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Real estate crowdfunding in the EU is going to be simpler and safer

27/10/2021

New EU Regulation on business crowdfunding will come into effect in November 2021. Unified European legislation leads to overall simplification and cost reduction, and also strengthens investor protection.


On 7th October 2020, the European Parliament passed Regulation (EU) 2020/1503 on European crowdfunding service providers for businesses. This concerns real estate crowdfunding related to business financing.


Prior to this, legislation on crowdfunding was mostly based on national legislation. However, the real estate crowdfunding market is seeing impressive growth, and because of this the EU legislation needed to address this subject. A harmonized EU legislation will facilitate cross-border crowdfunding and also limit the costs. Regulation (EU) 2020/1503 establishes uniform rules in the EU regarding investment-based and lending-based crowdfunding services related to business financing.


Crowdfunding platforms can now ask for an EU passport, which will allow them to get a single authorization in order to offer their services across the EU.

The new regulation will also strengthen investor protection. First of all, real estate crowdfunding project owners will be required to provide precise information to the investor regarding the crowdfunding offer. In addition, Investors will also have to demonstrate that they have the ability to face potential losses by completing a suitability and appropriateness test.


The regulation will cover and be applicable to every EU real estate crowdfunding platform raising up to 5 million euros, calculated over a period of 12 months.


Regulation (EU) 2020/1503 came into force on 10th November 2020, and will be applicable from 10th November 2021.

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