Relationship between the duty of confidentiality under the Real Estate Brokerage Act and the duty to provide information under the Tax Administration Act

FINANS TILSYNET Postboks 1187 Sentrum 0107 Oslo Circular The relationship between the duty of confidentiality under the Real Estate Brokerage Act and the duty to provide information under the Tax Administration Act CIRCULAR: 3/2018 DATE: 18.10.2018 THE CIRCULAR APPLIES TO: Real estate brokerage firms Lawyers with the right to conduct real estate brokerage

The relationship between the duty of confidentiality under the Real Estate Brokerage Act and the duty to provide information under the Tax Administration Act 2 | Finanstilsynet 1 Introduction The Tax Assessment Act previously contained rules regarding third parties' duty to provide information to the tax authorities, which took precedence over the real estate broker's duty of confidentiality. In connection with this, Finanstilsynet published Circular 6/2014. The Tax Assessment Act was repealed when the Tax Administration Act entered into force on 1 January 2017. The corresponding provisions are now continued in the Tax Administration Act. This circular replaces Finanstilsynet's Circular 6/2014. 2 The real estate broker's duty of confidentiality According to Section 3-6 of the Real Estate Brokerage Act, "[f]irms and lawyers who conduct real estate brokerage, cf. Section 2-1, employees and elected representatives, as well as other persons connected to such activities, shall maintain confidentiality towards unrelated parties regarding any personal matters or operational and business conditions they learn about in the course of performing their work or duties." Information about who has sold and acquired parts or similar items in assignments that the broker has, or has had, the assignment to mediate, the time of this, and the sale price, are not to be regarded as "personal matters or operational and business conditions." The reason for this is, among other things, that such matters are largely already mentioned in the land register. 1 Therefore, the assignment journal and brokerage journal, which contain this information, are not covered by the broker's duty of confidentiality. However, the broker must always assess whether they have entered individual pieces of information in the journal that are nevertheless subject to confidentiality. These pieces of information can then be redacted. The real estate broker has a duty to send a settlement statement to each client, showing all transactions concerning the relevant client. 2 Settlement statements often contain information about satisfying debts, including housing loans, attachment mortgages, and arrears on municipal fees, common expenses for condominium associations, etc. Such statements may also contain information about the settlement of estates/joint property. Settlement statements will therefore often contain information that concerns "someone's personal matters," and they will then be subject to the real estate broker's duty of confidentiality. Finanstilsynet assumes that transactions in settlement statements in assignments where the client is a business operator, normally will not concern "operational or business conditions" of such a character that they are covered by the duty of confidentiality. The purchase contract between the buyer and seller will normally contain standard contractual terms based on the relevant background legislation. Such standard terms are not subject to the broker's duty of confidentiality. The same applies to information about the parties to the agreement, the purchase price, and the time of handover. However, special contractual terms that have been negotiated may, due to their nature, be subject to the duty of confidentiality, and in such cases, they can be redacted in the documents. The reason why there is no duty of confidentiality for the information under the Real Estate Brokerage Act does not mean that this information should be accessible to everyone. Good brokerage practice and the consideration that clients should have trust in the real estate broker, implies that the broker and the firm should be careful in the handling of such information, and that they assess to whom, and for what purposes, they provide the information. 3 3 Duty to provide information to the tax authorities The real estate brokerage firms' duty to provide information to the tax authorities regarding their clients or customers is according to the Tax Administration Act 4 Section 10-2 (1) and (2): "Section 10-2. Control information from third parties (1) Any third party is obliged, upon request from the tax authorities, to provide information that may have significance for someone's tax liability. (2) Lawyers and other third parties are obliged, without hindrance from statutory confidentiality, upon request from the tax authorities, to provide information about money transfers, deposits, and debts, including who are the parties to the transfers, on their accounts belonging to the taxpayer." The provision is based on the Tax Assessment Act Section 6-2 and the Value Added Tax Act Section 16-2. The first paragraph corresponds to the Tax Assessment Act Section 6-2 no. 1 and the Value Added Tax Act Section 16-2 first paragraph, while the second paragraph corresponds to the Tax Assessment Act Section 6-2 no. 2 and the Value Added Tax Act Section 16-2 second paragraph. Finanstilsynet assumes that the brokerage firm, unhindered by the statutory duty of confidentiality, must provide information about transactions on client accounts upon request from the tax authorities. 5 In addition, the tax authorities may require the broker to also document the information "[...] for example by providing access to, presenting, compiling, delivering, or submitting accounting material with invoices, contracts, correspondence, board minutes, electronic programs and program systems." 6 This means, for example, that the broker, unhindered by the duty of confidentiality, must present the settlement statements. The duty to provide information and documentation also covers information about unnamed actors. 7 This means that upon request from the tax authorities for access to information in the brokerage journal, assignment journal, sales contracts, correspondence in individual cases, and other documentation, which does not concern information about money transfers, deposits, and debts, the broker must concretely assess whether the documents contain information about anyone's personal matters or operational and business conditions, and if so, the broker must redact these pieces of information before the documents are handed over to the tax authorities. For example, any terms that have been negotiated in the purchase contract, or special notes in the journal, which due to their nature are covered by the duty of confidentiality, must be redacted or removed before the broker delivers the documents to the tax authorities according to the requirements.

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