Minutes of the Fifth Meeting of the Bills Committee
to study the Estate Agents Bill

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Presentation by Research & Library Services (R & LS) Division of the LegCo Secretariat

Mrs Donna SHUM briefed Members on the research paper entitled "Estate Agents Bill - An Analysis of Accessibility of Information Required under section 37(2)" prepared by the R & LS Division which had been issued vide LegCo Paper No. HB 568/95-96.

2. Members noted with concern that (a) only 30% of properties had all information as required under clause 37(2) available from the Land Registry; (b) the remaining 70% of properties required further inspection of records kept by the Buildings Department and thus the time involved in searching was significant; (c) low accessibility of information from the Land Registry was true for properties built even in the 1980s; (d) accuracy of information available from the Land Registry regarding year of completion and floor area was difficult to ensure; (e) only floor plans but not exact figures on the floor area were kept by the Buildings Department; and (f) information on floor area maintained by the Rating and Valuation Department was not released to the public.

3. Members present expressed appreciation of the R & LS Division’s effort in compiling the research paper which facilitated their understanding of the actual difficulties in property search. In view of the problems revealed, they opined that the requirement regarding provision of property information by estate agents needed careful consideration. To ensure the accuracy of information regarding floor area, Mr Edward HO remarked that appropriate training in calculation of floor area should be provided to estate agents. Mr NGAN Kam-chuen also suggested that the Government should standardize the calculation of floor areas for estate agents to follow.

4. In response to Mr CHAN Kam-lam, Mrs SHUM said that it was not particularly difficult to conduct property search regarding New Territories properties. However, difficulty might be encountered in identifying the exact district area for the lot number of property. Miss Vicky LEE supplemented that it would take longer time in property search because some information of the properties in New Territories were kept in different sub-offices.

Meeting with deputations

Real Estate Developers Association of Hong Kong (REDA)

5. Mr S Y WAI informed Members of the amendments to their revised submission paper which had been issued to LegCo Paper No. HB 641/95-96. Members noted that the Association’s stance had been fully set out in their original submission (issued vide LegCo Paper No. HB 572/95-96).

6. The Chairman referred to para. 14 of REDA’s submission and queried why it was considered unnecessary to publish the application of licences in the newspapers. Mr WAI responded that publication in the Gazette was considered as a sufficient channel to inform the public of important information or notices by the Government. It should therefore apply to application of licences. He further explained that such an requirement would not only increase the cost but also cause confusion if it applied to salesperson’s licence in view of the high turnover rate of salespersons.

7. In response to Mrs Selina CHOW’s enquiry regarding para. 18 of REDA’s submission, Mr WAI said that REDA was concerned about the criminal liability to be imposed on estate agents. He pointed out that the Bill seemed to put the burden of proof on the estate agents which was against the practice of existing legal system.

8. Mr Edward HO referred to para. 6.1(b) of REDA’s submission and remarked that it would not be appropriate to exempt an estate agent from the Bill only because he was a shareholder of a property developer. Mr F K AU clarified that such a proposed exemption was to target at a number of developers which had a joint venture for property development. To address Mr HO’s concern, Mr AU suggested that the exemption could be circumscribed to major shareholders only. Mr WAI further supplemented that sale of new property had already been subject to strict regulation by the Government. In response to the Chairman, Mr WAI said that they had discussed their proposed exemption with the Housing Branch and it was agreed that property developers selling their own properties would not be affected by the Bill. However, subsidiary or separate companies set up by property developers to handle the sale of properties on their behalf would still be subject to the proposed regulatory system because the Government had to regulate estate agents handling overseas properties. In this regard, Mr WAI suggested that distinction should be made so that the regulation could only be applied to those handling sales of overseas properties. In addition, Mr WAI expressed concern that the Bill had not stipulated clearly under what circumstances exemption could apply. In this regard, the Chairman suggested and Mr WAI agreed that REDA could forward their further view regarding para. 6 of their submission in writing for the consideration of the Bills Committee.

Clerk

Joint Committee of the Major Real Estate Consultations and Property Developers (Joint Committee)

9. Further to the Joint Committee’s preliminary submission dated 10 January 1996, Members noted their detailed submission which was tabled at the meeting and subsequently issued to Members not present vide LegCo Paper No. HB 671/95-96. Mr Peter LEE briefed Members on four concerns regarding the Bill, raised by the Joint Committee, as set out in the speaking notes (which were tabled at the meeting and subsequently issued to Members not present under the same cover). They were : (a) extensive application of the Bill beyond residential sale transactions; (b) loopholes of the Bill possibly leading to disarray and confusion; (c) duplication of the Bill with existing and adequate legal principles; and (d) processing time and cost of property transaction being increased which would be against the interests of consumers.

10. Mr C N BROOKE then continued to elaborate on the other three concerns as set out in the speaking notes, namely, (a) unrepresentativeness of the composition of Estate Agents Authority (EAA); (b) reduction of consumers’ choices due to closedown of many estate agencies; and (c) unfairness in applying exemption to solicitors and accountants but not surveyors. Mr BROOKE drew Members’ attention to Appendix IV of the detailed submission which compared the licensing and regulation of estate agents in other jurisdictions and urged Members to make reference to overseas examples in considering the Bill.

