The Commission has opened a debate on real estate transactions. A new element has been brought to this debate by the publication of the comparative study on this subject by Pr. Peter L. Murray from the University of Harvard (USA) who shows that economic analysis and the lowest cost criterion do not suffice to provide an analysis of the best service.
For professor Murray “There is no indication that regulation is directly linked to the cost of a transaction, as some of the regulated markets provide good services at reasonable prices".
Besides this, the study by Pr. Murray shows that numerous regulatory constraints have no other goal but to ensure the total security of the transaction, such that it is anticipated by consumers from various EU countries. In this way, he stresses the importance of the quality of public records of real estate which give the buyer certainty, from the moment of signing the deed of purchase, that he/she will not be burdened by any encumbrance or mortgage charge and that he/she will be able to dispose of it fully without risk.
Pr. Murray thus highlights that in countries such as the UK and USA, the multiplicity of stakeholders in these records diminishes the reliability and thus increases the risk of litigation, as well as imposing a surcharge with the title insurance. Moreover, Pr. Murray pointed out on 1 October, when presenting his study, the various responsibilities assumed by civil law notaries who not only ensure the legal soundness of the transaction, but also in countries like France take charge of the transfer of funds from the buyer to the seller, as well as all taxes due to the State.
The President of the CNUE, Klaus Woschnak, draws attention to the fact that “legal advice given by civil law notaries need not represent a long and costly involvement. In fact, one should not judge the role played by civil law notaries on the sole criteria of lowest time and cost. The truth is that real estate transactions supervised by civil law notaries are of better quality and more legally sound, with fair and transparent fees for all.”
For President Woschnak, a comparison between real estate transaction services on the one hand in Estonia, Germany and France and on the other hand in the UK or Sweden show that civil law notary fees are low compared to the returns they bring to the buyer and seller. Furthermore, professional regulations imposed by member States for the civil law notary profession carry no bearing on this account.
Professor Murray found that deregulation of real estate conveyancing services does not automatically lead to improved services at lower costs. Moreover, he considers that in deregulated markets it appears than banks, lawyers and brokers are able to influence costs and practices based on their strategic positions in the market. In the most highly regulated jurisdictions such as Estonia and Germany, average costs of real estate conveyancing are low, the registry systems function effectively and consumer satisfaction appears to be high” according to Professor Murray.
‘There appears therefore to be little reason to foster standardization of real estate conveyancing regulation, practices or costs within the EU’, as ‘real estate is inherently a local matter’, claims Murray. ‘Differences in costs and practices within the EU are not so significant that there is any risk of impeding real estate development or commerce among member states.
For his part, Jean-Pierre Ferret, vice-president of the higher Council of the French notariat took this opportunity to highlight: "We should not forget that for someone who buys his home, the deed that he signs is not only the most important financial investment of his life, not only the heaviest and longest debt to which he binds himself, but also an act through which he expects to live a tranquil family life. For this single reason, this act must be girded by the strongest guarantees and these come at a cost."
The CNUE commissioned this independent study as a contribution to the political discussion, initiated by the European Commission’s DG Competition, relating to real estate transfers.
Professor Peter L. Murray from the University of Harvard has compared the cost of real estate transactions in Estonia, France, Germany, Sweden, United Kingdom and United States and found that the cost and quality is not linked to the level of regulation on the market.
Pr Murray’s final report and condensed report are available on the CNUE website at the following address: www.cnue.eu.