LegCo Paper No. CB(1) 862/96-97
(These minutes have been seen
by the Administration)
Ref : CB1/BC/11/95/2

Bills Committee on Estate Agents Bill

Minutes of Informal Meeting held on Monday, 18 November 1996 at 4:30 pm in Conference Room A of the Legislative Council Building

Members present :

Members absent :

Public officers attending :

Housing Branch
Miss Eva TO: Assistant Secretary for Housing
Mr Eric HO: Chief Executive Officer (Special Duties)
Land Registry
Mr John WAI: Deputy Registry Manager/Search & Technical Services
Mr Daniel WONG: Deputy Registry Manager/New Territories

Attendance by invitation :

The Hong Kong Association for the Advancement of Real Estate and Construction Technology Limited
Mr Edmund HO: Vice President
Mr YU Kam-hung: Council Member
Hong Kong Institute of Real Estate Administration
Mr HUI Wing-to, John: Chairman of the Executive Committee
Mr WONG Kam-cheong, Stanley: Executive Committee Member
HKU Professional Real Estate Agencies Alumni
Mr WU Kin-shun: Co-ordinator
Mr CHAN Yiu-man: Assistant Honorary Secretary
Property Agencies Association Limited
Mr LI Man-pong: Vice Chairman
Mr Marqus WONG: Executive Member
Hong Kong Chamber of Professional Property Consultants Limited
Mr Stephen SUEN: Vice President
Mr Tommy LEUNG: Consultant
New Territories Estate Merchants Association Limited
Mr LIU Chi-ming: Chairman
Mr LAU Chi-hung: Vice Chairman
Society of Hong Kong Real Estate Agents Limited
Mr Tony T N CHAN: President
Mr Michael N M CHOI: Council Member
Hong Kong Real Estate Agencies Association
Mr Stephen NG: First Councillor
Mr Joseph KWOK: Vice Chairman
Midland Property Holdings Limited
Mr William FUNG: Managing Director
Joint Committee of Major Real Estate Consultants and Property Developers
Mr C K LAU
Mr Dominic LEUNG
The Real Estate Developers Association of Hong Kong
Mr S Y WAI: General Secretary
Miss Wendy GAN: Representative
Centaline Property Agency Ltd
Mr SHIH Wing-ching: Director

Clerk in attendance :

Staff in attendance :

Miss Eva LIU: Head, Research & Library Services
Miss Becky YU: Senior Assistant Secretary (1)3

I The Meeting

Meeting with deputations

Discussion Session

II Any other business

I The Meeting

The Chairman welcomed representatives from the Administration, the trade and the Research and Library Services Division (RLS) of the Legislative Council (LegCo) Secretariat to the meeting. He said that the purpose of the meeting was for the trade to present their views on the time and cost required for obtaining the six major types of information required under Clause 37(2) of the Bill, and the proposed introduction of the concept of "due diligence" by the Administration. The Chairman reminded members that as this was an informal meeting, the LegCo (Powers and Privileges) Ordinance (Cap. 382) would not apply.

2. Before commencing discussions on Clause 37, Miss Eva LIU sought clarification from the Administration on the Principal Assistant Secretary for Housing (PAS for H)s remarks made at the last meeting on 13 November 1996 that RLS had not responded positively to requests made by the Administration for certain data relating to the research report on "An analysis of accessibility of information required under Section 37(2)". She said that apart from a request made by a Mr AU YEUNG from the Land Registry (LR) on 5 February 1996 for statistics on cases distribution relating to the survey, no other written requests had been received from the Administration. Miss LIU also pointed out that representatives from the Housing Branch had participated in the survey all along. The Assistant Secretary for Housing (AS for H) emphasized that in making the requests for further information and clarification concerning the research report, the Administration had no intention to challenge the results of the research report. She stressed that the Administration did ask for the information in order to have a better understanding of the findings of the survey, although such a request might not have been put down in writing. AS for H regretted that if such a fact-finding request had led to any misunderstanding on the part of RLS. The Chairman requested the Administration to provide in writing before the next meeting any comments it might have on data contained in the report.

