Exercise care on advertisements and be alert to misrepresentation when buying first-hand residential property

2021-01-26

• Consumers should refer to the latest version of sales brochures and price lists published by vendors for accurate information
• Such knowledge can help prospective buyers protect their rights, or detect potential misrepresentation by property agents

The sale of new residential developments remains the focus of Hong Kong’s property market this year. In this regard, consumers should not solely rely on promotional materials and advertisements when considering a purchase of a first-hand residential property, particularly those posted on social media or lamp posts. They should always be sceptical about promotional messages.

It is not easy for consumers to verify information that appears in advertisements. Advertisements with only a contact name and phone number, without a company name or licence number of a property agent, should be considered suspicious. They might not be issued by licensed property agents.

Hence, prospective buyers should always refer to the latest version of sales brochures and price lists published by the vendor for accurate property information. They set out payment terms and the basis of any available discount and any gift, financial advantage or benefit in connection with a property purchase provided by the vendor.

Apart from the sales brochures and price lists, prospective purchasers should also pay attention to the sales arrangements issued by the vendor, such as the date and time for the sale, the sales venue, the number of units offered and the method to be used to determine the order of priority of purchases.

According to the guidelines issued by the Estate Agents Authority (EAA), information provided by property agents to prospective buyers of new residential properties must only be based on the sales brochure and documents prepared and provided by the vendor.

It is important to note that when taking part in the sale of first-hand residential properties, property agents are not allowed to make any representation that may mislead prospective purchasers. Otherwise, they will be subject to sanctions by the EAA. Here, I would like to share a non-compliant case about misrepresentation in the sale of a first-hand residential property.

A salesperson of an estate agency arranged for a prospective purchaser (Ms A) and her fiancé to inspect a show flat of a first-hand residential development. When discussing the submission of registrations of intent of that development, the salesperson told Ms A that she and her fiancé had to submit separate registrations of intent since they were not yet married and thus could not purchase the property in joint names.

Later, when Ms A entered into an agreement of sale and purchase of a property of that development, she requested the solicitor to include the name of her fiancé in the formal agreement. Through the lawyer, she discovered that the representation made by the salesperson was not true.

According to the vendor of the development, there was no restriction on unmarried couples submitting registrations of intent in joint names. Feeling misled by the salesperson, Ms A lodged a complaint with the EAA.

The EAA disciplinary committee found that the salesperson had made a misrepresentation to Ms A on the submission of registration of intent. Thus, the salesperson was in breach of paragraph 3.7.2 of the code of ethics, which stipulates that “estate agents and salespersons should avoid any practice which may bring discredit and/or disrepute to the estate agency trade.”

Having considered the nature and gravity of the case and the disciplinary record of the salesperson, the committee decided to reprimand the salesperson, fine her HK$3,000 (US$387) and attach conditions to her licence requiring her to obtain 12 points under the EAA’s continuing professional development scheme in 12 months.

Other than the misrepresentation demonstrated in the non-compliant case, prospective purchasers of first-hand residential properties should also be reminded that it is common for property agents to provide them information about different mortgage plans or financing schemes.

According to the EAA’s guidelines, the relevant information or explanation provided by the property agents must only be based on the information provided by the banks and finance companies, or the vendor concerned.

To better protect themselves, I would advise prospective purchasers to make enquiries directly with the banks or finance companies, as each application will be considered by the banks or finance companies individually, and seek professional financial advice before making any purchase decision or paying any deposit.