LegCo Paper No. CB(1) 861/96-97
(These minutes have been seen
by the Administration)
Ref : CB1/BC/11/95/2

Bills Committee on Estate Agents Bill

Minutes of Meeting held on Wednesday, 13 November 1996 at 8:30 am in Conference Room B of the Legislative Council Building

Members present :

    Hon Andrew CHENG Kar-foo (Chairman)
    Hon Mrs Selina CHOW, OBE, JP
    Hon Edward S T HO, OBE, JP
    Hon Albert CHAN Wai-yip
    Hon LEE Wing-tat
    Hon James TO Kun-sun
    Hon CHAN Yuen-han
    Dr Hon LAW Cheung-kwok
    Hon NGAN Kam-chuen
Members absent :
    Hon Ronald ARCULLI, OBE, JP
    Hon LI Wah-ming
    Hon CHAN Kam-lam
Public officers attending :
    Mr William SHIU
    Principal Assistant Secretary for Housing
    Miss Eva TO
    Assistant Secretary for Housing
    Ms Sherman CHAN
    Senior Assistant Law Draftsman (Acting)
Clerk in attendance :
    Mrs Vivian KAM
Staff in attendance :
    Mr Stephen LAM
    Assistant Legal Adviser 4
    Miss Becky YU
    Senior Assistant Secretary (1)3

I Confirmation of minutes of previous meeting

(LegCo Paper No. CB(1) 309/96-97)

The minutes of the meeting held on 4 July 1996 were confirmed.

II Meeting with the Administration

(LegCo Paper No. CB(1) 256/96-97(01))

2. At the invitation of the Chairman, the Assistant Secretary for Housing (AS for H) highlighted salient points in the Administration’s response to views expressed by the Bills Committee at the last meeting on 30 October 1996 tabled at the meeting. She said that the objective of the Bill was to regulate estate agency activities rather than vendors selling their own properties. Regulation on sales descriptions of uncompleted flats by developers would be addressed by a separate piece of legislation which would require developers to provide in sales brochures adequate and accurate information on uncompleted properties developed under both consent and non-consent schemes. While acknowledging members’ concern on Clause 39(3), the Administration considered it reasonable and appropriate for the Estate Agents Authority (EAA) to disclose information to the relevant authority for the purpose of investigation of possible commission of offences. The Administration had no intention to probe into matters of privacy unnecessarily and the proposal was compatible with the Bill of Rights Ordinance. AS for H supplemented that the introduction of the "due diligence" concept would provide a defence for estate agents who had taken reasonable care to avoid contravention, in particular those relating to accuracy of information obtained from other sources such as vendors and Government departments. She supplemented that it would be difficult to list out in an exhaustive way what constituted "due diligence"; the Bill had already provided for flexibility for EAA to draw up guidelines to assist estate agents to comply with the provisions. Deletion of the term "fair, honest and open" from Clause 37 had been proposed taking into account the fact that the conceptual requirements for estate agents to act in a "fair, honest and open" manner might not be specific enough to constitute elements for a statutory duty the contravention of which might attract penalty; this view was shared by the Attorney General’s Chambers. Although the term could be included in the Bill as a matter of principle, penalty for breaches would not be applicable. AS for H assured members that the spirit of the term would be reflected in practising guidelines and codes of conduct to be drawn up by EAA. The Administration considered it unnecessary to repeat in the Bill reference to offences relating to deception, conspiracy to defraud and forgery as these had been covered under other ordinances such as the Theft Ordinance and the Crimes Ordinance, as well as the common law. There was nevertheless a need to state specifically in the Bill such unique offences as acting as estate agent without a licence, and furnishing false information in connection with an application for a licence.

Exclusion of developers’ subsidiary companies selling developers’ own properties from the application of the Bill (Clause 2)

3. Hon LEE Wing-tat remained opposed to the exclusion of developers’ subsidiary companies selling developers’ own properties from the application of the Bill as this would in his view run contrary to the initial intention of the Bill to regulate also the sale of flats by developers. He appreciated the consumer protection to be covered by the proposed legislation on description of flats on sale with regard to developers’ first sale, but was concerned that it would take time for enactment of the legislation. Mr LEE said that he would consider moving a Committee stage amendment to include developers’ first sale in the application of the Bill unless the Administration could advise a definite legislative time-frame for the relevant legislation. A member also expressed concern on the increased number of developers’ subsidiary companies engaging in estate agency work and establishing a different identity to avoid liability, and was worried that such companies might be exempted from the regulatory system by virtue of the proposed exclusion.

4. The Principal Assistant Secretary for Housing (PAS for H) reiterated that the objective of the Bill was to regulate estate agency work; this had been defined clearly in Clause 2 on Interpretation. Owners or developers disposing of their own properties were not targets of the Bill and developers’ subsidiary companies selling developers’ wholly owned or joint-venture properties should logically also be outside the scope of the Bill. He added that the proposal had been made having regard to views expressed by some members at previous meetings that such activities should be excluded from the definition of estate agency work in the Bill. PAS for H said that the Administration was mindful of the need to avoid creating grey areas when making the amendments, and would ensure parity treatment for all previously engaged in estate agency work. He also assured members that developers’ subsidiary companies selling properties other than those owned or developed by their parent companies would come under the jurisdiction of the Bill.

