At the invitation of the Chairman, the Principal Assistant Secretary for Housing (PAS for H) briefed members on the Administrations latest position on the Bill. He said that the Administration had carefully considered comments of the Bills Committee, the trade, relevant professional bodies and the public during the summer recess, and identified six major areas where possible Committee stage amendments could be made. These included: exclusion of developers subsidiary companies selling developers own properties from the application of the Bill; investigation power; provision of property information; duties and vicarious liability of estate agents; and offences. PAS for H added that the intentions of these amendments were aimed at allaying the concerns of the trade and streamlining implementation of the legislation without compromising the effectiveness of the regulatory system and the need to protect the interest of consumers.

Exclusion of developers subsidiary companies selling developers own properties from the application of the Bill (Clause 2)

2. PAS for H said that the objective of the Bill was to regulate estate agency activities; this commonly referred to work done in relation to the acquisition or disposition of properties on behalf of other persons. Owners or developers disposing of their own properties were not targets of the Bill and developers subsidiary companies selling developers wholly owned or joint-venture properties fell outside the scope of the Bill. In order not to unduly affect such commercial operations, the Administration was prepared to introduce amendments to exclude such activities from the scope of application of the Bill. PAS for H supplemented that the Administration would be mindful of the need to avoid creating grey areas when making these amendments, and would ensure parity treatment for all estate agency work.

3. Hon LEE Wing-tat considered that sales of properties by individuals and developers were very different and in view of the mode of sale of the latter and their impact on the property market, the latter should be regulated. He remarked that the Bill did not provide sufficient consumer protection in respect of developers first sale through subsidiary companies; while some members were concerned that some estate agents might escape from the regulatory system by virtue of being subsidiary companies of property developers. Hon Ronald ARCULLI however took a different view and said that the stringent criteria under the Land Grants for developers had warranted protection for prospective purchasers. PAS for H assured members that subsidiary companies of property developers selling properties other than those of their parent companies would come under the jurisdiction of the Bill.

4. Some members enquired if developers participating in joint-venture projects with such statutory bodies as the Hong Kong Housing Authority, the Hong Kong Housing Society, the Land Development Corporation, the Kowloon-Canton Railway Corporation and the Mass Transit Railway Corporation (MTRC) would be exempted by virtue of Clause 2(2)(d), in particular for projects of MTRC where land ownership was not transferable. PAS for H agreed with the need to spell out clearly the status of property developers in the event of non-transferability of land ownership and undertook to work out the details with the Attorney Generals Chambers (AGC).

5. Members sought elaboration on whether the re-sale of first sale properties by property developers which had been surrendered shortly after the signing of the Sale and Purchase Agreements was included in the application of the Bill, and whether banking institutions undertaking estate agency work should come under the jurisdiction of the Estate Agents Authority (EAA) or the Hong Kong Monetary Authority. PAS for H assured members that EAA would draw up guidelines for the different circumstances.

Investigation power (Clauses 29 and 55)

6. PAS for H said that in the light of members' concern on the power of investigation of EAA, the Administration was prepared to refine certain provisions under Clauses 29 and 55 to: require EAA and its investigators to maintain confidentiality and secrecy during investigations; define clearly the identity of investigators appointed by EAA; and remove the power of EAA to require an answer if such an answer might incriminate a person. As regards the need for verification as to whether there were genuine grounds for complaints and as to the identity of complainants, PAS for H assured members that EAA could only exercise its investigation power subject to its having the reason to believe that there was a case of non-compliance. Members were supportive of the proposed amendments.

Provision of property information (Clause 37)

7. PAS for H said that it had been the Administrations objective to facilitate public access to property-related information and that there were a number of channels through which property information could be obtained. Apart from the information system in the Land Registry (LR), a new infoline service on saleable area and date of completion of domestic properties had been planned to be introduced by the Rating and Valuation Department (RVD) at the end of 1996. Consideration would also be given to bringing in the concept of "due diligence" so that estate agents who had taken all reasonable steps to obtain and verify the required information would not be unduly penalized.

8. As for the practicability of the proposed "due diligence" clause and how estate agents could prove that they had tried their best to obtain and verify the information, PAS for H explained that the clause would provide for a defence for estate agents who had taken reasonable care to avoid contravention, in particular those relating to accuracy of information obtained from other sources such as vendors or Government departments. Estate agents who could demonstrate that they had reasons to believe in such information would be deemed to have exercised due diligence. PAS for H assured members that EAA would draw up practising guidelines in this respect to remove uncertainties.