3. Hon Mrs Selina CHOW was highly dissatisfied with the non-attendance of representatives from the Buildings Department (BD) as the main purpose of the meeting was to discuss the accessibility of property information provided by Government departments. AS for H explained that since most information required under Clause 37(2) could be obtained from the LR and the Rating and Valuation Department (RVD), representatives from BD had not been invited to the meeting. She said that the Administration would respond in writing to any questions which members might have in this respect. The Chairman considered that representatives from BD should be invited to the next meeting to provide first-hand information and elaborate on the availability of property data, the retrieval time and the schedule for the computerization of property data in the Department to members of the Bills Committee.

Meeting with deputations

4. The Chairman said that each of the twelve organizations would be allocated five minutes for presenting their views; the speaking order would follow the order of their response to the invitation to the meeting. The Administration would be invited to respond to points made after six organizations had made their presentations. This would be followed by a general discussion at the conclusion of presentation by all twelve parties.

The Hong Kong Association for the Advancement of Real Estate and Construction Technology Limited

5. While acknowledging the intention of the Bill to protect consumer interests, Mr Edmund HO cautioned that it might be difficult for estate agents to obtain information required under Clause 37(2). To allay the concern of the trade, Mr HO suggested devising a standard "Disclosure Statement" so that estate agents could inform potential purchasers the types of information which could be made available. This could ensure customer protection without causing delays to property transactions. The long-term objective would be for the Administration to improve public access to property-related information. Mr YU Kam-hung considered a need for the Administration to clarify and define the types of property information required, such as the floor area of a premises which might refer to gross area, net area, saleable area, or usable area. Moreover, estate agents might have difficulties in verifying such information as illegal structures in premises in the vendor statements as required under Clause 37(2)(g) in view of the time taken to undertake searches at BD. While Mr YU was supportive of the introduction of the concept of "due diligence" and the decriminalization of breaches relating to provision of information, he considered a need for the Administration to step up publicity efforts to promote a better understanding of these provisions.

Hong Kong Institute of Real Estate Administration

6. Mr HUI Wing-to took a different view on the performance of BD. He said that following the establishment of a working group on building plans, retrieval of such plans at BD had been easier. However, the significant increase in the number of transactions might have prolonged the time required for BD to provide such plans to their clients. He also pointed out that estate agents might have difficulties in obtaining such information as illegal alterations, date of occupation, saleable area and net area of individual premises from these plans. Furthermore, discrepancies in information in the building plans and the Occupation Permits (OPs) might also create difficulties for estate agents. Mr HUI agreed that it would take time to develop the Central Data Bank on property information and that this should be implemented by phases. He further suggested including in the Central Data Bank such essential items as Certificates of Compliance and special approvals issued by the Lands Department (LD).

HKU Professional Real Estate Agencies Alumni

7. Mr WU Kin-shun considered that estate agents would be assuming the role of banking institutions if they were required to provide such information as subsisting incumbrances of properties. He said that information regarding dates of completion and users restrictions in respect of properties would hinge on whether BD could provide such information. Mr CHAN Yiu-man added that the LegCo research report had rightly pointed out that over 98% of searches for information could not be completed without going to BD, and that it would take estate agents over one month to obtain building/floor plans and about a week for OPs from BD; this would adversely affect property transactions. Furthermore, it would be unfair to request vendors to make statements on structural additions and alterations as required under Clause 37(2) since second or subsequent owners might not be aware of such alterations. Mr CHAN also considered a need for the Administration to spell out clearly the definition for floor area of premises.

