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Inquiry Hearing Cases--A Selection II (Excerpts)

Gross negligence of estate agent resulted in client's heavy loss

An estate agency company was appointed as the sole agent for the sale of all the units, including shop spaces, in a commercial and residential block in Kowloon. At the time a Chinese herbalist was contemplating expansion of his practice for which more space was required. The herbalist sought assistance from this estate agency company, and inspected two adjoining shop units on the ground floor of the building in question accompanied by a salesperson representing the company. After some negotiation with the vendor the herbalist decided to purchase the two adjoining shop units. A provisional agreement for sale and purchase was signed and a deposit was paid.

The salesperson had provided the herbalist with no property information or land search results prior to the signing of the provisional agreement, nor had he indicated the capacity in which the vendor was selling the units. It was only when the formal agreement for sale and purchase was due to be signed that the herbalist's solicitor found out that the vendor was only a confirmor and there was no documentary evidence to confirm the transaction between this confirmor and the actual owner of the property. Eventually the confirmor could not complete the deal. The entire building, including the two shop units, was sold by the mortgagee bank to a third party. The herbalist was successful in a civil action that would entitle him to the refund of his deposit money, but the confirmor was a limited company without assets and the result was that he could not get the hundreds of thousands of dollars back at all.

Having examined all related facts and evidence the Disciplinary Committee found the estate agency company and the salesperson both negligent in dealing with the transaction. While handling the sale of an entire building in which there were residential and commercial units, they were not even able to secure documentary evidence that could confirm the vendor's title to the property. The vendor in this case was a confirmor which had only recently reached an agreement with the registered owner of the building. The agents were ignorant of the terms of the agreement and did not bother to find out. They relied only on a letter issued by the confirmor's solicitors to the confirmor in which the head agreement between the registered owner and the confirmor was referred to, and to which the terms of the head agreement had not been annexed.

The Disciplinary Committee held that both the estate agency company and the salesperson had the responsibility to protect the interest of their client, especially in the case of a confirmor sale. Under the circumstances, the agents should have endeavoured to obtain a copy of the head agreement between the registered owner and the confirmor and to scrutinise terms of transaction such as the sale price and the date of completion. In case of doubt the agents should have recommended to the purchaser that the deposits be stakeheld by solicitors. For the negligence of their duties the estate agency company was penalised with conditions restricting its practice and the salesperson, suspension of licence for four 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 their clients in accordance with the estate agency agreement and act in an impartial and just manner to all parties involved in the transaction.
 

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