Real Estate Tech and the Real Estate Brokerage Act: The Line Between Listing and Brokerage, IT-Based Explanations of Important Matters and AI Valuation Displays

Hello, I'm Noriaki Asato, Representative Attorney at LegalAgent.

In the real estate tech field, a wide variety of services are being offered, from matching functions connecting property searches and viewing reservations to AI-based price valuations, online explanations of important matters (IT-based explanations of important matters), and electronic contracts. The areas covered have also expanded, from sales and leases of residential and investment properties to home loans, renovations, and the use of vacant houses and private lodging. The basic regulation here is the Real Estate Brokerage Act (Act on Building Lots and Buildings Transaction Business). Whether a real estate brokerage license is required depends on whether the service merely lists property information or carries out substantive brokerage or agency toward the formation of a contract.

While pursuing convenience for users, it is important to work out which legal act your own service corresponds to, from the perspectives of both contractual relationships and operations on the ground.

The Line Between Listing Services and Brokerage Services

The first issue to check is where to draw the line between your involvement remaining at the listing of property information and stepping into brokerage or agency in transactions. Brokerage and agency under the Real Estate Brokerage Act refer to acts of mediating between parties toward the formation of a sale, exchange or lease of building lots or buildings. Merely displaying basic property information on a website and providing an inquiry form usually remains listing, and a paid listing does not immediately require a license just because it is paid.

On the other hand, if the company actively engages in negotiating terms or coordinating the parties' intentions through sales staff, customer support or a chat function, the likelihood increases that it will be found to be brokerage in substance. This is because, even if the terms of use state that the service "merely provides information," the judgment is based on the actual business activities. Where brokerage or agency is carried on as a business, not only is a real estate brokerage license required, but obligations also apply, such as explanations of important matters by a licensed real estate transaction specialist, delivery of statutory documents and regulation of the maximum fees.

Operating IT-Based Explanations of Important Matters and Electronic Contracts

IT-based explanations of important matters and the digitization of contract documents are becoming established as means of carrying out real estate transactions online. However, simply introducing a video call or e-signature system does not mean the procedures are lawfully completed. To give an IT-based explanation of important matters, it is a prerequisite to put in place a communication environment in which video and audio can be exchanged in both directions without interruption, and to deliver the explanatory materials to the other party in advance.

Furthermore, at the start of the explanation, the real estate transaction specialist's certificate must be presented on screen so that the other party can see it, and a procedure must be set out for temporarily suspending the explanation if communication problems arise and resuming it once they are resolved. In addition, electronic provision of the statement of important matters and the documents delivered upon execution of the contract requires the other party's prior consent and the methods prescribed by law. Recording the video or audio of the session is not a legal obligation, but if records are kept to prevent later disputes, it is important to obtain the other party's consent in advance.

Displaying AI Valuations and Recommendations

In real estate tech, a growing number of services display on screen AI-based valuation prices, estimated rents, expected sale prices and estimated investment yields. Because these figures strongly influence users' decisions, it is important to make clear on screen whether a figure is an estimate given as a reference value or a price guaranteed for a sale, as well as the reference date of the calculation and the scope of the data covered.

Attracting users by making valuations look excessively high may give rise to issues of improper representations under the Premiums and Representations Act. It is important to bear in mind that, however carefully disclaimers are added, they do not justify an improper representation that diverges from reality. A design that clearly shows the scope of the data used for the calculation and the limits on reflecting the circumstances of individual properties, together with the date of update, is appropriate.

Rental Management and the Rental Housing Management Business Act

When providing services relating to rental management, consideration of the Rental Housing Management Business Act is indispensable, separately from the Real Estate Brokerage Act. Rental housing management businesses managing 200 or more units, excluding properties they own themselves, are required to register with the Minister of Land, Infrastructure, Transport and Tourism. The business covered here is maintenance and preservation, such as inspection and repair of rooms and facilities, or the management of money such as rent carried out together with it; collecting rent alone does not constitute management business under the law.

A registered business is subject to obligations such as explaining important matters before concluding a management entrustment contract, segregating property and making periodic reports, even if it manages fewer than 200 units. In addition, the regulations on sublease businesses premised on subletting apply regardless of the number of units, so it is necessary to check how they apply in each case, separately from whether the business holds a real estate brokerage license.

Managing Customer Information and Property Information

The information handled in real estate tech includes not only names and contact details but also sensitive financial information such as employers, annual income, borrowing status and assets held. This information does not immediately constitute "special care-required personal information" under the Act on the Protection of Personal Information (APPI), but the privacy infringement and financial risk in the event of a leak are very large.

Therefore, it is desirable not only to prepare an external privacy policy but also to clearly set restrictions on internal access rights, the management of contractors, and the scope of provision to partner financial institutions and brokerage companies. After indicating who receives the information and for what purpose, also check whether the individual's consent is required, the supervision of contractors and the conditions for provision to foreign countries.

In connection with launching or reviewing real estate tech businesses, LegalAgent supports clients in working out whether the Real Estate Brokerage Act or the Rental Housing Management Business Act applies, drafting terms of use, and checking the operation of IT-based explanations of important matters and display screens. I think that, even in transactions conducted online, putting in place, one by one, the substance of the explanations and procedures required by law leads to the sound growth of the business.