Step 3: Sign “Estate Agency Agreement”
Important points-to-note when signing “Estate Agency Agreement”
According to the legal requirements1, when licensed estate agents are entrusted by clients to sell a residential property, they must enter into and explain the legally prescribed “Estate Agency Agreement” (Form 3, commonly known as the “Property Releasing Form”) with their clients when accepting the clients' appointment to sell the residential property. 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 client with a signed original or copy of the “Estate Agency Agreement” immediately after signing.
By signing this agreement, both parties can obtain accurate information about each other, providing greater protection for themselves. Additionally, one may lodge a complaint with the EAA if one suspects any misconduct committed by the estate agent in the latter’s agency service. Click here to learn how to ascertain whether an estate agent holds a valid licence.
A vendor may appoint more than one licensed estate agent to list the same residential property. However, the vendor should pay attention to whether any of the appointed estate agents has been appointed as an exclusive agent. If an exclusive agency has been granted, and the property is successfully sold through another estate agent during the subsistence of that exclusive agency agreement, the vendor shall be liable to pay commission to both the exclusive agent and the agent completing the sale.
In addition, an estate agent acting for a vendor client is required to complete a Property Information Form (Form 1) in respect of the property. This Form shall include the particulars of the current owner, floor area, encumbrances (such as mortgage and building order), year of completion, and any restrictions on use. The vendor should also assist the estate agent in completing the section entitled Vendor’s Statements, which covers whether any structural additions or alterations have been made to the property, and whether the Government, the management office, or the owners’ corporation has required or intends to carry out any repair or improvement works to the property or the building in which it is situated, together with the associated costs.
As to the property advertisements issued by licensed estate agents, they are required to contain the following information2,3:
- the business name of the licensed estate agency company
- the licence number (or the number of SPOB) of the licensed estate agency company
- the “Property Number” assigned to the listed property, and
- the date on which the advertisement is issued or updated
For the promotional video of signing the “Estate Agency Agreement”, please watch it on: https://youtu.be/y6vX8QsDveY
Types of Engagement
Vendors can discuss with the agent the type of engagement, which can be either “single agency”, “dual agency” or “potentially dual agency”.
Single Agency: Acting solely for the vendors
Advantages of “Single Agency”:
- Strong focus: The agent represents only one party, minimising conflicts of interest.
- Building trust: The agent focuses solely on the vendors’ requirements and interests, fostering mutual trust and cooperation.
Dual Agency: Acting for both the purchaser and the vendor
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: A licensed estate agent shall issue a written receipt to a client immediately for any moneys (including commission) received; and retain a copy of the receipt for not less than three years after it is issued.
1 Please refer to Section 6 of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation.
2 Please refer to the Practice Circular (No. 18-02(CR)).
3 Please refer to Section 14 of the Estate Agents (Licensing) Regulation.
4 Please refer to the Practice Circulars (No. 24-01(CR)) and (No. 16-01(CR)).