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

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Internal discussion

Resignation of Hon Albert HO

Members noted that Hon Albert HO tendered his resignation from the Bills Committee. His letter of resignation was tabled at the meeting.

Meeting more deputations

The Chinese translation of the summarised table of submissions dated 18 January 1996 with the following letters were tabled at the meeting and subsequently issued to Members not present vide LegCo Paper No. HB 526/95-96 :

1. from the Real Estate Developers Association of Hong Kong dated 11 January 1996;
2. from Miss Carol West of Dalgleish West & Associates Ltd dated 16 January 1996;
3. from United Association of Shau Ki Wan Estate Agencies dated 18 January 1996; &
4. from Mr John WONG dated 18 January and 19 January 1996 respectively.

3. Members noted that 6 parties (other than those to be met at the meeting) belonging to the trade and 5 public organisations had requested to meet the Bills Committee. The Chairman invited views from Members as to whether the Bills Committee was to schedule more dates to meet deputations. After discussion, Members agreed to meet more deputations at the next meeting which was originally scheduled to meet the Administration. The meeting to be held from 10:00 a.m. to 1:00 p.m. on Wednesday, 31 January 1996 would have two sessions. The first session (10:00 a.m. to 12:00 noon) would meet with public organisations and the second session (from 12:00 noon to 12:45 p.m.) deputations from the trade. Due to time constraint, the Chairman suggested that only one to two representative(s) from each party should be invited for the second session.

Clerk

Meeting with deputations

Society of Hong Kong Real Estate Agents Ltd

(Submission dated 9 January 1996 issued vide LegCo Paper No. HB 500/95-96)

4. Mr Michael CHOI said that the Society supported the introduction of a licensing system to the trade which could offer protection of the consumers and enhance professionalism of the trade. Mr CHOI briefed Members on their comments on the Bill as set out in the submission. He stressed that the Government should take a more active role in provision of accurate property information. As regards the future Estate Agents Authority (EAA), it was considered that the Bill should not specify its membership and should allow flexibility for future development. In addition, the Bill should only set out general principles/policies and leave the detailed operation rules in the trade for the determination of the EAA. The Society also found it unacceptable for making wrongdoings by estate agents even without the intention of fraud or deception as criminal offences.

5. Mr NGAN Kam-chuen referred to para. 3.7 of their submission and asked how the interest of the purchaser could be protected if supply of essential information were to be waived. Mr Henry SHIU responded that the purchaser should consult his legal adviser if he decided to purchase a particular property even without the essential information.

6. Mrs Selina CHOW queried why the estate agents, as recommended by the Society, needed not supply all essential information at the initial stage to potential purchasers. Mr CHOI explained that it was difficult and time-consuming to collect all the essential information without the availability of a Central Data Bank. Their recommendation could avoid delay in arranging for viewing of the property by potential purchasers.

7. Mr LI Wah-ming referred to para. 3.3 of their submission and opined that the responsibility for supply of essential information should not be shifted to vendors who had to pay commission for the services provided by the estate agents. He pointed out that estate agents should have basic knowledge of property in their specialised geographical area. Dr LAW Cheung-kwok further asked whether the Government had been contacted in relation to assisting the vendors in providing the essential information at a low cost. Mr CHOI responded that the vendor should have some basic information about his property and the estate agents would have no knowledge about change of ownership. Their recommendation was to avoid duplication of effort in view of the fact that the vendor might list his property with a number of agents. He also confirmed that the Society had discussed with the Government about searching of information which had led the Government to plan to set up a Central Data Bank.

8. As regards the possible criminal punishment which might be imposed on the estate agents for their wrongdoings, Mr James TO remarked that many commercial activities within different regulatory frameworks would also face the possibility of criminal punishment even there were no intention to commit a crime. Mr CHOI reiterated that the main issue was whether there was an intention of fraud and deception. The possibility of criminal punishment for wrongdoings without the intention to commit a crime would have adverse impact on the development of the trade.

Hong Kong Real Estate Agencies Association

(Submission in Appendix 13 of the summary table issued vide LegCo Paper No. HB 468/95-96 dated 15 January 1996)

9. Messrs Joseph LEUNG and Stephen NG briefed Members on their submission. As regards vicarious liability of estate agents, Mr LEUNG said that although the Administration had clarified that it only applied to civil (not criminal) liability, it should be clearly stipulated in the Bill. The Government could only centralise information at one point by end 1996. Mr LEUNG expressed concern that the purchaser or vendor could use the excuse to cancel sale and purchase agreement if a particular item of information was not yet available during the interim period. Mr NG pointed out that essential information should be required in full only prior to any conclusion of sale and purchase agreement but not upon introduction of the property to potential purchasers. It was also considered unnecessary to require every licensed estate agent to submit an annual Accountant’s report to the EAA. The requirement for an estate agent to keep money received from a client in a separate account was an adequate safeguard.

10. Mr LEE Wing-tat referred to the Association’s written comment that it was too troublesome to seek written agreement from client for the purpose of advertisement and enquired how the interest of a client could be protected without such a requirement Mr Denny WONG responded that section 47(1)(a) would forbid inclusion of any false and misleading information in advertisements. It would also deter dishonest estate agents to advertise property without the consent of vendor or to advertise property which was not really for sale. Such a requirement would only discourage the vendor to list his property with too many estate agents and thus would adversely affect the interest of the vendor, and those of the purchaser and estate agents eventually. In this regard, Mr LEE remarked that the vendor would balance his interest in deciding the number of estate agents he should list his property with. Mrs Selina CHOW asked why the Association considered it difficult to fulfil the requirements under section 47(1)(a) & (b). The Chairman suggested and the Association agreed to respond in writing.

Clerk

Kowloon Property Agencies Association Ltd.

