In a move aimed at enhancing discipline and transparency in the real estate contributions, the Board of Directors of the General Real Estate Authority approved an updated classification schedule violations and penalties, in accordance with the Real Estate Contributions Law and its implementing regulations. The new decision sends a clear message that the real estate market will no longer tolerate violations or practices that threaten the confidence of investors and market participants, and it establishes strict controls to ensure the rights of all parties and protect shareholders" funds.

Recently, the Board of Directors of the General Real Estate Authority a schedule classifying violations and the penalties prescribed in the Real Estate Contributions System, including deterrent measures that in some cases may result in referral to the Public Prosecution, substantial fines, and a ban on conducting business for specified periods.

Violations Referred to the Public Prosecution

The decision included the referral of four material violations for investigation and prosecution before the competent court, namely:

• Offering, advertising, marketing, or raising funds for real estate contributions without the approval or license of the Capital Market Authority.
• The licensee or manager of a real estate investment scheme making decisions or taking actions in the face of an actual or potential conflict of interest without complying with conflict-of-interest controls.
• Selling real estate investment assets without an appraisal approved by licensed appraisers.
• Failure to deposit the investment’s financial returns directly into the escrow account.—

Fines and Financial Penalties

• Submission of misleading information prior to licensing: A fine of 10,000 to 30,000 riyals, with a suspension of business activities for up to 5 years.
• Lending from real estate contribution capital: A fine equivalent to 1% of the amounts lent (up to one million riyals), along with a ban on conducting the activity for up to 5 years.
• Disposal of in-kind shares: A fine of up to 2% of the value of the disposed-of share (up to one million riyals).
• Obstructing the work of the contribution manager or advisors: An initial warning, followed by a fine of 10,000 to 50,000 riyals and a ban on conducting the activity for up to 4 years.
• Borrowing against share capital without authorization: A fine of 10% of the amount borrowed (up to 5 million riyals).
• Collecting funds outside official channels: A fine of 5% of the amounts (up to 5 million riyals) and suspension of business activities for up to 5 years.
• Failure to disclose material changes: A fine ranging from 10,000 to 70,000 riyals, with a suspension of business activities for up to 4 years.

Other violations and their fines

The table included eleven additional violations, such as:

• Failure to submit periodic reports to shareholders.
• Failure of the engineering consultant to supervise the joint venture’s operations.
• Signing or disbursing funds in violation of regulations.
• Failure of the joint venture manager to distribute profits or disclose material decisions.
• Providing misleading information in reports or disclosures.
• Failure to allow enforcement officials to perform their duties.

Fines for these violations range from 3,000 to 70,000 riyals, depending on the size of the joint venture (small, medium, large), and the violator is required to rectify the situation within ten days of the penalty being issued.

Within this strict regulatory framework, the General Real Estate Authority affirms that protecting investors and consumers is a top priority, and that any violations will be met with firm measures to ensure market stability and credibility.