'Exemption from Mandatory Notification of Negotiable Brokerage Fees'... Brokerage Industry Says "At Least That's a Relief"

Government Pushed 'Mandatory Notification of Negotiable Brokerage Fees' Last Year
Amid Growing Realtor Opposition, Final Exclusion in This Year's Amendment
Partial Relaxation of Obligation to Verify Floor Surface of Brokerage Objects
However, Industry Opposition Persists... Calls for Further Deregulation

[Image source=Yonhap News]

This year, with the full enforcement of the revised Enforcement Rules of the Licensed Real Estate Agents Act, the obligation for licensed real estate agents to notify clients about the possibility of negotiating brokerage fees has been excluded, and the obligation to verify the floor area of brokerage objects has been partially relaxed, leading to opinions in the brokerage industry that this is "somewhat fortunate." The government had been pushing strong measures to improve brokerage services, including lowering the upper limit rate for brokerage fees last year, but stepped back on some provisions due to strong opposition.

According to the Ministry of Land, Infrastructure and Transport and the brokerage industry on the 8th, the government promulgated and enforced partial amendments to the Enforcement Decree and Enforcement Rules of the Licensed Real Estate Agents Act on December 31 last year. The amendments include requiring brokerage offices to post business registration certificates under the Value-Added Tax Act to prevent brokers who are simplified taxpayers from charging VAT on brokerage fees, and increasing the guaranteed amount for brokers' liability for damages.

While the industry has expressed opposition that brokers’ burdens have only increased amid the lowered upper limit rates for brokerage fees since October last year, there is some relief as the obligation to notify clients about the possibility of negotiating brokerage fees, one of the most closely watched parts, was excluded.

Originally, the government had been promoting a system requiring brokers to mandatorily inform clients that brokerage fee rates are negotiable. This was intended to prevent cases in the field where brokers unilaterally notify brokerage fees without separate negotiations and apply the legally highest rate.

However, brokers opposed this, saying it would only increase unnecessary conflicts or questioning, "Who would say that prices can be lowered before even selling the property?" In response, the Ministry of Land, Infrastructure and Transport stepped back in October last year, stating, "The implementation timing of the measure to mandate notification to clients that brokerage fees are negotiable has not been decided," and the final amendment did not include this provision.

Along with this, the controversial obligation for brokers to verify the floor area of brokerage objects was also partially relaxed. Initially, the government had been pushing for brokers to be obligated to check for cracks and leaks in the floor area. This was to resolve conflicts by assigning brokers the duty to verify, as disputes over floor leaks among transaction parties had been continuously occurring.

However, brokers strongly opposed this, saying, "To check for leaks or cracks, furniture must be moved and flooring removed, which is impossible," and the government eventually revised the rule so that brokers only check visible parts and mark them as ‘clean,’ ‘normal,’ or ‘needs repair.’ A licensed real estate agent in Yeongdeungpo-gu, Seoul, said, "It seems that many of the concerns in the industry have fortunately been removed."

However, as the recent real estate ‘transaction cliff’ continues, calls from brokers for further deregulation are growing, raising the possibility of renewed conflicts between the government and the brokerage industry in the future. An industry official said, "Opposition from brokers, whose livelihoods have become difficult due to the government’s real estate policy failures, remains strong."

This content was produced with the assistance of AI translation services.