Losing your licence

The Polish government has announced plans to deregulate dozens of professions - 60 out of 380 on the list of those that currently require licences. Among the 49 professions to be liberalised in the first wave are those of real estate agents and property managers.
Donald Tusk launched the liberalisation programme in his first prime ministerial address to parliament after being re-elected last year; and at the beginning of March, the Minister of Justice Jarosław Gowin revealed details of the first phase of the deregulation. He expects that the bill will be presented to the lower chamber, the Sejm, this month. The government's plans have triggered protests from the professional groups in question, with the majority of the representatives of both real estate professions firmly against the removal of barriers to entering their occupations, arguing that the proposal increases the risk to clients and their monetary security. However, there are some people in the business who are not concerned by the projected changes - and some who even claim that there are no barriers in the first place, so there is nothing to be removed.

The bigger the barrier, the higher the price
The government is of a different opinion. It argues that the number of regulated professions in Poland is the highest in the EU. According to the legislators, up to 100,000 new jobs could be created in the first group of professions to be deregulated, which would benefit young people in particular, reduce red tape and increase competition in the services offered by those professions, resulting in lower prices. "Perhaps some people will be offering their services for a commission of 0.5 pct, but how will they be serving their clients?" wonders Olimpia Bronowska, a real estate agent from the Polish Real Estate Federation (PREF), adding that the whole point of a licence is to inform the client that they are dealing with a true professional. "The quality of services and the security of the clients' money are objections typically raised against any changes to the real estate professions. However, imposing barriers doesn't mean improving the quality, but rather raising prices," claims Andrzej Sadowski of the Adam Smith Centre. "Freedom of access to work is guaranteed by the Constitution and so all barriers are unconstitutional. The existence of professional bodies, licences and barriers harks back to a guild-based system, the weaknesses of which are commonly known. Under such a scenario we cannot speak of a free market. A free market is when there are no regulatory measures," says Mr Sadowski. In his opinion, the government's proposals are more about limiting barriers than about deregulation. "Liberalisation is necessary in some cases, for instance in the case of lawyers, where we require a professional association, but not in the case of real estate agents and property managers," argues Jarosław Skoczeń of the Emmerson real estate agency.

The market will do the checks
In order to obtain a real estate agent's or a property manager's licence, one must first complete a university degree, and if it is not related to real estate management, additional postgraduate studies must be completed. Following this, an internship of at least half a year is required for a person to obtain a licence. On January 1st 2008, professional examination was cancelled. "After the changes of 2008 nothing stands in the way of deregulating these professions completely. And with every change, the prestige of real estate agents is diminished [...]. Perhaps in time a primary education will suffice. Are we really on the right path? The market will eventually tell us," claims Mariusz Kania, the president of the management board of the Metrohouse agency. According to him, the lack of a licence necessary to verify the level of education and experience translates into a significant growth in the role of brands on the market, including those of professional associations.
The removal of licences may bring about the remodelling of the whole agency system in Poland. Professional organisations will aim for new goals. "The market will move towards consolidation, as the standard of an agent's work can only be shaped via large groups. The industry will have to face the task of maintaining the prestige of the profession itself and the high quality of services provided," says Mariusz Kania. In fact, although some companies and associations are not against the changes themselves, they do take exception to the way the government is communicating with the industry. "We have not been consulted in any way, and are instead shown propaganda materials, devoid of any commentary," complains Wojciech Kuc, the president of PREF.
The responsibility for educating real estate agents and property managers will now be shifted from the people interested in becoming professionals in the field to the real estate agencies themselves. "Their task will become more difficult, as now the fact that somebody is the holder of a licence implies that we are dealing with a person who has acquired, in a systematic manner, the knowledge necessary to work as a real estate agent," says the manager of Metrohouse. Now the agencies will have to provide comprehensive training of real estate agents on their own. "I can't even conceive that a person unprepared for the job could take part in multimillion euro transactions and advise a client who is making the most important decision of their life," he adds.

