Not advisable to pay straight to seller


Estate agents should advise their purchaser clients of the possible risks in payment of deposits directly to the vendor, and recommend the purchaser pay all deposits (both the initial and further deposits) to a firm of solicitors as stakeholders. Otherwise, they may be subject to disciplinary action by the Estate Agents Authority.

An estate agent acted for both the purchaser and vendor in a property transaction. He arranged for both parties to sign a provisional agreement for sale and purchase in respect of the property, but he deleted the terms on stakeholding the deposits in the PASP, and arranged for the purchaser to pay the deposits directly to the vendor.

The agent also did not conduct a land search immediately before the PASP was entered into.

In fact, the property remained encumbered by an undischarged mortgage when the PASP was signed, and an irrevocable power of attorney executed by the vendor was registered in the land register of the property.

The power of attorney was security for a loan from a finance company to the vendor.

Under such circumstances, the risk involved in the purchaser’s paying the deposits directly to the vendor was rather high.

In crossing out the stakeholding clause in the PASP and arranging for the purchaser to pay the deposits directly to the vendor without explaining to the purchaser the risks involved, the estate agent failed to protect and promote his client’s interests.

The agent thus failed to comply with the relevant regulation in paragraph 3.4.1 of the code of ethics issued by the Estate Agents Authority. It states that “estate agents and salespersons, in engaging and accepting an appointment as an agent, should protect and promote the interests of their clients, carry out the instructions of their clients in accordance with the estate agency agreement, and act in an impartial and just manner to all parties involved in the transaction.”

Moreover, the practitioner did not conduct a land search and provide a copy of the land search to the purchaser immediately before the PASP was entered into. Therefore, the agent failed to observe section 13(4) of the Estate Agents (General Duties and Hong Kong Residential Properties) Regulation.

The disciplinary committee suspended the estate agent’s license for seven days, and attached a condition to his license requiring him to obtain 12 CPD points under the Continuing Professional Development Scheme in 12 months.

(Published in The Standard)