A land search is an important document in a property transaction. It provides the searcher with essential information regarding the property, such as its address, ownership details and encumbrances, if any, that are registered against it.
According to section 13(4) of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation (Practice Regulation), an estate agent who acts for a vendor (or landlord) of a residential property is required to, immediately before an agreement for sale and purchase (or a tenancy agreement) of the property is entered into, carry out a land search of the property and provide a copy of it to the purchaser, or tenant. This statutory duty applies to estate agents acting not only for the vendor but also to those acting for both vendor and buyer.
To enhance the protection of consumers’ interests, the above statutory requirement of conducting an up-to-date land search is extended to estate agents who act for the purchaser alone by virtue of the practice circular No.13-03(CR) issued by the Estate Agents Authority (EAA), unless an up-to-date land search has already been provided by the estate agent acting for the vendor. By up-to-date, we mean that the land search must be conducted immediately before an agreement for sale and purchase (or tenancy agreement) is entered into, irrespective of whether the property is a residential one or not.
Here, I would like to share a case in which an estate agent failed to conduct a land search in a leasing transaction.
An estate agent acted for both the landlord and tenant in the leasing transaction of a residential property. After arranging for the prospective tenant to inspect the property twice, the estate agent arranged for the tenant to sign a provisional tenancy agreement (PTA). Before the signing of the PTA, the estate agent had not conducted a land search in respect of the property, nor had he provided a copy of the land search to the prospective tenant.
After the prospective tenant signed the PTA and paid a deposit for renting the property, his friend conducted a land search in respect of the property. From the land search, the tenant discovered that a building order for the demolition/alteration of unauthorised building works had been registered against the property and the order had not been complied with. Worried about the risks involved in the unauthorised building works, the tenant asked to cancel the deal and claim back the deposit through the estate agent but was rejected by the landlord. The tenant then lodged a complaint with the EAA.
The EAA disciplinary committee was of the view that the estate agent failed to inform the tenant that a building order for the demolition/alteration of unauthorised building works had been registered against the property and whether the order had been complied with, thus failing to comply with the guidelines of the relevant practice circular issued by the EAA. The estate agent also failed to carry out a land search in respect of the property immediately before the PTA was entered into and supply a copy of the land search to the tenant; and was in breach of section 13(4) of the Practice Regulation.
As a result, the estate agent was reprimanded and fined HK$3,000. A condition was also attached to his licence, requiring him to acquire 24 points of the EAA Continuing Professional Development Scheme in 24 months.
As a professional estate agent, conducting land search is a very important step for protecting the interest of a purchaser or tenant client. This step should be done immediately before a provisional agreement for sale and purchase or a PTA is entered into, so that the latest ownership and encumbrance details of the property can be ascertained and explained to the client before the latter commits to a binding contract.
I would like to remind consumers to study carefully the land search copy provided by the estate agent before entering into an agreement for sale and purchase (or tenancy agreement) or paying any deposit. By understanding the key information about the relevant property, potential risk and loss can be better avoided.