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

Confirmation of minutes

The draft minutes (in both English and Chinese) of meeting held on 13 December 1995 were tabled and confirmed without any amendment at the meeting. The minutes were subsequently issued to Members vide LegCo Paper No. HB 374/95-96.

Matters arising

Press release

2. Members were informed that the notice inviting written submissions and deputations was issued on Sunday, 17 December 1995 to various news media for release on Monday, 18 December 1995. The Hong Kong Standard had devoted a column to such notice.

Hansard report on Hon Albert CHAN’s motion debate

3. Copy of the Hansard report on the motion debate (in both English and Chinese) in the LegCo sitting in June 1993, moved by Hon Albert CHAN, urging Government to introduce legislation to regulate the operation of real estate agents through a licensing system, was tabled at the meeting for Members’ reference. The Hansard report was subsequently issued to Members not present vide LegCo Paper No. HB 375/95-96.

4. Members asked the Clerk to invite views on the Bill from those who had commented on the Report of the Working Group on Regulation of Estate Agents in 1994.

Clerk

Meeting with the Administration

5. The Chairman welcomed the Administration for attending the meeting. At the invitation of the Chairman, Mr William SHIU briefed Members on the background and main provisions of the Bill.

6. Mr SHIU said that the Bill was an enabling legislation to implement recommendations in the Report of the Working Group on Regulation of Estate Agents. A number of subsidiary regulations would need to be made after enactment of the Bill. The main recommendations of the Report are as follows :

1. to define the duties of estate agents;
2. to establish a statutory, independent body responsible for licensing and enforcement of the regulatory system; and
3. to provide sanctions against agents for non-compliance.

7. Mr SHIU pointed out that the proposed licensing system would be introduced in a gradual and planned manner to ensure that it will not result in large number of agents being driven out of business, thus leading to possible monopolisation by large estate agents or disruption of service to the public. Mr SHIU emphasised that the Government would take into account views from the trade, the public and professional bodies. The Administration maintained an open view towards amendments which were necessary and would improve the operation of the Bill.

8. Members then brought up a number of concerns for discussion and the Administration responded accordingly. The gist of their deliberations is summarised in the following paragraphs.

Property information to be supplied by the Estate Agents (Clauses 37(2) of the Bill)

9. Mr Edward HO enquired how the Government would assist estate agents in obtaining essential information about each property. Mr SHIU emphasised that the six items of information (on ownership, floor area, year of completion, permitted use, expiry date of the lease and renewal right) required under the Bill were basic and essential information in relation to property transactions and the bulk of them could be obtained speedily from the Land Registry at a reasonable search fee. A sample of the search form and information as regards the costs of various types of searches would be provided for Members’ reference. The estate agents could also have access to the information by way of subscription to the Direct Access System of the Land Registry. The Direct Access System, a fully automated land search facility, enabled subscribers to conduct on line searches of the land registers through computer terminals at their offices. In addition, the Government planned to install an infoline in the Rating and Valuation Department to facilitate public access to information on age and saleable area of domestic properties. The infoline was expected to be ready before end 1996. Furthermore, the Government aimed to centralise all relevant information at one contact point to facilitate easy access by estate agents. However, he agreed that some information required in the Bill might not be so readily available for old buildings e.g. pre-war buildings.

Adm

10. Mr SHIU said that under the Estate Agents Bill, an estate agent would not be liable to criminal offences so long as he had taken reasonable steps to obtain and verify the accuracy of information provided to the clients. The owner of the property also had the responsibility to make a statement as to whether unauthorised alteration works had been undertaken. Members noted that clause 56 stated clearly that an estate agent who failed to comply with the requirements would be liable only if he had no reasonable excuse. The defence of reasonable excuse afforded adequate protection for estate agents.

11. Mr Edward HO queried that some information might not be available at the Land Registry. Mr SHIU advised that there were other channels by which such information might be obtained such as the Rating and Valuation Department and the Buildings Department.

12. In this regard, the Chairman suggested the Administration should clearly prescribe the proper procedure and relevant forms in the schedule(s) to the Bill. Mr SHIU responded that these would be prescribed by the Estate Agents Authority (EAA) in the form of regulations.

