The importance of the EU for Property Professionals

The creation of the European Union has had far reaching consequences for those working within its borders. All professionals, as citizens of the European Union and as professionals, are affected by European law, directly and indirectly, and in particular by the rules of the internal market. However, the law of property remains within the competence of the member states of the European Union. Also, whilst the European Union has introduced sectoral directives harmonizing training to facilitate the mobility of professionals in Europe concerning, for example the medical profession or architects, there is no equivalent for property professionals as regards their professional status.

This does not mean to say that the European Union is not important for property professionals, in fact in many different ways it affects their daily professional lives. In considering how this applies we will look at the fundamental freedoms created by the European treaties, the rules of the single European market, and other areas of increasing importance.

The Fundamental Freedoms

The internal market is based on the fundamental freedoms of movement of the European Union; the free movement of people, goods, services and capital. The free movement of goods has little application for property professionals. However, the free movement of people, the free movement of services and the free movement of capital, all affect property professionals directly or indirectly.

The Creation of a Single European Market

The free movement of people

How do the rules relating to the free movement of people affect property professionals? The creation of a single European market evidently contributes to mobility in Europe, and when people move from one country to another they have to rent or buy a property because they need somewhere to live. Therefore the free movement of people including salaried workers and those who, for example, choose to live or retire in a country other than their own, has an effect on demand for property in different countries. These people must be treated as nationals in applying the principle of equality of treatment, which is at the heart of European texts on the fundamental freedoms. This creates a real European property market in which property professionals must work.

The free movement of services

As to the free movement of services, professionals as citizens of member states benefit from the free movement of services and associated freedom of establishment because these freedoms make it easier for them to work in different countries. Here we must refer to the 2006 Services Directive and the 2005 Directive on Recognition of Professional Qualifications. These two directives codify and expand on the essential existing rules and the rulings of the Court of Justice allowing property professionals from other member states to establish themselves in different countries within the framework of free movement of services. Thus they benefit professionals, who can for example open a branch office in another member state, which is particularly interesting for those who live close to a frontier.

These directives contain certain safeguards and must be read carefully. The Services Directive is aimed at eliminating obstacles to trade in services, thus allowing the development of cross-border operations. It also contains a section on quality care and encourages the elaboration of codes of conduct at a European level, in particular by professional bodies or associations. At the end of 2007 the European Commission published a working document on "Developing the Quality of Services in the Internal Market: the Role of European Codes of Conduct". This emphasizes the importance of the role of European professional associations in formulating such codes, involving contact between professionals from different member states. It is also important to work on normalization of standards at a European level.

The Services Directive imposes on professionals transparency of information for consumers, concerning identification of the enterprise and its services. This could pose problems for professionals from some member states, where there is no professional status or organized professions, wanting to work in other member states. On the other hand, for others who have a relatively detailed status it will not be difficult. In this way the Services Directive presents an opportunity for those who wish to develop their activities in other countries.

Article 15 of the Directive on Recognition of Professional Qualifications envisages the establishment of common platforms to facilitate the mobility of professionals. This applies to professions for which the minimum training requirements are not subject to co-ordination at EU level. They are subject to a regime of "mutual recognition" according to which each member state remains competent to regulate (or not) professions on its territory, whilst recognizing in principle qualifications acquired in other member states. The Directive allows member states to require a compensation measure from professionals coming from other member states.

The creation of common platforms aims to simplify the assessment of individual applications by the competent national authorities and give greater security to the professional as to the outcome of their application. It predefines the qualification criteria able to overcome the differences between the various national training courses so as to avoid the need for any compensatory measure. The European Union also encourages professional mobility by providing funding for cross-border training, which can include training for property professionals in the form of its Lifelong Learning Programme. The European Qualifications Framework adopted in 2008 will also help to compare qualifications across the European Union's education and training systems.