5. As regards the proposed legislation on description of flats on sale, PAS for H advised that this would be introduced into the Legislative Council before the end of 1997 as there was a need to take into account public opinions collated during the consultation period for the Law Reform Commission’s report on sales descriptions of overseas uncompleted residential properties which was underway; the report would also be discussed by the LegCo Panel on Housing at its meeting on 2 December 1996. He stressed that the impending legislation and the Bill had no direct correlation, despite their being complementary to each other, and that it would be impractical to withhold implementation of the Bill on such grounds.

6. Hon Mrs Selina CHOW and Dr Hon LAW Cheung-kwok supported exclusion of developers’ subsidiary companies selling developers’ own properties from the application of the Bill, but emphasized a need for the Administration to define clearly in the Bill the relationship between developers and their subsidiary companies in the sale of developers’ properties. The Senior Assistant Law Draftsman (Acting) (SALD (Atg)) reiterated that developers’ subsidiary companies representing only developers in the sale of their own properties would be exempted in the same way as vendors were presently exempted and such activities were outside the scope of the Bill. However, subsidiary companies of property developers acting on behalf of purchasers in property transactions would come within the target of the Bill. She agreed with some members’ that descriptions such as "solely" might be used to reflect the circumstances under which developers’ subsidiary companies selling only developers’ own properties would be excluded from the application of the Bill. A member remarked that the subject on developers’ subsidiary companies had been discussed in a number of previous meetings, and asked the Clerk to collate extracts of relevant minutes of meetings for members’ reference.

(Post-meeting note: Relevant extracts of minutes of meetings were circulated vide LegCo Paper No. CB(1) 336/96-97.)

Investigation power (Clauses 29 and 55)

7. The Chairman considered the provisions under Clause 39(3) for EAA to disclose information about a licensed estate agent’s accounts to the Crown Prosecution for use in any prosecution too broad and contrary to the common law where court orders would normally be required. AS for H explained that since EAA did not share similar power as the Police or other disciplined forces in investigating possible commission of offences, it was reasonable and appropriate for EAA to disclose information to the relevant authority for such a purpose. Otherwise, the effectiveness of the regulatory system might be affected. SALD (Atg) supplemented that reference could be made to Clause 29 on Investigations in the event of doubt. The Chairman remained unconvinced and emphasized a need for the Administration to re-define Clause 39(3) taking into account relevant provisions under Clauses 29 and 55.Provision of property information (Clause 37)

8. Hon Mrs Selina CHOW was highly dissatisfied with the Administration’s response on this subject as it had not addressed members’ concerns raised at the meetings on 4 and 30 October 1996. She demanded a comprehensive response to such requests as the types of property-related information which would not be available from relevant Government departments, and the schedule for property data in the Buildings Department (BD) to be fully computerized. PAS for H said that the information had been supplied previously. He reiterated that it had been the Administration’s objective to facilitate public access to property-related information but it would take time to develop a centralized information system. He emphasized that most information required under Clause 37 could be obtained from the information system in the Land Registry (LR) and the new infoline service on saleable area and date of completion to be introduced by the Rating and Valuation Department (RVD), as illustrated in the table circulated vide LegCo Paper No. CB(1) 10/96-97(01). While there might be circumstances where property information might not be so readily available, particularly those relating to pre-war buildings and premises constructed before the year 1970, estate agents would be deemed to have exercised due diligence if they had tried their best to collate the required information and inform clients to the best of their knowledge. Furthermore, the Bill had provided for flexibility for EAA to prescribe the exact types of property information required and the avenues through which such information could be obtained.

9. In referring to the table mentioned above, members sought clarification on how estate agents could collate unregistered information on premises. AS for H explained that information required under Clause 37 such as ownership, users’ restrictions of properties could be obtained from LR’s records and Occupation Permits (OPs) respectively, and those relating to subsisting incumbrances, dates of completion, saleable areas, lease terms could be collated from computer printouts in LR and the infoline service of RVD. AS for H recognized that there might be cases where estate agents might have to refer to relevant files in LR or buildings plans in BD for information which could not be obtained from existing information retrieval systems. Further searches in BD might take about ten days but this could be shortened if appropriate training could be arranged for estate agents by EAA. On the progress of computerization of property data in BD, AS for H advised that the microfilming of building plans would be implemented in three phases: plans for buildings constructed after 1990 were being microfilmed; those for buildings constructed between 1970 and 1990 would take about four years; but no fixed plan had yet been set for buildings completed prior to 1970. She stressed that frequent searches in BD would not be necessary as most information could be obtained from LR and the infoline service of RVD. Members’ requested the Administration to provide the percentages of properties in Hong Kong for which no OPs had been issued.

