Ministry of Justice: We will put an end to the chaos in the real estate market Israel today

Time to change: the Ministry of Justice is formulating individual rules of ethics, which will bring order to the real estate broker market.

Their main purpose is to define clear procedures that will be anchored in regulations and will regulate work practices, such as what the brokers must show and what information they must present, and will determine, among other things, the amount of the maximum brokerage fee, and also who will pay it.

Among the things being considered: limiting the amount of the maximum brokerage fee and lowering it from the current standard of 2%, and dividing the brokerage fee between the tenant and the landlord half and half.

The sharp increase in apartment prices began to trickle down to the rental market as well.

Against the background of immigration from Russia and Ukraine, the housing crisis is increasing, and the rental market, especially in the center of the country, sometimes resembles a "jungle" that is run without state supervision.

Not long ago we published for the first time that the Minister of Housing and Construction Ze'ev Elkin instructed his office staff to formulate a plan that would put order in the rental market, and now the Ministry of Justice is also handling part of it - real estate brokers.

In order to understand what are the issues that require regulation in the rules of ethics applicable to brokers, the Ministry of Justice recently issued a call for the formulation of rules of ethics for engaging in real estate brokerage.

One of the common claims raised by the public is the high brokerage fees, which remain unchanged despite the double-digit increase in apartment prices.

Drafting new ethics rules

We note that the broker's commission of 2% is not enshrined in legislation, but that it is a practice that has been established over the years, and there are quite a few brokers who charge less than that.

The Ministry of Justice explained to us that in order to limit the brokerage fees or to impose brokerage fees on the lessor as well, a legislative procedure is required, and due to the election campaign - it is unlikely that this will happen in the near future, but these are two options that are being considered.

The process of joining the convention was postponed, Ministry of Justice, archive, photo: Ministry of Justice

In the meantime, the ministry is concentrating on drafting new ethics rules for mediators, which can be promoted only by the signature of the Minister of Justice.

One of the responses that reached the voice of the reader and which represents additional responses from Lina about the brokerage fees being too high: "It's time for the payment ceiling for brokers to drop from 2%. This amount was relevant when apartments cost half a million shekels, not five times that. The claim that the buyer does not have to pay and can buy Another apartment is simply wrong - many apartments for sale are offered exclusively through mediation because the seller cannot handle the sale himself, for example when he lives far from the apartment.

"If in the past a realtor had to have an office and put up ads - today he puts an ad in Hand2 and doesn't have to have an office, so in terms of the amount of his work it actually decreased, not increased. A ceiling of 1%-0.5% is much more in line with the amount of work that is required and the value of the work that is performed" .

The Ministry of Justice recently conducted a survey with the aim of producing an up-to-date picture of the situation and mapping public attitudes, and it shows an unencouraging picture: 63% of the apartment renters who were helped by brokers are not satisfied with the service they received.

Among the buyers, the situation is slightly more optimistic - only 38% of them are not satisfied.

Two of the claims made by the public were that the broker "exploited my lack of familiarity with the area", and that "the price of the apartment was very high compared to the real market price".

To the question of whether relevant information about the apartment and the area was given, only 31% of the renters and 45% of the buyers answered in the affirmative.

The main claim of the respondents was that they were not given details regarding the hazards in the apartment, such as for example a fire that suddenly started in the building next door.

This topic is very important

The Director General of the Ministry of Justice, Attorney Eran Davidi, says in a conversation with "Israel Hayom": "In a short time we received 1,500 references from the public. It's crazy how important this issue is and the public is thirsty for change. We saw very low percentages of satisfaction with the services the public receives from the intermediaries, And that was really the big trigger not to leave it like that. The first thing will be the change in the ethics regulations that will create a new standard, to try to really put order in this jungle. It really is a jungle, certainly in the central area."

Davidi adds that although the central offices responsible for the real estate market are the housing and finance ministries, he considers it important to put order in matters related to his office - real estate brokerage. do, and not assign the responsibility to the other ministries."

The regulations that currently exist in Israel regarding real estate brokerage are very general, and do not refer to specific cases.

A mediator is not allowed to do legal actions from an ethical point of view, for example.

In the new edition, it will be explicitly stated that it is forbidden to make a memorandum of understanding, since this is a legal action - which is probably not clear enough today, because some mediators do prepare a memorandum of understanding.

From the comparative international research done by the Ministry of Justice, it appears that in most countries there really is a brokerage license, and in a large part of them there is also state supervision of the activities of the brokers.

This - in contrast to Israel, where a broker's license is required but there is almost no supervision.

According to Davidi, "When I arrived at the office, one of the first things they presented to me was conclusions from some kind of regulatory committee they had set up on the subject, which actually recommended canceling the license. Canceling the profession, meaning that anyone can be a broker. I really did not agree to that."

"Effective supervision is needed"

Davidi explains: "Purchasing an apartment or renting an apartment - these are such large, and sometimes one-time transactions, that to leave it without a license and without state supervision - it seems really wrong to me. I actually asked the office to go out for another job, to see what is happening in the world.

"We need effective supervision, a real mediator who really has some kind of standard, some kind of norm to which he is committed, towards the citizens. There should be a standard of the information that needs to be presented," this is how he summarizes his words.

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