Licensee should treat registered encumbrances with caution

An estate agent who failed to draw his client's special attention to existing encumbrances on land search records and to advise his client to seek independent legal advice before entering into a provisional agreement and purchase was given a warning by the Disciplinary Committee.

The estate agent introduced to a purchaser a property put on sale by a certain finance company as mortgagee. The estate agent was the parties' dual agent. Before entering into the provisional agreement for sale and purchase, the estate agent told the purchaser that the property would be sold subject to all existing encumbrances and that title was deemed accepted. However, he did not inform the purchaser that a writ of summons was registered against the property prior to the registration of the mortgage pursuant to which the mortgagee vendor had exercised its power of sale. It was claimed by a former owner in the said writ of summons that an assignment made by another former owner was null and void.

After the provisional agreement for sale and purchase was signed by the purchaser (but not yet signed by the vendor), it was faxed to the purchaser's solicitors. Without realizing that there was the land search and that it had revealed the said writ of summons, the purchaser only sought legal advice from his solicitors on the terms of the provisional agreement for sale and purchase signed by him but not on the land search. Meanwhile, the estate agent thought that the purchaser would consult his own solicitors on both the provisional agreement for sale and purchase as well as on the land search. As the estate agent received no contrary instruction from the purchaser, he arranged for the signing of the provisional agreement for sale and purchase by the mortgagee vendor the following day. Later on, when the purchaser's solicitors raised requisition on the said writ of summons, the mortgagee vendor refused to answer the requisition arguing that the purchaser had already agreed to purchase the property subject to all existing encumbrances. The purchaser, on legal advice that no good title would be acquired, aborted the purchase and the deposit was forfeited to the mortgagee vendor.