10. Members emphasized the importance of building plans and amended building plans as these would provide essential information on structural additions and alterations, and requested the Administration to confirm in writing the schedule for property data in BD to be fully computerized; and the time and costs required, currently and upon computerization, for obtaining OPs, building plans and other related information from BD. PAS for H reiterated that it would take time to computerize property data in BD but that most information required under Clause 37 could be obtained from LR and the infoline service of RVD. He suggested that members could visit the departments concerned or conduct another survey to ascertain the time required to obtain such information. In making this suggestion, PAS for H emphasized that he had no intention to challenge the results of the research report on "An analysis of accessibility of information required under Section 37(2)" prepared by the Research and Library Services Division (RLS) of LegCo. He remarked that the Administration had made a request previously for further information about the report but had not met with a positive response. He stressed that the request was made for the purpose of fact-finding and taking appropriate follow-up action with a view to further improving/upgrading the service.

11. Although members emphasized that they had every confidence in the findings of the research, they held different views on whether another survey should be conducted: some were opposed to the proposal given the fact that little improvements had been made in enhancing information retrieval since the release of the report; others agreed to conduct an updated survey subject to the availability of manpower resources. A member suggested that RLS could meet with the Administration to discuss the methodology of the report and the problems encountered in collation of data from Government departments. Another member considered it useful for a meeting amongst the Administration, representatives of the trade, Bills Committee members and staff of RLS to discuss specifically the subject of provision of property information.

Duties of estate agents (Clause 37)

12. Members were worried that the extent of consumer protection would be reduced, particularly in the case of dual representation, if the term "fair, open and honest" under Clause 37(3) were to be deleted. PAS for H advised that the requirements for estate agents to disclose fully to their clients (the purchaser/vendor or both) their interest in property transactions as well as information on all offers made would ensure consumer protection, particularly in the case of dual representation. Furthermore, estate agents would be required to specify clearly in estate agency agreements the mode of representation if they represented both the purchaser and the vendor. A member was not convinced that the objective of consumer protection could be achieved merely by requiring estate agents to disclose their personal interests in property transactions. She also considered it undesirable to remove the requirement for estate agents to conduct transactions in a "fair, open and honest" manner unless a safeguard particularly for dual representation could be devised. One member suggested leaving it flexible for EAA to draw up practising guidelines for the term; others expressed reservations at such an approach as this might weaken the extent of control of the Bill in this respect. SALD (Atg) pointed out that the most vital feature included in the concept of "fair, open and honest" had been dealt with under other provisions of Clause 37(1)(a). She supplemented that whether regulations should be drawn up to prohibit estate agents from taking part in property transactions in the event of conflict of interest, and whether communications between estate agents and clients on offers and acceptances should be spelt out would be policy decisions. PAS for H said that the Administration had an open mind on the proposed deletion and would consider reinstating the term in the Bill if necessary. An alternative would be for EAA to draw up practising guidelines on this term.

Offences (Clause 56)

13. Members expressed reservations at the uniformity of penalties for contravention of Clause 37. They considered that heavier penalties should apply for non-compliance of Clauses 37(1)(a)(vi) to (vii) and 37(2)(g)(i) to (ii), and that cases of willful deceit should be spelt out explicitly in the Bill as attracting criminal liability. While acknowledging the difference in the extent of offences under Clause 37, SALD (Atg) advised that decisions on whether the level of penalties should be adjusted to reflect the seriousness of offences and the inclusion of new offences would again be a policy consideration although it would be technically feasible to include in the Bill specific offences for cases of willful deceit. The Assistant Legal Adviser agreed with SALD and cautioned that any change to Clause 37(1)(a) should similarly apply to Clause 56(1)(g) which related also to the disclosure of information.

14. Some members asked if clients could take other legal actions, apart from disciplinary sanctions instituted by EAA, against estate agents who were in breach of statutory duties under Clause 37. SALD (Atg) advised that losses incurred from misrepresentation on the part of estate agents could be recovered through civil proceedings, while damage as a result of deception, conspiracy to defraud and forgery would be covered in the Theft Ordinance, the Crimes Ordinance and the new Fraud Bill. A member considered that non-compliance due to negligence should be subject to fines rather than imprisonment, and asked if this also formed part of the new non-imprisonment offences. SALD (Atg) explained that even non-imprisonment offences would, in so far as they were criminal offences, attract criminal records. Hon James TO Kun-sun also pointed out that non-imprisonment offences referred to those non-recordable offences where criminal records would still apply.

15. To facilitate members’ understanding of the offences and penalties provisions, the Administration was requested to provide a full list of criminal and disciplinary sanctions in relation to all elements under Clauses 37 and 56.

III Any other business

16. Members agreed that the meeting amongst the Administration, representatives of the trade, Bills Committee members and staff of RLS on the time and costs for obtaining property information as required under Clause 37(2) would be held on Monday, 18 November 1996, at 4:30 pm; and that the next meeting of the Bills Committee would be held on Tuesday, 26 November 1996, at 4:30 pm.

17. There being no other business, the meeting closed at 10:45 am.

Legislative Council Secretariat
11 February 1997

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