Consent needed for any changes

2015-10

A PROVISIONAL AGREEMENT for sale and purchase is a legally binding document. Estate agents should seek the written consent of both purchaser and vendor if either party would like to amend the terms of a PASP.

In this sample case, an estate agent acted for both the purchaser and vendor.

He first arranged for the purchaser to sign a PASP, which contained the provision that should the purchaser fail to complete the transaction, the deposit shall be forfeited to the vendor. But the vendor shall not sue the purchaser for any liabilities or damages.

However, when the agent later discussed the PASP with the vendor, he – at the request of the vendor – changed the provision to provide for specific performance in the event of a breach.

The estate agent also passed the purchaser’s HK$300,000 check to the vendor. The purchaser changed his mind and stopped payment on the check, which led to litigation between the two parties.

The addition of such a term to the PASP was a significant change, as the liabilities of both the purchaser and vendor had totally changed.

Upon investigation, the EAA disciplinary committee was of the view that the estate agent had not obtained the purchaser’s prior consent before making the amendment, or arranged for him to initial the amendment before passing the deposit to the vendor.

He failed to comply with paragraph 3.5.1 of the Code of Ethics, which stipulates that the agents shall, in fulfilling their duties, exercise due care and due diligence. The agent’s licence was suspended for 14 days and a condition attached to it.