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Inquiry Hearing Cases--A Selection II (Excerpts)

In breach of trust, an agent failed to disclose her relationship with the purchaser

It is the primary duty of an estate agent to put his client's interest first and to prevent any conflict between his own interests and those of the client from happening. Here we have a case in which an estate agent did not disclose to the vendor of a property that the purchaser was her husband and, for that breach of trust, the agent's licence was suspended by the Disciplinary Committee.

The estate agent in question ran her shop as a sole proprietor, without the assistance of employees. There was an old lady in her neighbourhood who engaged her as the listing agent for a property. She was able to find a potential purchaser for the property, and negotiation went on smoothly and it was agreed that the flat would be sold for around $490,000. When the provisional agreement for sale and purchase was about to be signed, the agent informed the vendor that the purchaser was unable to show up to sign the document and had sent a representative to sign and to deliver deposit on his behalf. The old lady, after the document had been signed, noticed that the purchaser named on the provisional agreement was not the one who negotiated the price with her. She asked around and found out that the purchaser was none other than the agent's husband. The old lady felt cheated, decided to cancel the deal, and then sold the flat a few days later through another agent at a price of $530,000.

The agent was summoned to an inquiry hearing, at which she admitted that the original prospective purchaser suddenly decided not to buy the flat and that, since she and her husband were looking for a flat at the time and found the flat reasonably priced, she caused someone to sign the provisional agreement on behalf of her husband. She emphasised that there was no reason why she should cheat the old lady and that the price to be paid was market price. Since there was no undue advantage to be gained, she thought that it was not necessary to inform the old lady of the identity of the purchaser.

The Disciplinary Committee held that it was one of the most basic and important responsibilities of the estate agent not to be involved in conflicts of interest, whether potential or actual. The Committee also indicated that grave penalties would be handed down if there was proof that the agent had failed to disclose the identity of the purchaser in order to gain advantage. In the present case, the Committee observed that the agent might indeed have the need to purchase a property and believed that the price offered was market rate. However, while the vendor had not suffered, it was beyond any doubt that the agent had committed a breach of trust. As a result the Disciplinary Committee handed down suspension of two weeks, a stern warning, and a requirement for the agent to seek appropriate professional training to improve on her understanding of the importance of the duty of trust that she owed to her clients.

Paragraph 3.6.1 of the Code of Ethics
Estate agents and salespersons should avoid accepting an appointment involving a property in which they have a beneficial interest.
 

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