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Deregulation of Professions Related to the Real Estate Market—Opportunity or Threat?
May 31, 2012   
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Poland has the most regulated labor market in the European Union, according to a 2011 study by a conservative Polish think tank called Fundacja Republikańska (Republican Foundation). Access to 380 professions is restricted in Poland, compared with 228 in Britain, 152 in Germany, and 47 in Estonia, the study reveals.

The study was published shortly before last year’s general election. When Jarosław Gowin was appointed justice minister shortly afterwards, in one of his first public statements he announced that deregulation would be his top priority during his term. A newly proposed bill confirms his determination, but also raises many questions about customer safety and fair competition.

The proposed law facilitates access to 49 professions. According to the Ministry of Justice, all these professions—from that of legal advisor, through librarian and tourist guide to taxi driver and welder—should open up and the current restrictions, or at least some of them, should be abolished. The new law would have a different impact on various types of professions, and it is difficult to find a common denominator for most of the jobs covered by the bill.

Deregulation may significantly affect two types of professions related to the real estate market: those of property manager and real estate agent. Currently both these professions are regulated by the real estate management act of Aug. 21, 1997 (Polish Journal of Laws of 2010, No. 102 item 651, as amended). In order to become a property manager, a person needs a license that can only be granted after a list of conditions is met.

Article 182 of this law states that in order to become a real estate agent, an applicant should meet the following criteria: full legal capacity, no criminal record, higher education, a postgraduate degree in real estate brokerage, and professional practice in this business. A civil liability insurance policy is also necessary. Similar requirements are provided for in Article 187 for those applying for a property manager’s license (where a postgraduate degree in property management is required).

The new bill would abolish most of these requirements. Under the proposed regulations, real estate agents and property managers would no longer be required to have higher education or a postgraduate degree. Previous experience would not be necessary either. Full legal capacity and no criminal record would be sufficient in order to obtain the license. Civil liability insurance would still be required.

The Ministry of Justice declares that the bill’s main aim is to create more jobs in professions that are currently subject to regulation. The author of the proposed law estimates that 500,000 - 700,000 people may find employment in the liberalised professions after its implementation. Moreover, according to Gowin, deregulation is designed to bring down prices and increase the availability of services on the market. He has stated that it should be the free competition only that creates the final price, rather than state-imposed restrictions. He pointed to other countries that have carried out similar deregulation, where service prices fell significantly, from 10 to 25 per cent.

Although these arguments may be convincing to some extent, the proposed deregulation seems to ignore other important issues such as the quality of services, safety of customers and fair competition. It is easy to predict that at least some of the newly “deregulated” real estate agents and property managers, without proper education and experience, will turn out to be troublesome for their customers. Those supporting the proposed law may also be right about its positive effect on lowering prices, but they seem to be ignoring the fact that doing business on a market flooded by a huge number of new participants will be more difficult—and for this reason, probably less ethical.

The bill is still being drafted by the ministry and the government as a whole, and it has a long way to go before it is adopted. But even if deregulation does get under way, at the end of the day, it will be the market itself that will decide if the project is successful. While certain groups of customers may opt for lower prices at the expense of inferior quality of services, skilled professionals should be able to keep their customers despite stiffer competition.

Andrzej Lulka, legal advisor and partner responsible for Real Estate Law at Gide Loyrette Nouel

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