The free movement of capital

The free movement of capital also concerns property professionals. The free movement of capital is a fundamental freedom, but one which has taken much longer than the others to be realized. The 1988 Directive for the implementation of Article 76 of the treaty establishing the European Communities enshrined the principle of full liberalization of capital movements between member states with effect from 1 July 1990. "Capital movements" in this context are understood to be all the operations necessary for the purposes of capital movements carried out by a natural or legal person, including direct investment, investments in real estate, operations in securities and in current and deposit accounts and financial loans and credits. It is important to emphasize that the fact of buying a property in another member state falls within the framework of the free movement of capital.

The European Union is also having an impact in the area of financial services, which can be of concern to property professionals because their clients need access to credit and associated products. In 2007 the European Commission published a White Paper on the integration of EU Mortgage Credit Markets, the outcome of which may well be of interest for property professionals. For example the White Paper announced that a Recommendation to member states on property valuation standards, foreclosure procedures and land registration will be presented in 2008. It also announced that the European Commission will publish regularly updated "scoreboards" on the cost and duration of land registration and foreclosure procedures in all member states.

European legislation affecting businesses

There are other business requirements which can be of relevance to property professionals. European law applies to the creation of companies, including property companies. If a European national wishes to create a property company in a particular member state it must be subject to the same rules as nationals of that member state, based on the principle of equality of treatment. For example, if there are fiscal advantages attached to certain possible investments in a member state these fiscal advantages cannot be reserved to nationals of that member state.

In the matter of civil judicial co-operation, there are also important existing texts. In 1968 the original six member states agreed on common rules on jurisdiction and enforcement of judgments in civil and commercial matters in the Brussels Convention. This facilitates judicial co-operation and recognition of decisions of justice in the European Union. Also, for example, since 1 December 2002 the European Judicial Network in civil and commercial matters between the member states has been operating. It aims to benefit individuals and businesses involved in cross-border litigation.

Property professionals have to deal constantly with contracts. There is a 1980 convention to determine which law is applicable to a contract and so also to property contracts. The 1993 Unfair Contract Terms Directive introduces a notion of "good faith" in order to prevent significant imbalances in the rights and obligations of consumers and sellers and suppliers. It is one of eight directives currently being analyzed in the Review of the Consumer Acquis. The area of contract law is one which is likely to continue to develop in the near future, in the form of the Common Frame of Reference which is intended to provide a handbook to be used for the revision of existing and preparation of new legislation in the area of contract law.

There is other European legislation which affects daily professional life. Examples include the 2006 Directives on the Common System of Value Added Tax and With Regard to Reduced Rates of Value Added Tax. Specific sectors of activity can also be affected, for example timeshare in the 1994 Directive on Timeshare (to be revised by the current proposal for a directive on the protection of consumers in respect of certain aspects of timeshare, long-term holiday products, resale and exchange). Property professionals must be aware of the provisions of the 2005 Directive on Prevention of the Use of the Financial System for the purpose of Money Laundering and Terrorist Financing.

Free and Fair Competition in the Single Market

Like all professionals, property professionals are also concerned by the rules ensuring free competition amongst providers of services. Professional services in this context refer to the liberal professions and include real estate. These rules are based on Article 81 (concerning agreements, decisions of undertakings and concerted practices which may restrict competition) and Article 82 (abuses of a dominant position) of the EC Treaty. Whilst there are no specific rules which relate only to the property sector, the European Commission has taken a number of initiatives which concern professionals regarding free competition. For example, it has adopted two reports on the subject of regulation of professional services, the first being the "Report on Competition in Professional Services" of 9 February 2004 followed on 5 September 2005 by the report "Professional Services-Scope for More Reform". These reports focus on six professions, lawyers, notaries, accountants, architects, engineers and pharmacists, not on property professionals but their contents merit attention.

The conclusion of these reports is that the Commission is not opposed to all regulation as it is recognized that there are legitimate arguments in favour of certain regulations in the professions, but it considers that restrictive regulations should only exist where they provide an effective and proportionate means of protecting consumers. All interest groups are urged to make a joint effort to reform or eliminate those rules which are not justified, Regulatory authorities in the member states and professional bodies are invited to voluntarily review existing rules taking into consideration whether those rules are necessary for the public interest, whether they are proportionate and justified, and necessary for the good practice of the professions.

