Real Estate Brokerage "Al-Sa‘y"

"Al-Sa‘y" or real estate brokerage is a vital commercial activity in Saudi Arabia that facilitates property transactions between parties. Given its importance, the Kingdom issued regulations for it, most notably the Real Estate Brokerage Law under Royal Decree No. (M/130).

Definition of real estate brokerage:

Practicing intermediation to conclude a property transaction between its parties, whether through traditional or electronic brokerage, including receiving a commission for the services rendered.

Types of "Sa‘y":

• Brokerage in real estate: intermediation in selling, buying, or leasing real property.
• Brokerage outside real estate: intermediation in other deals such as goods or services.

Real Estate Brokerage Law:

• Licensing: Brokerage may not be practiced without a license from the General Real Estate Authority.
• Commission: The broker is entitled to a commission, with its percentage and conditions set in the executive regulations.
• Penalties: Practicing without a license may lead to a fine up to SAR 200,000, in addition to warning or license cancellation.

Companies Law:

Regulates incorporation of brokerage companies and the responsibilities of partners and shareholders.

Commercial Courts Law:

Commercial courts have jurisdiction over disputes related to commercial activities, including brokerage.

Under the Real Estate Brokerage Law, no one may practice brokerage without a license from the General Real Estate Authority. Therefore, an unlicensed broker has no right to claim commission before the courts. This is aligned with the Sharia principle "prohibition implies invalidity" whereby a non-compliant contract has no legal effect.

Penalties:

• Warning.
• Suspension of the license for up to one year.
• License cancellation.
• A fine not exceeding SAR 200,000, and the fine may be doubled if the violation recurs within three years.

Legal framework:

• In real estate: comprehensively regulated by the Real Estate Brokerage Law.
• Outside real estate: depends on the nature of the deal and the parties’ agreement.

Licensing:

• In real estate: mandatory from the General Real Estate Authority.
• Outside real estate: not required except for certain specified activities.

Commission:

• In real estate: set at 2.5% of the transaction value for sales or the first year’s rent for leasing, unless a different percentage is agreed in writing.
• Outside real estate: determined by agreement with no statutory percentage.

In real estate brokerage:

• Licensed broker: may claim the due commission before the competent court.
• Unlicensed broker: may not claim commission due to violating the law.

In non-real estate brokerage:

• Registered broker: may claim commission if he proves his role in the transaction.
• Unregistered broker: faces difficulty claiming rights without a clear agreement.

Real estate brokerage is not merely a trade activity but a responsibility that requires compliance with applicable regulations in the Kingdom. Compliance ensures transparency, protects rights, and supports the real estate market’s stability and growth.

We recommend for licensed brokers:

Obtain the necessary licenses and document all transactions in writing with the Authority to ensure rights and avoid legal liability.

We recommend for parties to real estate deals:

Deal only with licensed brokers to protect rights and ensure legal certainty.

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