shall not be considered final and due to execution, until the appeal deadline has elapsed or the appeal has been settled.
The appeal deadline is thirty days from the date of delivery of a copy of the penalty decision to the offender or his attorney. The offender’s appeal to the Bureau of Grievances shall be attached with documents and a copy of it shall be sent, during the fixed period, to the Minister of Commerce, who shall refer both the case file and MC remarks to the Bureau within fifteen days from the date of submitting the appeal.
Fourthly: Transitional Provisions
Existing real estate offices shall adjust their activities, according to the provisions of the regulations, within a period not exceeding Rajab, 7, 1398 AH, and the owners shall apply to the offices of the pertinent commercial registration to approve their new amendments to their offices so as to continue their business according to regulations.
The commercial registration offices shall examine the aforementioned applications, to verify availability of all the necessary conditions for the continuation of functioning of real estate offices, in accordance with the regulations, and they have the right to ask the owners to meet legally required documents within a period not exceeding one month from the date of submission of applications.
The Commercial Registration offices shall notify the applicants referred to in the previous article that their applications are accepted or rejected, and in case of rejection, the reasons shall be explained. Those whose applications are rejected may appeal against the rejection to the Minister of Commerce within fifteen days from the date of receiving the decision.
In case of appeal refusal, the enrolment in the Commercial Registration will be cancelled after giving the owner an appropriate time limit for the liquidation of the assignments of the office. The office shall not be involved during this period in further transactions related to its activity.
Ministerial Resolution No. (1) Dated 02.01.1417 Amending Executive Regulations of Real Estate Offices
The Minister of Commerce,
Within his authority,
upon perusal of the Regulations of Real Estate Offices issued by the Council of Ministers’ Resolution No. 334, dated 07/02/1398;
upon perusal of the decision of the Minister of Commerce No. 1704 dated 16.05.1398 for issuing the Executive Regulations of the Real Estate Offices;
And upon perusal of the memorandum of the Undersecretary of the Ministry of Commerce for Technical Affairs No. (3102/11) dated 25/12/1416);
And based on the requirements of the public interests,
Decides as follows:
A new paragraph is to be added to Article II of the regulations for real estate offices to read as follows:
G: An undertaking to delegate a literate Saudi national to sign in case the owner of the office is illiterate.
In addition to Article VI, a new article is to be added to the executive Regulations thereof and to be read as follows:
5 - Non-acceptance of any cash or checks, except from the property’s owner or the owner of the office or the legal attorney authorized to receive them on behalf of the office’s owner.
This resolution shall be published in the Official Gazette and shall take effect from the date of publication.
Minister of Commerce