Be vigilant and stakehold all deposits at a firm of solicitors

2019-07-23

In a recent media report, an estate agent took the cash deposit from the property purchaser for himself and did not pass the money to the vendor. The incident has tarnished the reputation of the estate agency trade and many trade representatives also shared the same view. Here I would like to remind property purchasers, particularly the inexperienced ones, to be vigilant when paying their deposits and avoid paying them in cash directly to any parties including estate agents or even the vendors. Instead, the deposits should be paid to a firm of solicitors as stakeholder until completion of the transaction.

In the past, there were cases in which purchasers’ deposits were swindled by criminals who pretended to be property owners. In some other cases, the property vendor, who was in financial difficulty, absconded after receiving the deposit and did not complete the transaction.

Generally speaking, the Provisional Agreement for Sale and Purchase contains a provision regarding the handling of deposits. Purchasers should take note of it when signing the agreement. In order to remind property purchasers of the importance of placing all deposits at a firm of solicitors for stakeholding, the EAA produced an Announcement in the Public Interest on this subject in the past. In fact, the EAA has issued guidelines for estate agents to follow with regard to the handling of the deposits. According to the guidelines, estate agents are required to advise their clients in writing to arrange for the stakeholding of all deposits (both the initial and further deposits) by a firm of solicitors and the risk of not doing so. If the client, despite the estate agent’s advice, nonetheless decides to proceed with the transaction without arranging for the stakeholding of the deposits, the estate agent shall obtain a written acknowledgement from his client that the advice of arranging for stakeholding the deposit, the risk of not doing so and the need to seek legal advice have been given by the estate agent.

As the amount of deposit for purchasing a property is usually high, I would like to remind consumers again that they should not put their deposits at risk for the sake of expedience.

Ruby Hon
Chief Executive Officer
Estate Agents Authority