Property Agencies Association Limited

8. Mr LI Man-pong was of the view that some property information, such as that on ownership, was more important than others, and that it might not be necessary for estate agents to visit various Government departments as information required under Clause 37(2) could be obtained from the title deeds or banking institutions as far as subsisting incumbrances were concerned. He pointed out that collation of the six items of information would be time-consuming and costly, and would affect the operation of the trade. In particular, the time, efforts and costs involved would be enormous if a vendor asked multiple agents to sell his property. This would also create significant workload for the trade and for Government departments concerned. Mr LI considered it unrealistic to require estate agents to obtain the six major types of information before full-scale implementation of the Central Data Bank on property information. He preferred not to spell out the concept of "due diligence" in the Bill as this was covered in the common law, and further suggested that potential purchasers should make their decisions by merely visiting the premises concerned.

Hong Kong Chamber of Professional Property Consultants Limited

9. Mr Stephen SUEN remarked that the Bill was aiming at a perfect system which would be impossible to achieve in the short term. He expressed concern on the time and cost required to collate information required under Clause 37(2), and pointed out that potential purchasers would be anxious to expedite the process in view of the rapid changes in market value of properties. Mr SUEN was supportive of the concept of "due diligence" as this could alleviate estate agents concern on the difficulties in collating the requisite information. He also cautioned the adverse impact which Clause 47 would have on the flow of property information as owners would be required to give written consent before estate agents could advertise the premises concerned.

New Territories Estate Merchants Association Limited

10. Mr LIU Chi-ming said that property transactions in the New Territories involved much less time and procedures than those in the urban areas since visits to the premises concerned by potential purchasers would suffice. He was initially under the impression that due diligence exercised by the trade would be sufficient for regulatory purpose and that the rest would be monitored by the EAA. The Bill had however sought to raise the estate agents trade to a professional level as that of solicitors. Furthermore, it would be difficult to reconcile the basic educational requirements for entry to the trade with the complex duties which estate agents would be expected to discharge.

11. At the invitation of the Chairman and in response to the points made, AS for H advised that the intention of the Bill was to enhance customer protection without causing undue disruptions to the trade. The six major types of information required under Clause 37(2) basically followed the recommendations made by the Working Group on Regulation of Estate Agents and had taken into account opinions of the trade and the public collated during the consultation period of the Report of the Work Group. The information required was basic and necessary information obtainable through either the Direct Access System (DAS) in LR and the infoline system on saleable area and date of completion of domestic properties to be introduced by RVD. AS for H pointed out that consumers interest should not be sacrificed or compromised for the sake of efficiency. She supplemented that information relating to subsisting incumbrances could be obtained from BD or LR, and clarified that estate agents were not required to verify information contained in a vendor statement. The vendor was only required to provide the information with the best of his knowledge. AS for H acknowledged the trades concern on different definitions on floor area now being used by the industry. She said that efforts would be made to clarify in the regulations as regards the definition of floor area. She emphasized that the Bill had provided for flexibility for the Estate Agents Authority (EAA) to implement specific requirements by phases, and to prescribe the exact types of information under different circumstances. It could also organize relevant training courses on information retrieval for estate agents. As regards the concept of "due diligence", AS for H assured the meeting that EAA would draw up guidelines in this respect so that estate agents who had taken reasonable care to avoid contravention would not be unduly penalized. On the possibility of a phased introduction of provisions in the Bill, the Administration would seriously consider application of the Bill on residential properties first as most complaints and malpractices were related to residential transactions.

12. The Deputy Registry Manager/Search & Technical Services supplemented that efforts had been made to facilitate public access to property-related information kept by LR. The DAS launched in 1994 allowed subscribers to conduct on-line searches of the computerized land registers in their offices. The coverage of DAS had now extended to all Urban land registers and New Territories (NT) Town Lot land registers and would be further extended to cover the NT Demarcation District and Survey District Lots by phases. He added that the newly introduced Document Imaging System would enable DAS subscribers to receive copies of imaged land documents through fax machines in their offices in early 1997.

13. Members noted from the meeting on 13 November 1996 that 70% of property data required further searches at BD, and considered a need for the Administration to provide a written response on:

- a detailed description of each of the six items of information required under Clause 37(2) to avoid ambiguity. For example when information was requested on "floor area", whether reference was being made to the gross area, saleable area, or usable area of a property;

- the departments from which each of these items of information could be obtained. These should include LR, RVD, BD and LD where appropriate; and

- the types and the percentages of information requested under Clause 37(2) which were and were not available from these departments, with a breakdown by the years of completion of properties such as pre-war, before the 1970s, 1970-1980, 1980-1990, and since 1990.

