Practice Circular on good and effective competition practices became effective

2024-12-05

The Estate Agents Authority (“EAA”) issued a new Practice Circular (No. 24-01(CR)) in August this year to provide guidelines to the estate agency trade on how to adopt good and effective competition practices regarding the charging of commissions for transactions of sale and purchase and letting of properties as well as offering of incentives (if any) to purchasers in the sale of first-hand residential properties. The new Practice Circular has come into effect on 1 November 2024.

On the charging of commission in respect of all transactions of sale and purchase and letting of properties, the new Practice Circular encourages estate agency companies to, before any preliminary sale and purchase agreement (“PSPA”) or tenancy agreement is entered into, provide clients with a letter issued by the estate agency company under its letterhead containing clear provisions defining the detailed scope and duration of services and/or duties to be covered by the stated or agreed commission, and the names of the individual licensees and his/her supervisor(s) (if any) providing the specific service to the clients.

For the sale of first-hand residential properties in Hong Kong, if estate agency companies decide to offer incentives to purchasers, the new Practice Circular requires that these companies must, before submission of the relevant tender/offer/registration of intent for the purchaser or entering into any agreement in connection with the purchase or making any payment in relation to the purchase by the purchaser (whichever is the earliest), take the following steps to inform the purchaser in writing of the incentives so offered: (a) use the pro-forma incentive letter issued by the estate agency company under its letterhead (regardless of whether it has been duly signed by an authorised signatory of the estate agency company or not) setting out details of the incentives and specified information; (b) if the incentive is in monetary terms, state in the incentive letter the absolute amount of the rebate or a formula showing how the amount of the rebate would be calculated, which may only be expressed as an explicit percentage of the purchase price as stated in the PSPA; and (c) provide the purchaser with the original of the incentive letter.

Price competition in respect of charging of commission among the estate agency industry in a free market economy is a fact of life and charging how much commission is also a business decision of each estate agency company. The EAA will not intervene nor set any criteria for commission levels. However, to ensure that the industry has rules to follow and comply with the Competition Ordinance, the EAA issued the new Practice Circular for the trade to follow to enhance the trade’s professionalism, facilitate fair competition within the industry and provide consumers with better protection. 

Ruby Hon
Chief Executive Officer
Estate Agents Authority