Property firm fined, barred for breaching en bloc rules

In an unprecedented move, the Council for Estate Agencies (CEA) has fined a property agency and barred it from undertaking any enbloc sale work for one year starting April 20, after it was found to have breached its duty as adviser and brought about a conflict of interest by offering incentive payments to several homeowners of Thomson View Condominium in exchange for their backing the development’s collective sale.

HSR International Realtors, was ordered to pay a penalty of S$74,000, CEA said in a statement on Tuesday (May 17). The move came after the High Court voided the collective sale in 2013 as it deemed HSR’s actions to offer four homeowners sweeteners amounting to S$548,000 inappropriate.

This is the first time since CEA’s inception close to six years ago that a disciplinary action has been taken against an agency instead of individual agents, which industry players read as the council’s tough stance against improper conduct. The CEA was formed in October 2010 as a statutory board under the Ministry of National Development to license property agencies and individual agents, as well as regulate industry practices.

The collective sale of Thomson View Condominium was brought to the High Court in 2013 after minority homeowners objected to the deal even though the third tender attempt received a bid of S$590 million from Wee Hur-Lucrum, or about S$10 million above the indicative price.

The High Court found that HSR, the marketing agent of the deal, had offered incentives, including additional payments and the reimbursement of a business class return air ticket from Europe to Singapore, to the four homeowners in return for their signatures on the Collective Sale Agreement.

“The Court ruled that the Collective Sale Committee had not acted in bad faith. However, the Court found that HSR had breached its duty as an advisor to the Collective Sale Committee by offering the incentive payments. In particular, these incentive payments brought about a conflict of interest on the part of HSR, which led to the agency placing its own interest (to collect the commission) and the interests of the four subsidiary proprietors over the interests of the minority subsidiary proprietors,” the CEA said.

“The Court also ruled that HSR had breached its duty of transparency by not disclosing the incentive payments to the Collective Sale Committee or the subsidiary proprietors,” said the council, whose disciplinary committee then took action against HSR.

Other collective sales have also been dismissed by the High Court as a result of undisclosed incentive payments, such as the one involving Harbour View Gardens in 2013. The court said the collective sale committee had failed to act in good faith while the agent’s conduct was commercially unacceptable. The CEA noted, however, that in the Harbour View Gardens case, “the collective sale committee’s lawyer had advised the agency that the incentive payment was in order”.

TODAY’s attempts to reach HSR’s management for comments were not successful. But industry players told TODAY that the hefty fine and ban imposed by CEA reflected the severity of such behaviour and highlighted the need for agencies to better police their agents’ actions. Mr Ku Swee Yong, chief executive of Century 21, said the CEA announcement brought home the message that agencies can be held liable for their agents’ misbehaviour even though the latter are not employees.

“We cannot say that since these are associates not on full-time salaries, therefore we are cleared of any trouble. If they misrepresent the agency, in theory we should also be held partially liable because it’s part of our training and our internal service standards,” he said.

Mr Eugene Lim, key executive officer of ERA Realty Network, said the extent of breaches in the Thomson View Condominium collective sale case may have played a part in CEA’s decision to take action against the entire agency.

“It’s a huge case, unlike previous small cases when only individual agents were taken to task… I think education and training are important safeguards,” he said.

Source : Today – 18 May 2016

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