14. AS for H advised that Clause 37(1) had provided for flexibility for EAA to prescribe the exact types of information required, including that on floor area of premises, by way of subsidiary legislation; and this would be subject to the approval of the Secretary for Housing and normal legislative procedures. She supplemented that reference could be made to the definition adopted by RVD in defining the floor area of premises, and undertook to provide further information as requested.

Society of Hong Kong Real Estate Agents Limited

15. Mr Tony CHAN pointed out that apart from the three departments of LR, RVD and BD, LD was also responsible for providing certain information, such as small houses in the New Territories. He shared the view that it might be difficult to obtain information on floor area of premises as 47% of building plans from BD did not provide such details. While Mr CHAN recognized the need for defining clearly in the Bill the floor area of premises, he cautioned that the trade and owners were used to making references to the gross area of premises and that any change might create confusion. He added that it would be useful if the Administration could provide a library on sales brochures on description of flats issued by developers as these would provide valuable property-related information. Mr CHAN expressed reservations at the concept of "due diligence" as it would be unfair for the onus of proof to be placed on the accused before accurate information could be made available. He emphasized the need for the Administration to provide reliable and readily available property data for estate agents at reasonable costs through the setting up of the Central Data Bank on property-related information. He further suggested that consideration should be given for the gross floor area of premises to be specified in building plans or be provided by RVD; the age of buildings and the floor areas to be stated in demands for rates; and that additional and relevant information such as title deeds should be added on to the directory on Names of Buildings in order to facilitate the work of estate agents during the transitional period.

Hong Kong Real Estate Agencies Association

16. While appreciating the implementation of the infoline service through which information on dates of completion of buildings could be obtained, Mr Stephen NG cautioned that certain information such as subsisting incumbrances of properties might not be available at all. He considered it unfair for estate agents to be held responsible for providing information required under Clause 37(2) given the fact that the Administration also had difficulties in setting up the Central Data Bank on property information. Mr NG was in support of a phased implementation of the Bill, and the proposal for a standard "Disclosure Statement" as these would ensure that property transactions would not be held up unnecessarily.

Midland Property Holdings Limited

17. Mr William FUNG considered that the Administration did not appear to have regard to the actual practices of the trade when drafting the Bill. Under the conditions prescribed in the Bill, and taking into account the fact that about 10 million property transactions took place each year in Hong Kong of which 70% involved estate agents, estate agents would have to spend several millions of dollars in obtaining property information. He added that estate agents might have difficulties in obtaining such information as users restrictions in the absence of a centralized property data system since such information might only be available in the Deeds of Mutual Covenant (DMC) rather than OPs. Mr FUNG cautioned that estate agents would be assuming the role of solicitors if they were required to check on DMCs. He further pointed out that property information in overseas countries such as Canada and the United States was very advanced, and estate agents could have direct access to such computerized information as users restrictions and lot sizes. By comparison, the estate agents trade in Hong Kong was far more active and internationalized and yet the provision of property data by the Administration was very backwards. He echoed the view that the Bill as drafted was too refined.

Joint Committee of Major Real Estate Consultants and Property Developers

18. Mr C K LAU expressed concern on the compatibility of regulations to be drawn up by EAA with the intention of the Bill, and on the legality of Clause 37(2)(g) which required vendors to provide such information as structural alterations and additions. He also expressed doubts on the need for estate agents to check all instruments for information on users restrictions of properties. Mr LAU considered a need for the Administration to re-consider the depth and the effect of the Bill and to review its provisions. He cautioned that LR might not be able to cope with the surge in workload if estate agents were required to verify the ownership of every property assigned to them.

