April 15, 2007

Does home owner have recourse against agent with poor service?

Q WHEN I tried to sell my Housing Board (HDB) flat, I was very disappointed with the poor service of my property agent who conducted his work in a non-professional manner.

There was no feedback given to me after each viewing of my unit by potential buyers and although my agent claimed that he had placed many advertisements for my flat, I hardly saw any.

When he finally managed to get a buyer, he did not arrange for the buyer and me to meet to sign the HDB's Option to Purchase together.

Instead, he asked the buyer to sign the Option to Purchase first and collected the deposit. After that, he asked me to sign the agreement.

Is this the normal practice adopted by HDB?

According to HDB rules, if a buyer backs out of the deal, the seller can keep the deposit.

After a lapse of about a week, my agent informed me that the buyer had backed out and even cancelled the sale of his current flat. He told me that the deposit for my flat would be returned to the buyer but I doubted this. Most probably, he had pocketed the deposit without my knwledge or the knowledge of the buyer because he refused to arrange a meeting for us to sort out the problem.

Please advise me of the action that I can take against my agent who may have pocketed the deposit. In the first instance, why did he not discuss with us the amount of deposit?

Can I claim damages for his negligence and breach of trust? What if my flat is sold at a lower selling price in the future? Can I make a claim against anyone for the loss? If so, against whom?

A Your relationship with your agent is essentially a contractual one.

The terms of his engagement would thus be covered by whatever you both might have expressly agreed he should do.

Further, there may also be implied terms, that is, terms that you both may not have discussed but are implied or expected of an estate agent.

Over and above the contractual terms, the law also imposes on the agent certain fiduciary duties, that is, the agent must act in utmost good faith and in the best interests of yourself, his principal.

These fiduciary duties arise out of the trust and confidence reposed by you in him as your agent. He should also not put himself into a position of conflict of interest such as acting for both the buyer and the seller.

Therefore, whether he was in breach of his duties in not giving you any feedback after each viewing of your unit would depend very much on whether you had expressly asked him to do so or whether this was part of his expected duties.

It may be that each viewing did not result in anything significant or worthwhile taking note of because, as often happens, a prospective buyer may view the property and not say anything.

As for the advertisements, if you had agreed that the estate agent was to advertise the sale of your property in the classified ads section of the local newspapers, then you have a right to see these advertisements.

Also, if the estate agent wants you to pay for these advertisements, you would have a right to ask for the details of the advertisements that he claims to have taken out.

Generally, you as the seller would sign the option first as it allows you to set out on what terms you are prepared to grant the option.

However, as the HDB's Option to Purchase is a compulsory standard form document, the terms are fixed and hence it may be purely out of expediency and to nail the deal that your agent may have asked the buyer to sign first.

If at all, it is the buyer who should insist that you sign it first.

At the end of the day, the test is really whether your agent did act in your best interests. If he did secure a buyer for you at your asking price or price range, then it is hard to fault him on a technicality.

You must understand that when you grant an option, you collect the option fee that must not be more than $1,000 and the buyer has 14 days to accept the option.

If he accepts it, he must sign on the 'Acceptance' portion and deliver it to the seller together with the option exercise fee.

At this stage, you would be holding a deposit which is made up of the option fee and the option exercise fee and in total, the deposit must not be more than $5,000.

The maximum amounts stated are fixed by the HDB. Your agent is duty bound to hand over the deposit to you and if he fails to do so, he would be in breach of trust.

If the seller does not exercise the option within the 14-day period, you are entitled to keep the deposit and that would be the end of the matter. This appears to be your case as the buyer backed out after one week.

But if he exercises the option and pays an option exercise fee, then both the buyer and seller are said to enter into a valid and binding contract for the sale and purchase of the flat.

If the buyer backs out, he would be in breach of contract and you could recover your losses from him if say, you get a lower selling price than what he had agreed to pay.

However, any claim against the buyer is subject to your showing that you mitigated or minimised your losses by acting reasonably and expeditiously.

You will not be able to hold your agent liable if the buyer backs out without exercising the option. He would also not be liable if the buyer decides not to proceed with the transaction after exercising the option. Your agent would have discharged his duties and obligations.

However, he cannot retain any monies he holds on your behalf and you could claim against him accordingly for such monies.

On the HDB website, it is advised that in selecting an agent, you should check if the agency has a valid housing agent's licence issued by the Inland Revenue Authority of Singapore or you may choose any agent from an agency accredited under the Singapore Accredited Estate Agencies Scheme to benefit from the quality check it provides.

Amolat Singh
Amolat & Partners

Advice in this column is not meant as a substitute for comprehensive financial advice. E-mail questions to [email protected]

Agent's duties

You will not be able to hold your agent liable if the buyer backs out without exercising the option.

He would also not be liable if the buyer decides not to proceed with the transaction after exercising the option. Your agent would have discharged his duties and obligations.