(Submissions in Appendices 2 and 2A of the summary table issued vide LegCo Paper No. HB 468/95-96 dated 15 January 1996)

11. Messrs TANG Hoi-tung and Eddie LOU briefed Members on their submissions. They expressed concern that imposition of criminal liability would deter people to join the trade. In addition, it was unfair that government departments, solicitors, liquidators or other specified professions could have immunity. They further remarked that it was too late for the Government to start setting up a Central Data Bank. The Bill also did not specify whether the accountant’s report was an auditor’s report or a management report. Mr TANG opined that it was impossible to fulfil such a requirement if an auditor’s report was required.

12. Mr LEE Wing-tat enquired how consumers would be benefited from setting up a Central Data Bank. Mr LI Man-pong responded that it would be beneficial to the consumers since access to information would be expedited. The conclusion of a deal might also be facilitated. Mr Albert CHAN further asked how estate agents could justify their one-percent service charge if their duties were to be shouldered by the Government or vendors. Mr TANG responded that commission charge was only payable if a deal was concluded. It was therefore not related to the operating cost which had already been incurred beforehand. In this regard, Dr LAW Cheung-kwok asked whether the Central Data Bank would affect the competitiveness in the trade and thus the rate of commission charge. Mr TANG explained that requirements of the Bill would in fact increase the operating cost of the trade.

13. Mrs Selina CHOW also asked and Mr TANG confirmed that the Administration had not indicated which party would bear the cost for obtaining information from the Central Data Bank. The Chairman suggested that the Bills Committee could follow up with the Administration.

Chairman

Hong Kong Institute of Real Estate Administration

(Submission in Appendix 6 of the summary table issued vide LegCo Paper No. HB 468/95-96 dated 15 January 1996)

14. Mr John HUI briefed Members on their submission. The Institute was supportive of the spirit of the Bill which could protect the consumer’s interest. The regulation on advertisement seemed to overlap with other legislation governing the publication of sales brochure for property not yet completed. The standard for granting a salesperson’s licence should be clearly prescribed. As regards the composition of EAA, the category of related professions had not been defined. Mr HUI further suggested that senior administrators of real estate companies and surveyors should be included. As regards vicarious liability of estate agents, Mr HUI remarked that although the Administration had clarified that it only applied to civil (and not to criminal) liability, it should be clearly stipulated in the Bill. The Institute recommended that educational qualification and professional standard for estate agents should be prescribed and thus qualifying examination could be arranged.

15. Mrs Selina CHOW asked and Mr Danny CHEUNG confirmed that imprisonment should not be imposed for offences without the intention of fraud and deception.

16. As regards the educational qualifications for licensing, Mr NGAN Kam-chuen queried why it was necessary to prescribe a relatively high educational qualification and professional standard which would increase the operating cost and since conducting business in a honest manner was the main issue. Mrs Selina CHOW shared his view and remarked that competency in the trade did not necessarily relate to educational qualification. Messrs Alfred LAI and John HUI clarified that the educational qualification and experience in the trade would be the criteria for professional standard. In response to Chairman’s enquiry, Mr HUI confirmed that qualifying examination might not be workable during the transitional period. However, it should be the goal in the long run.

New Territories Estate Merchants Association Ltd

(Submission in Appendix 8 of the summary table issued vide LegCo Paper No. HB 468/95-96 dated 15 January 1996)

17. Mr LEUNG Shui-pui briefed Members on their submission. Mr LEUNG supplemented that the Association had been playing an important role in monitoring the estate agents in the New Territories and assisting their operation by provision of standard property inspection sheet and contract etc.. He expressed concern that the Association had not been consulted about the Bill and stressed that representative of the Association should be included in the future EAA in the light of its unique experience in handling property transaction in the New Territories. Mr YAU Shek-hay drew Members’ attention to the unique situation in the New Territories where accurate information regarding property was not always available. The Bill would also bring adverse impact on the small land owners by increasing the transaction cost and thus purchasers would bear extra burden of cost. Mr LIU Chi-ming supplemented that persons with criminal record not related to fraud or deception should be eligible for license. The vicarious liability of estate agents was unfair. A central compensation fund should be set up for civil liability of estate agents. As regards licensing requirements, existing practitioners should be exempted from the educational requirement because they were well-experienced in the trade. Mr LIU further stressed that the Association objected to imposition of criminal punishment on estate agents.

18. Dr LAW Cheung-kwok concurred that the Government as well as the Bills Committee should consider the unique situation of New Territories, particularly the lack of accurate information regarding property, during the legislative process of the Bill. However, Mr CHAN Kam-lam held the view that it would be difficult to apply different criteria to different geographical areas, and could mean that estate agents exempted could not handle transaction in relation to new property or high-rise building. Mr LIU Chi-ming acknowledged the difficulty to apply different criteria. However, he proposed that existing practitioners with two years’ experience in the trade could automatically be eligible for licence so that their career would not be affected. The new licensing requirements should only apply to newcomers. Associations could also contribute in organising training courses for practitioners.

19. Mr Ronald ARCULLI enquired whether the Association had raised their concern regarding the lack of accurate property information with the Government. Mr LEUNG Shui-pui pointed out that provision of accurate property information in the New Territories was almost an impossible task. In this regard, the Chairman suggested that the Bills Committee and the Association should reflect the difficulty to the Government.

Chairman

20. Mr NGAN Kam-chuen asked about the impact on the trade if the licensing requirements prescribed in the Bill were implemented. Mr LEUNG Shui-pui responded that most of the practitioners in the New Territories did not have formal education. Imposition of the prescribed licensing requirements would seriously threaten their working opportunities.

21. There being no other business, the meeting ended at 6:45 p.m..

LegCo Secretariat
29 January 1996