It should be noted in connection with the Services Directive that Article 37 of the Directive provides that professional codes of conduct must comply with Community law, which includes competition law. Any attempt to establish fixed prices will be deemed to be contrary to Articles 81 and 82 of the EC treaty as decided in the Belgian architect's case in 2004.

Property Professionals and Sustainability

Property professionals operate in the built and natural environment. Accordingly, it is increasingly important for them in carrying out their professional services to be aware of European legislation on environmental issues. In particular, what is the importance to property professionals of the sustainability agenda?

The environment started to have an impact on development in the European Union with the 1979 Directive on the conservation of wild birds and continued with measures such as the 1985 Directive on the assessment of certain public and private projects on the environment. Legislation such as the 1992 Directive on the conservation of natural habitats and of wild fauna and flora followed.

Energy supply, land contamination, waste management and transport are all issues of sustainability which can be relevant to property professionals, as can habitat/biodiversity loss, social exclusion (in terms of social housing), and water supply issues. Investors are increasingly taking account of environmental sustainability in making investment decisions as are public authorities in providing social housing. The European Parliament resolution of 10 May 2007 on housing and regional policy expresses support for the Commission's campaign for sustainable energy. This means that property professionals operating in different areas must know about a building's environmental sustainability. These sustainability factors impact on the design and construction of buildings and their cost.

Property developers need to know about environmental impact assessments. They also need to know about European legislation on waste and water management, an area which continues to develop with the European Parliament's recent approval of directives on waste and water quality.

Buildings have a major impact on the sustainability agenda in environmental, economic and social terms. Eighty per cent of the European Union's greenhouse gas emissions come from energy, forty per cent of Europe's energy consumption comes from the buildings sector. In October 2006 the European Commission adopted an Energy Efficiency Action Plan, with the strategic objective of boosting energy efficiency with a target to save twenty per cent of the European Union's total primary energy consumption by 2020. The construction and renovation of buildings needs to take these matters into account.

The buildings sector not only accounts for forty per cent of the European Union's energy requirements but also offers the largest single potential for energy efficiency. Research shows that more than one-fifth of the present energy consumption could be saved by 2010 by applying more ambitious standards to new buildings and those undergoing renovation. The question of improved energy efficiency has been tackled in earlier existing instruments including the 1992 Boiler Directive, the 1989 Construction Products Directive and the buildings provisions in the 1993 SAVE Directive. There have also been a number of instruments introduced with a view to improving energy use, such as the 2002 Directive on Energy Performance of Buildings, the 2004 Directive on Combined Heat and Power, the 2005 Directive on Energy Using Products and the 2006 Directive on the Promotion of Energy End-use Efficiency and Energy Services.

The 2002 Directive on Energy Performance of Buildings requires that a minimum level of energy performance applies to all new buildings and large existing buildings which undergo major renovation, an energy performance certificate be provided when buildings are constructed, sold or newly rented, and the regular inspection of boilers and air-conditioning systems in order to guarantee a proper and energy efficient operation of these appliances. It is anticipated that proposals for the recasting of the 2002 Directive will be introduced before the end of 2008.

Other environmental directives have an effect on the environment within which property professionals operate. Examples include the 2004 Directive on Environmental Liability with Regard to the Prevention and Remedying of Environmental damage and the 2006 Directive on the Management of Waste from Extractive Industries. Different EU policies (such as water, waste, chemicals, industrial pollution prevention, nature protection, pesticides, agriculture) contribute to soil protection. In addition in 2006 the European Commission adopted a Soil Thematic Strategy and a proposal for a Soil Framework Directive with the objective to protect soils across the EU. The proposed Soil Framework Directive remains under discussion but the issue of contaminated land is one of which property professionals must be aware.

All the examples given illustrate the importance of the European Union to property professionals. With the expansion of the European Union and extension of the Single European market its importance will increase. In the circumstances, property professionals cannot afford not to be aware of the significance to them of the European Union. They must also recognize the importance of being organized at a European level in order to take full advantage of the opportunities offered in the European market. 

July 2008