Impartial contract-engineeering in real estate transactions : : the Swedish broker and the Latin notary

University dissertation from Infrastructure, Kungliga Tekniska högskolan

Abstract: Even in the days of an ever closer European union, Europe contains no less than four different legal cultures with respect to real estate conveyances: the Latin-German notary system, the deregulated Dutch notary system, the lawyer/solicitor system, and the Scandinavian licensed real estate broker system. The latter is of particular interest in that Scandinavian brokers play a far larger role in real estate transactions than their European counterparts. This paper examines and compares the Swedish real estate broker and the Latin notary. The Swedish broker is required by law to act as an impartial intermediary, to provide counseling to both parties, and to assist in drawing up all contracts and other documents necessary for the transaction at hand. To that end, the broker must be active and observant of the particular needs of the parties to the present transaction, always striving to enable them to reach equitable and practical agreements so as to prevent future disputes. In other words, the broker is required to tailor the transaction to fit the needs of the buyer and seller. The Latin notary profession prevails in large parts of the world, particularly the Latin-German parts of continental Europe, and Latin America. While there are divergences in the notarial laws of all countries, the similarities are greater still, and it is correct to speak of a single profession throughout all these countries. The notary carries out several important functions, the nexus of which is the authentication of legal documents. In the preparation of these documents, the notary is required to provide impartial counseling in order to tailor the transaction at hand to fit the will and needs of the parties. To uphold the integra fama of the profession, and to safeguard the proper performance of the notarial functions, lawgivers in all countries emphasize the importance of impartiality and integrity. There are national divergences as to the specific rules of conduct related to impartiality, particularly those concerning what activities are considered incompatible with the notariat, but they rest on common principles. Most importantly, not only must the publica fides be honored, it must be seen in the eyes of the public to be honored. The organization and regulation of the notary profession raises important economic issues, particularly with regard to competition/monopoly and market failures. The discussion of the regulation or deregulation of the notariat is by no means settled. Comparing the two professions, it is striking to see the enormous similarities in the legal frameworks and their respective rationales. Two common features are of particular interest. Firstly, both the Swedish broker and the Latin notary are required to assist the contracting parties in the contract phase, drawing up any necessary documents and counseling the parties as to the implications of the transaction. In that respect, both professions function as tailors to the transaction. Secondly, both the broker and the notary are required to act impartially and independently – impartially visavi the contracting parties, and independently in order to preserve the public faith in the independence and integrity of the professions. The similarities can be summarized as a function on the real estate market: impartial counseling and contract-engineering. This function exists alongside other functions, such as the brokers’ traditional matchmaking, or the registration of property rights. This functional approach may prove very useful in all kinds of analyses of the real estate market, whether of political, legal, or economic nature. For instance, with respect to the merits and/or necessity of the Swedish impartiality rule, those wishing to amend the law and introduce a system of overtly partial brokers acting solely on behalf of their principal have to face the question of what is to become of counseling for the principal’s counterpart. Should the counterpart be forced to choose between hiring their own legal counsel or make do without? Further, those wishing to contest the mandatory notarial intervention in real estate transactions have to face the same question: what is to happen to impartial counseling, given not only to the client but also to the client’s counterpart? Both instances illustrate the common feature shared by the two examined professions: impartial contract-engineering and counseling. To complete the picture and cover the whole arena of real estate transactions, the next logical step is therefore to compare and analyze different systems for registration of property rights. Doing so will hopefully achieve a tool for examining the real estate market that will prove useful indeed, particularly in future discussions concerning European harmonization.

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