October 1996
| BILL SECTION | COMMENTARY |
|---|---|
| S.2 - Interpretation Definition of estate agency work. |
The Bill's definition is substantially different to that proposed by the Working Group. The term needs to be redrafted to clarify that the Bill applies only to residential sales transactions. |
| S.23(5) - Licence Renewal Pending determination of a renewal application, the Authority may grant a provisional licence. |
The vesting of discretion in the Authority as to the grant of a provisional licence is likely to lead to business disruption if the Authority refuses to exercise its discretion in favour of the applicant. The grant of a provisional licence should be mandatory although subject to such conditions as the Authority may impose. |
| S.27 - Objections The grounds for objection include that a person is not of good character or has been guilty of conduct in either case rendering him not a fit and proper person to hold a licence. |
The criteria by which the Authority decides whether a person is fit and proper to be licensed are contained in ss.19-21. The criteria are matters such as bankruptcy, criminal convictions or mental disorder. The concepts of good character and guilty conduct (which it is assumed is something different to criminal conduct) are subjective and are referable to no criteria for evaluation. |
| S.29 - Investigations The investigator has substantial powers to require disclosure of documents and provision of evidence. |
The section will give rise to argument as to the extent of a licensee's obligations. Section 29(4)(a) should be amended to read that only documents which in the investigator's reasonable opinion are required to be produced in order that the test should be an objective test as opposed to a subjective one. The Bill provides that breach of s.29(4) is a criminal offence. Criminal sanctions should not be imposed in circumstances where the potential liability is highly subjective and controversial. |
| S.37(1)(a) - Information Regarding Property The information about a property to be provided by an estate agent. |
Whilst it is accepted that the obligations imposed by this section are generally proper obligations to impose on estate agents, a breach of any of the provisions of s.37(1) is a criminal offence. The breach of such an obligation is already capable of remedy at civil law if the client suffers loss and damage. In a regulated environment, a breach may be a matter for disciplinary sanctions by the Authority; it is not a matter for the criminal courts. |
| S.37(1)(a)(v) - Offers The estate agent must inform a vendor client of each offer received. |
What is the definition of an offer? How does one distinguish between an expression of interest by a potential purchaser and a formal offer. |
| S.37(1)(a)(vi) - Disclosure of the Estate Agent's Beneficial Interest in the Property |
The working group identified the malpractice of the estate agent acting as confirmor in the sale. This can still happen if the estate agent does not sign an estate agency agreement with the vendor. |
| S.37(2) The prescribed particulars of real property which an estate agent must provide. |
The present section is a half-way house. It identifies the type of
information an estate agent must have but leaves the particulars to be prescribed in
Regulations made by the Authority with the approval of Secretary of Housing. As this is
matter potentially involving criminal liability, the Bill must either spell out precisely
the information which an estate agent must have, with proper definitions, or simply say
nothing and leave the matter to be prescribed in due course by the Authority. If this were
done, a failure to provide the information could be a disciplinary matter to be dealt with
by the Authority rather than involving criminal sanctions. The section indicates the type of information which an estate agent must provide. Much of the information that an estate agent is required to have under this section is not obtainable at one specific location. Until Government has centralised the information bank for land, the retrieval of this information will be both time-consuming and costly. If a vendor appoints a number of estate agents to market his property, all these agents will be seeking to obtain identical information from various Government offices and this will inevitably lead to a strain on Government resources and delay in the retrieval of information. |
| S.37(2)(a) - Supply of Title Information Title information has to be updated to the date the particulars are supplied. |
This is impractical. It requires an estate agent to conduct a title search on the property he is marketing every day. This will cause a substantial increase in costs. |
| S.37(2)(b) - The Total or Entire Area of a Property | The phrase "total or entire area" is undefined. This will again
lead to confusion and uncertainly. Perhaps the saleable are concept can be introduced into
this piece of Legislation. An estate agent normally quotes the floor area based upon information provided to him by the vendor. If the obligation to quote the correct area is imposed on the estate agent, conflict will inevitably arise. In Hong Kong, where sale prices are often dictated by reference to the floor area of the property, a vendor is unlikely to be happy with an estate agent who quotes a floor area less than that which the vendor has instructed him. This is likely to lead to the termination of the estate agent's appointment and a consequent increase in costs by the retainer of a different estate agent. |
| S.37(2)(d) - Restrictions on the User of Property These includes restrictions in the Crown Lease or any instrument prescribed. |
Advice on this topic is one which should be provided by solicitors
advising the purchaser. They are professionally qualified to understand and advise upon
restrictions on title and restrictions on user. Crown leases are sometimes illegible. What is the definition of an instrument? Under the Conveyancing and Property Ordinance, an instrument can mean any document that has legal effect. On occasions, some restrictions are imposed in assignments. As drafted, the Bill would require agents to check every previous assignment. This is clearly work more properly undertaken by solicitors. |
