Concrete Analysis | How a property agent fell afoul of the Estate Agents Authority’s code of ethics by offering loan to a client
- Guidelines issued by the Estate Agents Authority say that property brokers must not offer loans to clients in order to make a sale
- EAA’s disciplinary committee finds estate agency and its employee in breach of its code of ethics and imposes a heavy fine on both of them
It is common for prospective buyers to submit more than one registration of intent to stand a better chance of purchasing first-hand residential properties through balloting. Sometimes, they might not have sufficient down payment for multiple submissions. Notwithstanding, property agents are not allowed to offer loans to prospective purchasers to help them submit any registration of intent under any circumstances.
According to the Practice Circular (No. 13-04 (CR)) issued by the Estate Agents Authority (EAA), property brokers must not offer or make loans to a prospective purchaser to persuade them to sign a provisional agreement for sale and purchase, or for any other purpose, even if they are requested to do so.
When agents accept credit card payments by prospective buyers, they should make sure that the credit cards are debited on the same day. Moreover, in case brokers accept cheques in exchange for cashier orders issued by the estate agency company, the prospective buyers’ cheques must be deposited for payment on the same day or the next banking day.
Property agencies are responsible for establishing proper procedures and systems to ensure that their employees or persons under their control comply with the above requirements. For example, there should be measures in place to monitor and govern the release of cashier orders to frontline staff to ensure that no loan is made to prospective buyers of first-hand residential properties. In addition, estate agencies should implement appropriate measures to detect non-compliance by employee and to discipline them.
I would like to share a non-compliant case of an agent making a loan to a prospective property buyer.
A property agent arranged for the individual to view a show flat of a new residential development. After the inspection, the client was persuaded to buy the flat and she finally signed a provisional agreement for sale and purchase.
