Inquiry Hearing Cases - A Selection (Excerpts)
"Negative Equity" Properties and Their Stakeholding
Two estate agents were found guilty of failing to advise their client that the property being transacted might be a negative equity and that certain risks might be involved in not stake-holding the deposit money with a solicitor. The agent's failure caused the client (the purchaser) to suffer loss of his deposit money and the Disciplinary Committee handed down sentences of suspension for four and six months respectively to the agent and his supervisor.
The agent and his supervisor were found to have failed to disclose to the prospective purchaser important information relating to the property. They noticed, before the provisional agreement for sale and purchase was entered into, that the property had been mortgaged a number of times and that the vendor had not produced satisfactory evidence on his ability to pay off the mortgages. Moreover, while the vendor demanded an exceptionally large deposit, the agent did not advise the prospective purchaser the risks involved in not stake-holding the deposit money with a solicitor.
Later in the transaction process, the purchaser's solicitor found out that the property was a negative equity and that the sale could not proceed. By that time, the vendor could no longer be contacted and the prospective purchaser had lost the deposit money.
The Disciplinary Committee gave very careful consideration to the evidence produced by the parties, and concluded that the agent had not exercised due diligence in protecting the interests of the client. The Committee was also mindful of the monetary loss of the purchaser. Consequently the estate agent was given a suspension of four months. His superior in this transaction, the branch manager, was party to the transaction in his supervisory role. As he had instructed his subordinate to continue with the deal even in the absence of comprehensive information about the mortgage status of the property, he was found to have failed to exercise appropriate judgement and advise his subordinate and client in a proper manner. His responsibility was therefore deemed greater and his licence was suspended for six months.
Paragraph 3.4.1 of the Code of Ethics
Estate agents and salespersons, in engaging and accepting an appointment as an agent, should protect and promote the interests of their clients, carry out the instructions of the clients in accordance with the estate agency agreement and act in an impartial and just manner to all parties involved in the transaction.
Paragraph 3.5.1 of the Code of Ethics
Estate agents and salespersons shall, in fulfilling their duties, exercise due care and due diligence.
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