Step 3: Sign “Estate Agency Agreement”
Important Notes on Signing the “Estate Agency Agreement”
According to the legal requirements3, when licensed estate agents are entrusted by clients to rent residential properties, they must enter into and explain the legally prescribed “Estate Agency Agreement” (Form 6, commonly known as the “Property Viewing Form”) with their clients before arranging for the tenant to inspect the residential property or before signing the tenancy agreement of the property (whichever occurs earlier). The Agreement specifies key terms of the engagement, such as the validity period of the agreement, the type of engagement, the commission amount, and other details. This helps enhance transaction transparency and protects the rights of both parties. The “Estate Agency Agreement” is legally binding, and once signed by both parties, they must comply with the terms stated in the Agreement. Additionally, the estate agent must provide the tenant with a signed original or copy of the “Estate Agency Agreement” immediately after signing.
For the promotional video of signing the “Estate Agency Agreement”, please watch it on the EAA's YouTube channel.
Types of Engagement
Consumers can discuss with the agent the type of engagement, which can be either “single agency” or “dual agency”
Single Agency: Acting solely for the tenant
Advantages of “Single Agency”:
- Strong focus: The agent represents only one party, minimising conflicts of interest.
- Building trust: The agent focuses solely on the tenant's requirements and interests, fostering mutual trust and cooperation.
Dual Agency: Acting for both the tenant and the landlord
Advantages of “Dual Agency”:
- Facilitates transactions: The agent represents both parties, facilitating a quicker coordination with both parties’ needs and conditions to expedite the transaction process.
- Minimises miscommunication: The agent understands the intents of both parties, helping to resolve communication issues and avoid misunderstandings.
The Payment of Commission
The amount or rate of commission is determined through mutual agreement between the client and the estate agent4.
Consumers should pay the commission to their agent according to the agreement between the consumers and the agent and the terms specified in the prescribed Estate Agency Agreement: namely, upon signing of the agreement for sale and purchase or upon completion of the transaction in a sale and purchase situation; or upon signing of the lease or commencement of the tenancy as specified in the binding lease in a leasing situation. However, the client shall have no obligation to pay any commission to the agent if completion of the property transaction/commencement of a binding lease falls through without fault on the part of the client. The commission shall become payable to the agent in the case of mutual cancellation of a binding agreement for sale and purchase/binding lease of the concerned property between the vendor and purchaser/landlord and tenant not arising from any provisions of the agreement for sale and purchase/lease.
Reminder from the EAA: According to the prescribed “Estate Agency Agreement”5, if a prospective tenant, his spouse, any nominee, undisclosed principal, or agent enters into a binding tenancy agreement with the landlord of the relevant property during the validity period of the “Estate Agency Agreement” (whether through another agent or directly with the landlord), the prospective tenant is required to pay commission to the agent.
Generally, after signing the “Estate Agency Agreement” with the client, a licensed estate agent will arrange for the prospective tenant to inspect the relevant residential property. Click here to learn more about important points-to-note when conducting on-site property inspections.
3 Please refer to Section 6 of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation.
4 Please refer to the Practice Circular (No. 24-01(CR)).
5 Please refer to Schedule 3 of the Estate Agency Agreement for Leasing of Residential Properties in Hong Kong.