13. Mr Edward HO further suggested and Members agreed that the LegCo’s Research and Library Services Division should undertake a model study for the Bills Committee to consider. The study was to ascertain, as far as information as regards property as listed out in clause 37(2) of the Bill was concerned, (a) the accessibility of such information, (b) the time taken and the cost incurred by an estate agent both as regards obtaining such information from the vendor, Government departments (e.g. the Land Registry, the Rating and Valuation Department and the Buildings Department) or any relevant party and as regards his being reasonably satisfied of the accuracy of such information. The study should cover both old and new properties for comparison purpose. Mr James TO added that the study should cover other relevant information (such as floor loading stipulation of an industrial undertaking and the sewage connection of a commercial undertaking which would be converted into a restaurant etc.) not prescribed in clause 37(2). Mr SHIU pointed out that the EAA would specify and standardise different types of essential information to be provided in relation to different types of properties.

R & SL

Division

14. Mr James TO remarked that it might be too heavy a burden for the estate agent to check the accuracy of the statement provided by the vendor under clause 37(2)(g). Ms Eva TO explained that clause 37(8) relieved estate agent’s liability in verifying the accuracy of information contained in the statement. She added that this section should also not be construed as requiring the vendor to warrant the accuracy of such a statement. A vendor would have civil liability if misrepresentation were involved. Members agreed to discuss this point further when the Bills Committee proceeded to clause-by-clause examination.

Composition of the EAA

15. In view of the fact that EAA would be a powerful regulatory body, Mr Fred LI was concerned that estate agents and related trades, whose interest might be inter-connected, were over-represented, as they composed two-third of the membership. Mr SHIU responded that in order to ensure impartiality of EAA, one-third of its members would come from the trade (excluding the Chairman and the Vice-chairman), and the remaining would come from related professions and the community. He stressed that it was important for EAA to balance different interests in order to ensure impartiality and credibility. In this regard, Mr Fred LI suggested and Mr SHIU agreed to consider whether half of the Authority’s members should come from the trade and related professions whereas the other half should come from the community (including the Independent Commission Against Corruption and Consumer Council).

Adm

Licensing requirements

16. Messrs Fred LI and Edward HO asked and Mr SHIU confirmed that the licensing requirements to be prescribed by the future EAA would be referred to LegCo in accordance with the normal legislative procedures. Mr Andrew CHENG suggested the Administration to make reference to overseas licensing requirements to set out the details in the Bill. Mr SHIU pointed out that under the Bill, the EAA would work out the detailed licensing requirements and he undertook to pass Members’ views to the future EAA.

Adm

17. Mr NGAN Kam-chuen also opined that EAA should adopt less stringent criteria in assessing the eligibility of a person who had criminal record not related to his own credibility. Mr SHIU explained that the Bill aimed to protect the interest of consumers by requiring practitioners to perform certain duties and by imposing penalties for serious breaches. In determining the eligibility of an applicant, the Authority had to take into account previous criminal record in order to ensure the integrity and image of the trade.

18. Dr. LAW Cheung-kwok asked how consequential wastage of practitioners in the trade could be avoided. Mr SHIU responded that there would be a transitional period during which the EAA would issue transitional licences and allow sufficient time for estate agents to meet the full licensing requirements.

Monopolisation by large estate agents

19. In response to Dr. LAW Cheung-kwok’s question about how the Bill would deal with the problem of possible monopolisation by large estate agents, Mr SHIU said that the future regulatory system would be fair and reasonable to all estate agents and the EAA would adopt a balance approach to avoid monopoly by large establishments. The Bill aimed to ensure that estate agents would meet certain basic standards of competence and perform their work in a fair and honest manner. There was however no requirement on minimum capital or staffing for operating an estate agency business which if required, would probably adversely affect small agents.

Overseas properties

20. Dr. LAW Cheung-kwok referred to clause 37(1)(a)(ii) which required every licensed estate agent (whether the property was situated in Hong Kong or elsewhere) to be reasonably satisfied as regards the accuracy of property information. He wondered how it could apply to the completion date on an advertisement regarding overseas property which had not yet been built. In this connection, Members noted that a sub-committee under the Law Reform Commission was studying the issue of sales descriptions of overseas properties. The Law Reform Commission’s recommendations would be published for public consultation in due course.

