EAA Publications
|
| |
| The Freshman |
Content
Page |
| |
| A moment's carelessness leads
to heavy losses |
| |
Mr Koo and his girlfriend
wanted to purchase a property for their future matrimonial home.
As their savings were moderate, they set their target at flats
costing between $1 million and $2 million.
Agent A took them to inspect several flats. One of these had
an area of 400 square feet. It was built and occupied only three
years before, and was situated in a quiet and pleasant neighbourhood.
The asking price was $1.8 million. The agent did his best to
convince them to take it, calling it a steal and claiming that
two or three clients were already haggling over the terms. If
they really liked the flat, the agent said, they should pay
a deposit quickly. Agent A also suggested that Mr Koo should
make a large deposit so as to be sure of getting the flat. As
the soon-to-be wedded couple liked the flat very much, Mr Koo
drew a cheque of $200,000 and signed a provisional agreement
for sale and purchase.
Three days later, Mr Koo was informed by his solicitor that
he could not contact the vendor. It was also discovered that
the flat was purchased in 1997 for $3.8 million and was mortgaged
to a bank, then re-mortgaged to a finance company in 1998. Three
months before, the owner was already behind in his mortgage
repayments. Now a total of over $4 million was owed to the bank
and the finance company. In the meantime, the owner could not
be found and the agent turned out to be unlicensed and his whereabouts
were unknown. The bank was in the process of repossessing the
flat, and the savings Mr Koo used for buying a matrimonial home
went down the drain.
Under the Practice Regulation, as soon as they accept a listing,
estate agents have to possess the prescribed property information
including subsisting encumbrances of the property. The mortgage
and second mortgage of the flat in the case above should have
been stated in the Property Information Form supplied to the
purchaser.
Further, before the signing of an agreement for sale and purchase,
the agent acting for the vendor has to carry out a land search
at the Land Registry and provide a copy of the land search to
the purchaser. In case of doubt, a clause should be inserted
in the agreement specifying that the whole of the deposit should
be stakeheld with either the vendor's or the purchaser's solicitors
until the vendor has proved that he can redeem the property.
The agent acting for the vendor should also urge the latter
to furnish proof of repayment on his own initiative, so that
the deal may proceed smoothly.
As shown in the above case, Mr Koo acted carelessly in entrusting
the transaction to an unlicensed agent, thus incurring heavy
losses. As the sales and purchases of properties often involve
large sums of money, everyone involved, the vendor, the purchaser
and the agent, should go about it carefully.
|
| |
