REGA adopts Classification of Violations, Penalties under Real Estate Contributions Law

Logo of Real Estate General Authority (REGA)

The Real Estate General Authority (REGA) approved a classification table for violations and penalties under the Real Estate Contributions Law and its executive regulations.

According to Umm Al-Qura gazette, the table refers four violations to the Public Prosecution. 

These violations include offering, advertising, marketing, or raising funds for real estate contributions without getting an approval or a license from the Capital Market Authority (CMA).

Decisions taken by licensed parties or contribution managers where there is an existing or potential conflict of interest. Violations also include the sake of real estate contribution assets without valuation by certified appraisers, and failure to deposit contribution-related returns directly into the escrow account.

According to the abovementioned classification, applicants providing misleading information before obtaining a license will face a fine of SAR 10,000–30,000 and up to a 5-year activity ban.

Licensed practitioners providing misleading information to obtain classification will face the same fine range. If the licensed party, engineering consultant, or chartered accountant lends money from the real estate contribution capital, they will face a fine at 1% of the lent amount (maximum SAR 1 million) in addition to up to 5-year ban.

Property owners failing to transfer ownership after licensing will be punished by a fine at 0.5% of the property value (maximum SAR 500,000).

Disposal of the entire in-kind share in the first year, or more than 50% in the second year until liquidation will have a 2% fine (maximum SAR 1 million).

Repeat violations such as obstructing the work of the manager, consultant, or chartered accountant necessitate delivering a first warning, subsequent fines of SAR 10,000–50,000 and up to a four-year ban.

Unauthorized borrowing against contribution funds or assets require a 10% fine of the borrowed amount (maximum SAR 5 million), in addition to up to a five-year ban.

Those who collect contribution-related amounts outside the escrow account will face a 5% fine of collected sums (maximum SAR 5 million) in addition to up to a five-year ban.

A fine of SAR 10,000–70,000 will be imposed upon failure to disclose material changes based on project size, with bans up to four years for large contributions.

Violators must correct the offense within 10 days after the penalty is imposed.