| S.37(2)(g) - Statement by Vendor The vendor should make a statement on repairs and alterations. |
This is likely to be impractical. An estate agent cannot force a vendor to provide this information. What is the liability of the estate agent if the vendor refuses and/or neglects to provide this information? |
| S.37(3) & (4) - Statutory Duty A statutory duty of fairness is imposed on a licensee. |
Is the duty to act in a manner which is open and honest and fair any
different from an agent's existing fiduciary duties to his principal under Common Law? The
imposition of a statutory duty in this manner will inevitably lead to litigation as to
whether the Bill imposes higher or different duties on an estate agent to those which he
is currently subject under the Common Law. Changes to the Common Law affecting a class of individual should not be done lightly because the existing corpus of legal authority on the duties of estate agents is diminished in value as a consequence. The word "fair" is a value-laden word such that what is fair to one person may not be fair to another. To impose such a duty is to introduce a lot of uncertainties into our law. As long as a salesperson or estate agent acts honestly, he should have achieved the required standard. |
| S.37(5) - Client's Cause of Action A client has a cause of action if an estate agent is in breach of parts of S.37. |
This section is redundant. If a client has suffered loss and damage as a consequence of a breach of duty by a licensed estate agent, he already has an action at Common Law. Is there any advantage in giving a client an additional statutory cause of action? |
| S.37(6)(a) - Presumptions of Knowledge Imposed on an Estate Agent | The section refers to subsection (1)(c) which does not exist. If the
section is seeking to say that an estate agent is deemed to have knowledge of information
and the burden of proof in civil proceedings is thereby altered, then the section should
make clear what information the agent is deemed to have. In any event, reversing a presumption as to proof is again not something which should be done lightly by statute. There is no reason why Common Law principles as to a plaintiff having to prove his case on the balance of probabilities should be different in proceedings between a client and an estate agent. |
| S.37(6)(b) - Preservation of Cause of Action | As this section specifically preserves the Common Law causes of action which a client may have, it begs the question as to why the Bill imposes a separate cause of action. |
| S.38 - Provision of Accountant's Report | There is no objection to lodging audited accounts with the Authority. Why, however, should failure so to do be a criminal offence? Failure to prepare accounts is not a criminal offence under the Companies Ordinance and for other professions, failure to lodge accounts with their respective regulators is a disciplinary matter not a criminal one. |
| S.40(1)(a) - Control of Offices by Managers | No objection to the principle. Objection to the imposition of criminal liability for breach. |
| S.41(1) - Employment of a Sales Person without a Licence | No objection to the principle. Objection to imposition of criminal liability for breach. |
| S.42 - Notices to the Authority | No objection to the principle. Objection to imposition of criminal liability for breach. |
| S.45 - Vicarious Liability | Whilst there is no substantive objection, again, the Common Law has perfectly adequate concepts of vicarious liability and there is no need to add an additional statutory. |
| S.46 - Liability for Client Money Received | No objection to the principle. Objection to imposition of criminal liability for breach. Again, in other professions, misuse of clients' funds is a disciplinary offence. To be prosecuted in a criminal court, the Crown must show the usual criminal standards of proof as to intention. |
| S.47 - Advertising | A lawful business should be allowed to advertise, as long as such
advertisements are not false, inaccurate or misleading. Of course, they should not
contravene any other Ordinances, such as the Control of Obscene and Indecent Articles
Ordinance. We support the proposal enabling the Secretary to make regulations governing advertisements by estate agents thus making sure that such advertisements are not false, inaccurate or misleading. However, to regulate further will be inappropriate as the contents of such advertisements should be decided commercially by the estate agents concerned. It will only complicate matters to drag in the vendors to approve such advertisements in writing as vendors are most unwilling to expose themselves in any further claims by signing anything. |
| S.49 - Execution of Estate Agency Agreements | Without execution of an estate agency agreements, the estate agent will
be unable to sue the client for his fees. This displaces the usual Common Law provision of
quantum meruit. Nevertheless, the client can still sue the estate agent for damages, etc. The section should be expanded to allow execution of an estate agency agreement to be by a licensed estate agent or a licensed sales person. |
| S.50(3)(a) - Estate Agency Agreement The estate agency agreement should specify the amount of fees. |
This is contrary to the usual arrangement whereby fees are not normally charged on a lump sum basis but are based on a percentage. It will be difficult to complete the estate agency agreement with the specific amount of the fees at the beginning of the transaction because the ultimate fee recoverable depends upon the sale price obtained. |
| S.56 - Imposition of Criminal Liability | The undesirability of criminal sanctions has been dealt with throughout the commentary. The only other comparable jurisdiction which has criminal liability (the U.K.) has no provision for custodial sentences. |
| Schedule to the Bill - Composition of the Estate Agents Authority | The Estate Agents Authority should be composed of members who really understand the daily workings of the estate agency business. At least half of the members should be selected from people inside the estate agency industry. |
Dated the 13th August 1996
(Ends)
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