(12) Estate Agents Ordinance and its subsidiary legislation

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(12) Estate Agents Ordinance and its subsidiary legislation

In Hong Kong, there are specific statutory provisions governing the practice of estate agents and salespersons under the EAO and its subsidiary legislation. Ethical standards and practical guidelines are found in the Practice Directions and Code of Ethics and in various Practice Circulars issued by the EAA from time to time.

The essential features of the regulation of estate agents and salespersons in their capacity as agents for their clients/principals are highlighted below. However, what follows does not represent all the duties of an estate agent under the law. Readers should consult the full texts of the relevant law and other publications by the EAA.

Estate agency work

Under the EAO, estate agency work is defined as any work done in the course of business in relation to the introduction to a client of a third person who wishes to acquire or dispose of a property or to the negotiation for the acquisition or disposition of the property by the client. To carry out estate agency work or to engage in the business of doing estate agency work in Hong Kong without a valid licence is an offence under the EAO.

Estate agency agreements

An estate agent has to enter into an estate agency agreement using the prescribed form with his principal/client (vendor, purchaser, landlord, or tenant, as the case may be). The respective forms contain prescribed terms and conditions to which the agency relationship is subject and set out certain specific duties required of an estate agent. An estate agent may have other duties as agreed between him and his client. Failure to enter into an estate agency agreement with a client may deprive an estate agent of the right to pursue any claim for remuneration in court.

Property information

Upon accepting instruction from the vendor of a residential property, an estate agent must make searches at the relevant government departments for the prescribed property information. These include ownership, encumbrances, area, property age, user restrictions, and information on the government lease. The agent has the duty to supply the prescribed property information to prospective purchasers. Before assisting his clients in entering into an agreement for sale and purchase, an estate agent must also carry out an up-to-date land search of the relevant property.

Agency relationship

a.	Dual agency – In Hong Kong, an estate agent often acts for both sides in a property transaction, that is, both the vendor and the purchaser or both the landlord and the tenant. This is permissible under the EAO so long as the agent informs both clients that he is so acting and has the consent of both. In addition, under the estate agency agreement, the agent must disclose in writing to each of his clients the amount or rate of commission to be received from the other client.

b.	Exclusive agency – The vendor of a residential property may choose to appoint an estate agent as his exclusive or non-exclusive agent. For exclusive agency, the agent has to explain to his client the meaning of exclusive agency and ensure that his client understands the effects thereof, that is, where the vendor sells his property through another agent during the validity period of the exclusive agency agreement, he is liable to pay commission to the exclusive agent. If an exclusive agent undertakes additional duties, such duties should be spelled out in the estate agency agreement.

Disclosure of interest

An estate agent is required to disclose to his client any pecuniary or other beneficial interest he has in the property in respect of which he acts. His duty to disclose extends to the situations where any related person (for example, his spouse, specified relatives, employers, etc) owns such interest in the property concerned.

Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation (Practice Regulation)

Practitioners are required to follow the Practice Regulation when they act in respect of the sale and purchase and leasing of Hong Kong residential properties. The Practice Regulation is structured on the normal workflow of an estate agent and covers the following areas:

a.	Provision of property information to clients;

b.	Entering into estate agency agreement;

c.	Accepting appointment from clients;

d.	Advertising of listed properties;

e.	Property inspection;

f.	Assisting clients in conducting negotiation;

g.	Assisting clients in entering into agreement for sale and purchase or lease;

h.	Commission arrangement.

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