EAA Publications
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| The Freshman |
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| The temptation of a "trial
deposit" |
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 To
many Hong Kong estate agents, the use of "trial deposit"
is a favourite play. It means that at the time the vendor and
the purchaser are negotiating through an agent, the agent would
suggest that the purchaser draw a cheque for a deposit so as
to show his earnest interest in the property to the vendor,
in the hope that the vendor may accept the purchaser's offer
more quickly.
For the purchaser, placing a "trial deposit" involves
certain risks. Although the agent in most cases pledge that
the cheque will be in his custody and will not be given to the
vendor before the deal is clinched, unscrupulous agents may
do otherwise, as in the following case.
Through an agent, Ms Tseng inspected a flat in Shatin and liked
it. The owner asked for $7 million but Ms Tseng would only offer
$6 million. There was a larger difference between the two sides.
The agent then suggested that Ms Tseng draw a cheque for $200,000
as a trial deposit payable to the vendor. The agent pledged
to show the cheque to the vendor only as an indication of Ms
Tseng's earnestness and that unless an agreement was reached
the cheque would not be given to the vendor.
That evening, the agent called Ms Tseng saying that the owner
would only lower the price to $6.7 million. Ms Tseng said she
would make a final offer of $6.2 million. Sensing that the deal
might be off, the agent suddenly said that there was another
flat on a lower floor of the same building with identical area,
layout, and view. The owner of that flat might accept $6.2 million.
Ms Tseng was beginning to get tired and said without thinking
that a flat on a lower level was possible.
The next day, the agent produced a provisional agreement for
sale and purchase, already signed by the vendor, for another
flat on a lower floor. He also told Ms Tseng that the $200,000
cheque of trial deposit had been given to the vendor of this
flat. On questioning, Ms Tseng discovered that the two flats,
the one at the high level and the one at the lower level, were
owned by the same person. Thus, the agent was able to use the
cheque for the trial deposit for the flat on the lower level.
Ms Tseng was very dissatisfied with the agent's conduct in acting
without her consent. She gave up the idea of concluding the
deal, and immediately instructed the bank to stop payment for
the cheque. Needless to say, the vendor subsequently sued Ms
Tseng for damages, and the agent also demanded through solicitors
the payment of commissions payable by both the purchaser and
the vendor, on the ground that she breached the agreement.
If this dispute should go to court, the outcome would be uncertain.
Factors unfavourable to Ms Tseng included the absence of any
written instructions regarding the "trial deposit"
such as its validity period, the purchase price, and restriction
on unauthorized release to the vendor. At least she ought to
have written on the back of the cheque that it was to be used
only for a particular flat.
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