Advertising

21. Mrs Selina CHOW referred to the requirement that an estate agent should ensure that an advertisement was not false, inaccurate or misleading. She opined that since advertisement was to attract and draw people’s attention and was placed for a commercial purpose, it might worth careful re-consideration of such requirement.

Educational qualifications for licensing

22. Mr NGAN Kam-chuen remarked that it would be more appropriate to require a person to complete certain prescribed training courses before he was eligible for applying for an estate agent’s licence, than require him to attain a high education standard.

23. Mrs Selina CHOW shared the view. She said that the educational qualifications for licensing, if set too high, would adversely affect the employment opportunity in the trade. She would rather emphasise relevant working experience and competence in the trade. The EAA should set down the standard of applicants along the lines of either completing a specially-designed training course or passing a prescribed test. In response to Members’ enquiry, Mr SHIU indicated that the educational qualifications in clause 19(1)(b)(ii) could mean a prescribed training course or a prescribed level of basic education or both which would be determined by the EAA. Mr James TO suggested and the Administration agreed to make reference to the qualifying examinations in other trades (which had not prescribed educational qualifications) such as electric technicians, plumbers and investment advisers of the Securities Futures Commission.

Adm

Disciplinary power of EAA

24. In response to the Chairman’s enquiry, Ms Eva TO explained that there was no contradiction between clause 31(1)(v) and clause 56(6)(a). Clause 31(1)(v) empowered the EAA to impose penalties and exercise disciplinary powers and one of such powers was to revoke an existing licence. Clause 56(6)(a) provided the court with power, on conviction of a person, to disqualify such a person for obtaining a licence or applying for a new licence for up to 5 years. Mr SHIU supplemented that the EAA should possess appropriate power to regulate the licensing system and it would make reference to the court’s decision before granting a licence.

Estate agent to represent both the vendor and purchaser

25. The Chairman asked why the Bill did not preclude an estate agent from representing the vendor as well as the purchaser since it might give rise to malpractice. Mr SHIU responded that double agency was a long established practice and had enabled property transactions to be carried out in a generally efficient and cost-effective manner. The Bill provided flexibility to a client by allowing an estate agent to represent either the vendor or the purchaser or represent both parties. The requirements for estate agents to disclose their interests to their clients and inform the vendor of every offer made would be adequate safeguards.

Compensation fund

26. With regard to the Chairman’s suggestion of setting up a compensation fund, Mr SHIU responded that, based on complaint statistics, embezzlement or misappropriation of clients’ money was not a problem. The Independent Commission Against Corruption and the Consumer Council had been consulted and agreed that there was no need to set up a fund at the present stage. He added that the proposal might place a financial burden on estate agents and might lead to possible monopolisation of the market by large estate agents. The Chairman said that the compensation fund of travel agents had been operating smoothly. Mr SHIU replied that a compensation fund would be costly to administer and such costs might eventually be passed on to consumers. In order to protect the consumers’ interest, the Bill proposed that the estate agent should keep money received from a client in a separate account which would be subject to inspection by the EAA.

Vicarious liability of estate agents

27. Mr CHAN Kam-lam, referring to the employers’ vicarious liability in respect of employees as stipulated in clause 45, remarked that it might be unfair to the employers if a criminal liability were involved. Mr Dennis Morris pointed out that an employer’s vicarious liability could only arise in relation to an act or omission of an employee. Accordingly, it could not arise as regards something done, say, by a third party while inspecting a property which an estate agent was instructed to sell. Ms Eva TO clarified that clause 45 of the Bill applied only to civil rather than to criminal liability. Apart from this section, vicarious liability existed under common law if there was an employer-employee relationship and an actionable act or omission on the part of the employee occurred in the course of the employment. Mrs Selina CHOW said that the trade was justified to express concern, because commercial activity without the intention to commit a crime might still lead to criminal liability. In this connection, the Chairman remarked and the Administration concurred that educational effort was important to enable practitioners in the trade to have a clear understanding of the Bill and its relevant legal concepts.

28. The meeting ended at 5:40 p.m..

29. The next meeting would be held on (a) 22 January 1996 at 4:30 p.m. to meet with deputations and (b) 31 January 1996 at 10:45 a.m. to continue discussion with the Administration.

LegCo Secretariat
29 January 1996