Cheaper for the client
The act is based on the assumption that clients should pay less, even though it puts certain inconveniences on market players. But there will be more professionals who do not have to pay for additional training, which means it will be cheaper. "The price, as in the case of public procurement, is not a good criterion - one should be attracted by the quality," declares Arkadiusz Borek, president of the Polish?Institute of Real Estate Management (IGN). Andrzej Sadowski of the Adam Smith Centre, a strong opponent of any regulatory measures and barriers, is of the same opinion. He believes that professional bodies should not contribute to price spikes by putting regulatory measures on their services, but rather should work to maintain quality. "The free market does not oppose professional bodies as long as they protect the quality of provided services. New associations should guarantee this quality," says the economist. In his view the choice between a certified or non-certified real estate agent or property manager should be made by the client, and not be regulated by law. "It's not good when only one organisation issues licences," he adds.
Some representatives of both occupations are projecting even darker scenarios. "It won't do any good. As a result the client may suffer rather than the professional associations - because there aren't any. If someone thinks that access to these professions is difficult, then they need to be better informed," says Arkadiusz Borek of IGN. "Professional bodies will not lose out and may even benefit from the situation, especially the large, well-known real estate agencies with a strong brand that have been operating on this market for years. Such entities could not afford to lower their standards," explains Mr Kania. The removal of licences may also represent something of a setback for developers. "It will become more difficult for those willing to work in these professions to fulfil developers' expectations. They will encounter problems with gaining experience through internships, which so far have been compulsory for those who apply for a licence, but will now not be required," argues Wojciech Knawa, head of Echo Investment Property Management. He adds that with the withdrawal of licences he will lose the certainty he has about his future employees' qualifications. "Now I can't even imagine hiring a person who is the holder of a licence, but lacks experience in property management," he adds.
According Arkadiusz Borek, once the barriers have been lifted, the situation will worsen: "As we speak there are a lot of buildings in Poland that may soon collapse. Overdue renovations and insufficient rents are contributing to the situation. A smaller fee for a less qualified manager would only make things worse. You can hire a cheaper manager, but will he or she ever be seen on the premises?" he asks.

Security first
"Deregulation cannot be traded off against the client's security, and not only in monetary terms, but also in terms of the client's health and life," adds Maria Kowalska, the president of the Polish Federation of Real Estate Professions Association (PFSZN). "We currently have the Professional Accountability Committee, but it is to be abolished. We will be left with the option of civil court action, but this route is lengthy and expensive. And we all know how Polish courts operate...," warns Olimpia Bronowska of PREF. Many representatives of the business take the 2006 tragedy in Katowice, when the roof of an exhibition hall collapsed, as a prime example of such negligence.
"Also, there may be more scams at the agency level," suggestz Jarosław Skoczeń of Emmerson. As a result of the lack of licences and professional accountability, the market may move into a grey zone. PREF president Wojciech Kuc believes that if somebody is conscious of their wants or feels that there is a chance of making a mistake, they will not register as agents or property managers at all. "Companies offering combined services related to a property encumbered by bank credit may also benefit. So far, such action has been illegal and sanctioned with the revocation of the licence. But once the changes come into law, it will become impossible to enforce this," claims Mr Kuc.

Does the government have the will?
The planned changes are unacceptable, according to representatives of the business. Basically because only a primary education would be needed to enter these professions. Deregulating is fine, but only if it is not against the interests of the citizens, the real estate agents add. For such reasons, real estate professions associations are pushing for more regulatory measures and the reinstatement of the professional examination. "The primary market regulations are being increased via the introduction of trust accounts to improve client security, whereas the scondary market is to be left without any regulations," Ms Bronowska points out. The PREF also wants the reinstatement of the professional examination and the introduction of trust accounts for transactions on the secondary market. "Increasing the number of certificates or higher levels of insurance will not do any good. This has already been seen in the case of travel agencies: adding barriers did not protect clients from losses," says Andrzej Sadowski of the Adam Smith Centre. We will find out soon enough if the government still has the determination to implement its plans. "If the proposal isn't passed, this will mean that professional bodies are stronger than the government," concludes Mr Sadowski.