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X. Case Illustration



Mr. A (the vendor) wants to sell his residential flat and Ms. B (the purchaser) wants to buy it .They have appointed separate estate agents to handle the deal. A provisional agreement for sale and purchase will be signed soon.


Question 1:
Before signing the provisional agreement, Mr. A wants to see if there is any other purchaser who can pay more. He also wants to find a second agent to help him. Must he sign another agency agreement?Answer 1


Question 2:
Besides the information provided by the agent, Ms. B wants to know more about the flat before signing the provisional agreement. Where can she get more information?Answer 2


Question 3:
Ms. B doesn't know Mr. A's full name but she needs to issue a cheque for the initial deposit in advance. Can she pay the money directly to her agent and ask him to pass the money to Mr. A? How will her agent handle the deposit money? Answer 3


Question 4:
Is the provisional sale and purchase agreement a legal document which both parties must obey?Answer 4


Question 5:
What will Mr. A and Ms. B need to do when signing the formal sale and purchase agreement?Answer 5


Question 6:
Can Ms. B re-sell the flat to another person after signing the formal agreement?Answer 6


Question 7:
What are the things that both parties should be aware of when the completion day/property handover day is approaching?Answer 7

Answer 1:
Yes, he must. Mr. A should not state in the agreement that the agent is the exclusive agent since he intends to appoint more than one agent to help him. For more details about estate agency agreement for vendor, please click here.


Answer 2:
Ms. B can ask her agent for a copy of the land search carried out in respect of the flat. Alternatively, she can conduct a land search herself at the Land Registry. A land search computer print-out will contain information about the flat such as:


  1. the present owner of the flat and all the previous owners of the flat;
  2. details of the flat (e.g. the address and government lease term of the relevant land lot);
  3. whether there is any government order in respect of the flat that has not yet obeyed (e.g. a repairing order or an order to demolish an unauthorized structure);
  4. whether there is any mortgage over the flat which has not yet been discharged;
  5. whether there is any lawsuit concerning the flat (e.g. a bank suing the owner for some outstanding mortgage repayments).

If there is any item on the land search record that Ms. B does not understand, she should ask her agent or her solicitor immediately.


For more information about land search, please visit the Land Registry's webpage.


Answer 3:
Yes. The agent should give Ms. B an official receipt in respect of her initial deposit. He should then deposit the money into an independent bank account opened by his estate agency company (not his personal account). The agent can only withdraw the money and arrange payment to the vendor with Ms. B's prior written instruction.


If the agent fails to observe this procedure, he will have breached the Estate Agents Ordinance and the Practice Regulations imposed by the Estate Agents Authority. The relevant penalty may be a suspension of his estate agent licence, a fine or even an imprisonment.


To be safer, however, it is recommended that Ms. B should ascertain Mr. A's identity and then issue a cheque in favour of him directly.


Answer 4:
Yes, although it is a provisional agreement, Mr. A and Ms. B must obey it, or bear the legal consequences if they don't.


Answer 5:
Please refer to relevant Q&A.


Answer 6:
Yes, but Ms. B should check whether such is allowed in the formal sale and purchase agreement before doing so. She will act as a "Confirmor" and the new purchaser will act as a "Sub-Purchaser" in the transaction. Since it will involve an additional party, special attention must be paid to the timing of payments, the discharge of the existing mortgage, and the handing over of the flat. Additional stamp duty may also be incurred.


Answer 7:
In respect of Mr. A (the vendor), he must make sure that vacant possession of the flat can be delivered to the purchaser on the completion day (unless otherwise stated on the sale and purchase agreement e.g. the flat is sold with an existing tenancy). He can either send the keys to his solicitor or to his agent for arranging the handover. Prior notice must be given to all the relevant parties.


For Ms. B (the purchaser), she must either transfer the balance of purchase price to her solicitor before the completion day, or prepare the relevant cashier's order (bank draft) in favour of the vendor. She must also carry out a final inspection of the flat.


For other details about completing the sale and purchase of property, please refer to section VI.