Agents failed to disclose interest

2017-06

Estate agents should make a full disclosure of any conflict of interest to their clients in relation to the properties they handle. Otherwise, they may be subject to disciplinary action by the Estate Agents Authority.

Two agents appointed by a vendor of a shop property arranged for the vendor to sign a provisional agreement for sale and purchase with a buyer.

The purchaser was a limited company, which was beneficially owned and actually controlled by the two estate agents – despite the fact the sole director of the firm was the niece of one of the estate agents.

However, the vendor was not informed of this.

Shortly after, the property was resold to another purchaser through another agent of the same estate agency, at the price of HK$4.5 million on top of the original purchase price.

The vendor discovered the identity of the estate agent’s niece and the resale. Feeling deceived, he claimed compensation against both agents and lodged a complaint with the EAA.

The EAA’s disciplinary committee was of the view the two estate agents failed to disclose the conflict of interest in the property transaction.

They breached paragraph 3.7.2 of the Code of Ethics, which provides that “estate agents and salespersons should avoid any practice which may bring discredit and/or disrepute to the estate agency trade.”

The committee reprimanded the two estate agents, suspended their licenses for six months, and required them to obtain 24 points in the core subjects of the Continuing Professional Development Scheme in 24 months.

Regarding the compensation claim by the vendor in a civil litigation against the two estate agents, the High Court decided they were liable to pay compensation to the vendor of the property.

(Published in The Standard)