Failing to deal with Building Orders in PASP

An agent who failed to advise his clients to deal with the Building Orders before entering into a provisional agreement for sale and purchase had his licence suspended by the Disciplinary Committee.

The estate agent concerned served both the vendor and the purchaser in the sale and purchase of a luxury flat. The land search records showed that the property was subject to two orders issued by the Building Authority relating to an earth-retaining structure. The vendor also told the estate agent about the orders and that he had paid his share of expenses for the remedial work to the Incorporated Owners. Before the signing of the provisional agreement for sale and purchase and on the advice of his solicitors, the vendor instructed the estate agent to specify in the provisional agreement for sale and purchase that the sale was on an "as is" basis, which the estate agent did. However, the estate agent did not mention the two orders in the provisional agreement for sale and purchase.

Thereafter, the vendor and the purchaser had serious disagreement over, among other things, whether any money (and if so, how much) should be set aside for the compliance of the two orders. As no agreement could be reached on this issue, the sale and purchase fell through with the vendor paying a hefty compensation to the purchaser.

The Disciplinary Committee, having heard the evidence from all parties concerned in the inquiry hearing and considered all the relevant facts, observed that the estate agent was under a duty to disclose the orders. Such information formed part of the prescribed property information under the category of "subsisting encumbrances" in Form 1 and the agent was required to possess and supply the same under the Practice Regulation. The fact that the estate agent had not advised the vendor on the effects of the two orders and provided for the compliance of the same in the provisional agreement for sale and purchase had prejudiced the vendor's interest in that the vendor was bound to give something which he could not possibly give, namely, a good title to the property. The Disciplinary Committee concluded that the estate agent had failed to protect and promote the interest of his client, the vendor, by omitting to advise or cause the parties to ascertain or apportion their respective liabilities towards the discharge of the two orders in the provisional agreement for sale and purchase. For this reason, the Disciplinary Committee ordered that the licence of the estate agent be suspended for a period of time. Paragraph 3.4.1 of the Code of Ethics Estate agents and salespersons, in engaging and accepting an appointment as an agent, should protect and promote the interests of their clients, carry out the instructions of their clients in accordance with the estate agency agreement and act in an impartial and just manner to all parties involved in the transaction.