It is provided in the Estate Agents Ordinance that an estate agent must disclose to his client whether he has any pecuniary or other beneficial interest in the property in respect of which he is acting. The Ordinance also requires that if any of the agent's spouse, parents, children, brothers, sisters, and the employees and major shareholders, partners and directors of the company he belongs to, has pecuniary or other beneficial interest in the relevant property, the agent also has to make disclosure.
Some time ago Mr Mak, a property owner, advertised in a number of newspapers to sell his residential unit in Tsing Yi, setting the price at $4.2 million. A few days later, an estate agent called Mr Mak and told him that a prospective purchaser, which was a limited company, was ready to offer $3.8 million for the unit. Mr Mak was not satisfied with the offer. The agent then claimed that she could discuss the price with the prospective purchaser again. Seeing that she was earnest, Mr Mak signed an estate agency agreement with her in which the agent did not make any disclosure of interest.
Through the efforts of the estate agent, Mr Mak finally agreed to clinch the deal at $4 million. Subsequently, Mr Mak discovered that the day after the provisional agreement for sale and purchase was signed, the purchaser resold the unit in the capacity of confirmor, at a higher price of $4.38 million. Mr Mak grew suspicious and instructed his solicitor to investigate the background of the purchaser, only to find that both the estate agent and her husband were shareholders of the purchaser company. Mr Mak then knew that the estate agent had not disclosed her interest and made a secret profit by re-selling the flat. He decided to demand compensation from the agent.
In the above case, the estate agent has contravened the provision of the Estate Agents Ordinance in failing to disclose her interest to her client. Even if there was no interest at the time the estate agency agreement was signed, once any interest arises during the validity period of the agreement, the agent should disclose it to the client as soon as possible so as to avoid a conflict of interests affecting public confidence in estate agents.
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