11. In view of the fact that the Bill had not imposed a minimum capital requirement for operating an estate agency business and the licensing requirements would not be very stringent, Dr LAW Cheung-kwok queried why it was estimated that one-third of the practising agents would be driven out of the trade. Mr BROOKE explained that the main issue was the criminal liabilities and sanctions proposed in the Bill which would deter estate agents from practising.

Meeting with the Administration

12. As regards the research paper regarding an analysis of accessibility of information required under clause 37(2), Members brought up a number of concerns for discussion and the Administration responded accordingly. The gist of the ensuing deliberations is summarised in paragraphs 13 to 18.

Accessibility of information

13. The Chairman referred to the finding of the study that accuracy of information regarding floor area was difficult to ensure and quoted some deputations’ view that it would take a long time to ascertain the information. Mr William SHIU reiterated that such information should be available at the Land Registry and Rating & Valuation Department. If they were not available, estate agents should inform their clients accordingly. In addition, Members were reminded that the infoline, which would be ready in the summer of 1996, could facilitate public access to information on floor area and other relevant information. In the long run, the Government also aimed at centralising all relevant information at a data bank. In this regard, Mr Edward HO requested that Members should be informed of the cost and time involved in searching each type of information once such plan had been implemented. In response to Mr HO’s further enquiry about the time requirement of 6 weeks to view floorplans at the Buildings Department, Mr SHIU said that the Buildings Department planned to facilitate public access by way of microfilm and imaging although it would take time to complete the task. He undertook to report the progress at the next meeting.

Adm

Adm

14. Mr Fred LI asked whether calculation of building area and usable area could be standardize. Mr SHIU responded that there was no legal standard. However, rateable area was available at the Rating and Valuation Department which was calculated on a standard formula.

15. Mr LEE Wing-tat expressed dissatisfaction at the lack of progress in facilitating public access to property information and in standardising calculation of floor area since 1993 when the idea of a legislation governing estate agency had been discussed and the Law Reform Commission and the Consumer Council had completed two reports regarding floor areas. Mr SHIU agreed that public access to property information needed improvement. However, the Bill had already taken into account possible difficulties and therefore would only hold estate agents liable if they failed to comply with the requirements for provision of information without reasonable excuse. As regards legal standard of floor areas, Mr SHIU informed that public consultation exercise of the Law Reform Commission’s recommendations had yet to be concluded. A bill might be introduced to LegCo by the end of 1996. He remarked that the recommendations were about sales description of property and the impact had to be considered carefully since it might be related to other legislations.

16. Mr Fred LI referred to para. 50 of the research paper and queried why it would take time for the Land Registry to provide information regarding properties built even in the 1980’s. Mr SHIU remarked that they might be isolated cases. The Land Registry had made an effort to ascertain the situation with the LegCo research team. He undertook to revert to Members of their finding at the next meeting.

Adm

Comparison with other jurisdictions

17. The Chairman quoted a deputation’s view that there was no legal requirement about supply of property information in U.K. and queried the rationale for such a requirement in Hong Kong. Mr SHIU responded that such legal requirement was recommended by the Working Group on Regulation of Estate Agents with representatives from major trade associations, the Law Society of Hong Kong, the Consumer Council and the Independent Commission Against Corruption. The six pieces of information required in the Bill were considered basic and essential for property transactions and most of them were readily available. He emphasised that the recommendations received support from the public and the LegCo’s Housing Panel. He further remarked that due regard should be given to local circumstances since overseas examples might not be relevant to the situation of Hong Kong.

Implementation timetable of the Bill

18. Miss CHAN Yuen-han asked about the implementation timetable of the Bill. Mr SHIU said that the EAA would be set up within 3 months’ time after enactment of the Bill. EAA could then proceed to stipulate and issue the licensing requirements and regulation details. In addition, there were transitional arrangements to ensure that licensing could take place in a planned manner. In this connection, Dr LAW Cheung-kwok asked whether the Government would consider enforcing the requirements under clause37(2) only upon centralisation of property information being put into practice. Mr SHIU remarked that it was an ideal arrangement. However, since majority of the required information had been readily available, the spirit of the Bill was to ensure that they would be provided to the purchasers. Yet the Government would consider the practical situation in the transitional period.

Over-regulation of the Bill

19. Mrs Selina CHOW referred to the submission from the Hong Kong General Chamber of Commerce (issued vide LegCo Paper No. HB 652/95-96) which suggested that the Bill was over-regulating. Mr SHIU agreed to respond later. However, he remarked that stipulation of operation details in the Bill was to clarify the duties and responsibilities of estate agent. EAA, being a regulatory authority, should also be given the appropriate powers.

Adm

Way forward

20. Members discussed how the Bills Committee should proceed with the deliberation of the Bill. After deliberation, the Clerk was asked to prepare a workplan for the Bills Committee to facilitate discussion.

Clerk

Date of next meeting

21. The next meeting would be held on Friday, 8 March 1996 after the Finance Committee meeting to continue discussion with the Administration.

22. There being no other business, the meeting ended at 10:40 a.m..

LegCo Secretariat
30 April 1996