9. While members were appreciative of the "due diligence" concept, they considered it essential for the Administration to facilitate public access to accurate property-related information, and enquired about the progress and time frame for the proposed Central Data Bank on property information and also how one could ascertain whether structures in premises were legal or illegal. PAS for H emphasized that it would take time to develop a centralized data centre for property-related information, and that it would be impractical to withhold implementation of the legislation on such grounds as most information required under the Bill could be obtained from LR or the new infoline service of RVD. As regards information on illegal structures, PAS for H advised that the Bill only required estate agents to obtain a statement from vendors relating to structural additions or alterations within premises; the engagement of professionals to ascertain the presence of illegal structures would not be mandatory. He stressed that with the introduction of the "due diligence" concept, estate agents who had taken reasonable steps to comply with the requirements and inform clients concerned would not be unduly penalized even in the event of non-availability of information. PAS for H added that consideration would be given to phasing out implementation of different provisions in the Bill. The Senior Assistant Law Draftsman (Acting) confirmed that Clause 37(2) provided for flexibility for EAA to prescribe by way of subsidiary legislation the types of information required for different properties such as overseas and pre-war premises. Hon Ronald ARCULLI however expressed reservations at such an approach as it might be difficult to define residential and commercial premises, particularly where business might be carried out in residential premises. At members request, PAS for H said that careful consideration would be given regarding the definitions of residential and commercial premises when drawing up the relevant regulation. He also clarified that the housing information system referred to in the 1995 Policy Commitments was different from the Central Data Bank proposed by members.

10. As regards the costs for obtaining property information, PAS for H advised that there was no provision under the Bill governing the manner in which costs should be recovered. Estate agents could consider absorbing such costs in the commission or charging the clients separately. To facilitate a better understanding of the various property information systems including the new infoline service, members considered it necessary for the Administration to list out the types of housing-related information which would not be available, and also the difficulties which would be encountered in obtaining information relating to such properties as residential, commercial, industrial, small house, as well as premises in the New Territories.

Duties of estate agents (Clause 37)

11. PAS for H said that as most of the salient elements constituting the act of being "fair, open and honest" by estate agents had been spelt out under Clause 37(1)(a), the Administration was prepared to remove clauses 37(3)(b) and 37(4). Members were supportive of the proposed deletions.

Vicarious liability (Clause 45)

12. In order to allay the concern of the trade, PAS for H said that the Administration was prepared to remove this provision having regard to legal advice that the deletion of Clause 45 would not affect estate agents liabilities under the common law. Members were supportive of the proposed deletion.

Offences (Clause 56)

13. PAS for H said that while the Administration remained of the view that criminal liability was necessary where disciplinary actions such as suspension or revocation of licences were considered to be inadequate as deterrent for certain serious breaches such as willful deceits and thefts, it had re-examined the offence provisions in the light of members comments and representations from the trade and was prepared to streamline certain provisions along the following lines to reflect the seriousness of the offences:

minor breaches, such as failure to report changes of address and employment, would be subject to fines;
breaches of statutory duties under clause 37, such as failure to provide correct information on properties, could be subject to disciplinary actions; and
the wordings of some offence provisions would be refined to eliminate possible grey areas and ambiguity.

Hon Ronald ARCULLI considered that the proposed penalty provision under (a) was insufficient as deterrent for non-compliance and that heavier disciplinary actions such as suspension or revocation of licences should apply. PAS for H undertook to consider the members suggestion.

Law Reform Commission (LRC)s report on the sales descriptions of overseas uncompleted residential properties

14. Members asked if the Administration would consider incorporating in the Bill such recommendations as the need for sales descriptions and the handling of sales of overseas uncompleted residential properties to be undertaken by licensed local estate agents. PAS for H shared his experience as a member of the LRCs Subcommittee and advised that regard had been made to the Bill in drawing up recommendations in the report. The purpose of appointing local licensed estate agents in future sales of overseas uncompleted residential properties was to protect prospective purchasers from false sales statements. The consultation period for the report would end in November 1996. PAS for H took note of members views but emphasized that implementation of recommendations in the report would not affect the regulatory framework of the Bill.

Way forward

15. PAS for H said that the Administration was prepared to work out the details with AGC and propose draft Committee stage amendments to the Bills Committee for consideration in about six weeks time should members agree to the general directions of the proposals. Members requested and the Administration agreed to set out in writing the six major areas referred to in the above paragraphs with cross-references on the clauses affected before 14 October 1996. The Chairman ruled out the establishment of a technical subcommittee proposed by a member and invited members to respond to the Administrations proposals within October 1996.

II Any other business

16. Three meetings had been scheduled as follows:

- Tuesday, 29 October 1996, at 10:45 am;

- Thursday, 31 October 1996 at 2:30 pm; and

- Wednesday, 6 November 1996 at 10:45 am.

(Post-meeting note: The meetings on 29 October 1996 and 6 November 1996 were subsequently re-scheduled to 30 October 1996 and 13 November 1996 respectively; the one on 31 October 1996 was subsequently cancelled.)

17. There being no other business, the meeting closed at 10:40 am..

Legislative Council Secretariat
16 January 1997

Last Updated on {{PUBLISH AUTO[[DATE("d mmm, yyyy")]]}}

Bills Committee on Estate Agents Bill

Minutes of Meeting held on Friday, 4 October 1996 at 8:30 am in Conference Room B of the Legislative Council Building

I Meeting with the Administration

Exclusion of developers subsidiary companies selling developers own properties from the application of the Bill (Clause 2)