Documentation of Bidding Rounds and Related Matters in Real Estate Brokerage

Circular Documentation of Bidding Rounds and Related Matters in Real Estate Brokerage

CIRCULAR: 9/2013 DATE: 16.10.2013 THE CIRCULAR APPLIES TO: Real Estate Brokerage Firms Lawyers with Real Estate Brokerage Activities

FINANS TILSYNET P.O. Box 1187 Sentrum 0107 Oslo

Documentation of Bidding Rounds and Related Matters in Real Estate Brokerage 2 | Finanstilsynet

1 Background With effect from January 1, 2014, amendments have been adopted to the Real Estate Brokerage Regulations regarding bidding procedures, as well as to certain other provisions related to this. The significant change is that bidding rounds must be documented, meaning that communication during the bidding process must be in writing, and bidders must identify themselves. Electronic messages, such as email and SMS, or the use of bidding platforms, will satisfy the requirement for writing. The rules will apply to real estate brokerage assignments entered into after January 1, 2014, but not to assignments concerning commercial real estate, lease agreements, or real estate abroad. The purpose of this circular is to inform about the broker's duty to ensure a proper conduct and documentation of the bidding process.

2 General Duties in Bidding The broker shall facilitate a proper conduct of the bidding round. The broker shall manage the bidding by, among other things, adjusting the pace so that the client and potential interested parties can be secured a proper basis for their decisions. An example of this is to advise bidders against setting such a short deadline for the bid that the broker does not have the opportunity to inform other interested parties who might wish to participate in the bidding round. If the bidder nevertheless maintains a short deadline, the broker must ensure that the seller is aware of the consequences of this. The broker shall also encourage the client not to accept bids directly from bidders, but to refer them to the broker. The broker shall otherwise continuously assist and advise both the seller and bidders regarding the bidding.

3 Written Bid and Acceptance, Signature and Control of Bidder's Identity For assignments entered into after January 1, 2014, the broker may only inform the seller or potential buyers about bids that have been given in writing. The same applies to bid increases and counter-bids, as well as any acceptance or rejection from the seller. In addition, the bidder must have identified themselves and provided a signature to the broker before the bid is communicated. Bids, acceptance, or rejection must be documented for future reference. Electronic messages must be archived physically or electronically. The same applies to the use of so-called bidding platforms. The rules do not entail any change in existing practice regarding what bids and acceptance should contain. Finanstilsynet assumes that the industry itself develops appropriate forms and standards for bids, bid increases, and acceptance, which safeguard the purpose of a verifiable conclusion of the agreement. The requirement for writing does not restrict the general rules on contract formation and power of attorney in the relationship between buyer and seller. If the broker, for example, comes into a situation where the seller's acceptance cannot be confirmed in writing before the acceptance deadline expires, the oral acceptance must be communicated to the bidder. Such an incident must be explained and documented, and the responsible professional must follow up on the deviation in the usual manner. The broker must have obtained the bidder's signature and identification no later than before communicating information about the bid to the seller and interested parties. Both the identification requirement and the signature requirement will be fulfilled by the use of an electronic signature from a certificate issuer registered with the Norwegian Post and Telecommunications Authority. Alternatively, the identification types specified in the anti-money laundering regulations will fulfill the identification requirement. The collection can then be done, for example, at a viewing by the broker (or viewing assistant) noting that they have checked the interested parties' identification by stating the identification type and reference number on a registration form, where the interested party simultaneously provides their signature. The registration form must be archived. An alternative procedure could be, for example, that a copy or photo of the bidder's identification document together with a signed bid form or a registration form is sent to the broker electronically or in another way. In that case, the copy of the identification document must be archived. Finanstilsynet, however, advises against sending copies or photos of bank cards electronically as this also contains the card number. If the brokerage firm has previously obtained identification and signature from a bidder in connection with another assignment, this can be used. The broker must then ensure a reference to the assignment number where the documentation can be found. If the bid was submitted by an agent, it is sufficient to obtain identification and signature from the agent.

4 Broker's Information on Bid Status and Other Matters During the Bidding Round The broker is obligated, as before, to inform those involved in the bidding round about the status of the bidding. This information must now be given in writing. Information must be provided about the size of the bid, any reservations and acceptance deadline to the client, bidders, and other interested parties, but only to the extent necessary and possible. No changes have been made to previous practice on this point. For example, it will normally only be necessary to give information to those interested parties who are expected to participate in the bidding round. This can concern interested parties who have already placed a bid, as well as persons who have expressed such interest in various ways. Furthermore, as a general rule, it will only be necessary to inform about the highest bid, and not expired bids. Normally, it will not be necessary to give information about bids that are obviously too low to be considered. The change compared to before is that if information about bids is given to those involved in the bidding round, this must be given in writing. The limitation "to the extent possible" applies only if it is not practically possible to give the information, for example due to a short acceptance deadline, or if contact details for the person are not available. In addition, the limitation will cover legal obstacles, for example where the bidder has set a condition that the bid should not be used in an open bidding round. The broker shall confirm in writing to the bidder as soon as possible that the bid has been received. The purpose is to prevent the bidder from not knowing that the bid has not reached the broker, for example due to technical problems.

5 Information on Bidding in the Sales Brochure Information must be given in the sales brochure about the procedure for bidding and the bidder's rights and duties. The information must be formulated so that interested parties get a clear and easy-to-understand introduction to the bidding process. Interested parties must be made aware of the central rights and duties they will have as bidders. This includes, among other things, the right to receive written information about bid status before placing their own bid. The information will normally be general based on current legal rules, industry norms, and practice. If special conditions for bidding have been agreed upon in individual cases, this must appear in the sales brochure.

Anne Merethe Bellamy director market supervision Wilhelm Mohn Grøstad section chief

Contact persons: Special Advisor Eva Marie Hansen, tel. 22 93 97 75, e-mail: emh@finanstilsynet.no Senior Advisor Johan Andreas Skartveit, tel. 22 93 99 24, e-mail: jas@finanstilsynet.no Advisor Marit Skjevling, tel. 22 93 97 27, e-mail: mas@finanstilsynet.no

Link to law change on Lovdata: Regulation June 21 no. 722: Regulation on amendment to the regulation on real estate brokerage (documentation of bidding rounds)

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