The Real Estate Developers Association of Hong Kong

19. Mr S Y WAI urged members, the Administration and the EAA to have regard to the fact that not all property data were available and that it would take experts to verify such information.

Centaline Property Agency Limited

20. Mr SHIH Wing-ching said that the report of the Working Group on Regulation of Estate Agents contained very general recommendations whereas the provisions in the Bill were very refined. He considered that the Bill when enacted would bring a major change to the operation of the trade and estimated that 90% of estate agents would not be able to adapt and comply with the requirements. Mr SHIH suggested that information required under Clause 37(2) should be provided by vendors or made available only before the signing of the preliminary Agreement for Sale and Purchase.

21. In response to the Chairman, AS for H advised that it was the Administrations objective to facilitate access to property information through centralization of property related data. She had reservations on the proposal that some information under Clause 32(7) were to be provided at a later stage as these were basic information which could be obtained from various existing information systems administered by the Administration. The information was essential in assisting the purchaser to make an informed decision. AS for H supplemented that the Administration did not have any pre-determined views on educational qualifications of estate agents and these had yet to be determined by EAA; the intention would be to minimize as far as possible any possible entry barriers against serving estate agents during the transitional period. As regards the concept of "due diligence", AS for H emphasized that this was a defence rather than a transfer of onus of proof so that estate agents who had taken reasonable care to avoid contravention would not be unduly penalized. She added that this concept was not new and had been adopted in a number of recently enacted legislation.

Discussion Session

22. Mrs CHOW was in support of the view of the trade that the Bill as drafted was too refined and had deviated from the recommendations of the Working Group. She requested the Administration to review if the Bill reflected the proposals in the Working Group report and to consider re-drafting the Bill as necessary. Mrs CHOW also considered a need for the Administration to advise the timetable for implementation of the Central Data Bank on property information which would provide expedient and reliable property information to estate agents and the public, and the schedule for submitting the related funding request to the Finance Committee.

23. While Mr Michael CHOI agreed with the need to provide potential purchasers with certain information on properties concerned, he was worried that the cost for obtaining such information would be passed on to consumers. He considered that both vendors and purchasers would be affected by the provisions under Clause 37(2) as the former might not be able to dispose of their properties expeditiously in view of the time required to collate the information and this would result in limited choice of properties for the latter. Mr CHOI suggested leaving it flexible for reference to gross area and saleable area of properties as the former was commonly adopted at the present stage. The important point was for estate agents to provide sufficient information to clients concerned so that they could make their decisions based on the available information.

24. Mr WONG Kam-cheong said that while estate agents would be required to make reference to OPs, such permits did not contain information on subsequent alterations made. Furthermore, since many title deeds were old and illegible, there was a need for the Administration to issue Certified True Copies of the deeds. Mr WONG further pointed out that it would be difficult for estate agents to obtain certain information as some properties in the New Territories did not have title deeds, and premises constructed before the year 1967 did not even have "Certificates of Exemption".

25. AS for H reiterated that Clause 37(2) provided for flexibility for EAA to prescribe the types of information required. Consideration would be given to refining its scope and improving the drafting of this clause in the light of the concerns of the trade. AS for H acknowledged that there were always some odd cases in property transactions particularly in the New Territories where information might not be so readily available. She emphasized that in these cases, estate agents would be deemed to have fulfilled their obligations under the concept of "due diligence", so long as they had taken reasonable steps to obtain the information and inform their clients accordingly. While establishment of a Central Data Bank could facilitate access to property information , it remained a long-term goal in view of the significant number of properties in Hong Kong and the complexity of integrating and aligning incompatible data. The setting up of a central data bank was not a pre-requisite to the implementation of the Bill. The Administration would nevertheless consider re-drafting certain provisions in the Bill in the light of views expressed.

26. Before concluding, the Chairman thanked representatives from the Administration and the trade for attending the meeting, and requested the Administration to follow-up on concerns raised at the meeting.

II Any other business

27. There being no other business, the meeting closed at 6:40 pm.

Legislative Council Secretariat
11 February 1997

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