Oct 2020 - 3 min read
In this CEAnergy article, we review the actions of a former salesperson who committed dual representation in a rental transaction involving an Executive Condominium unit.
In early 2018, the owners of an Executive Condominium unit that was still within its minimum occupation period (MOP) sought the services of a salesperson to rent out the unit. Housing & Development Board (HDB) regulations state that owners are not permitted to rent out the entire unit within the MOP, but the rental of bedrooms while the owners still stay on the premises is allowed with HDB’s permission. The owners, however, were unaware of this regulation and the salesperson did not provide the owners with advice on this matter.
On the instruction of the owners, the salesperson proceeded to advertise the rental of rooms in the unit on an online property portal and conducted viewings with potential tenants.
In August 2018, a potential tenant contacted the salesperson to arrange for a viewing of the unit. The salesperson conducted the viewing and told the potential tenant that he would have to pay her a fee if he agreed to rent the unit. The salesperson did not inform the tenant that she was representing the owners/landlords.
The tenant agreed to rent the unit and the salesperson proceeded to prepare the tenancy agreement. However, instead of a room rental, the tenancy agreement was for the rental of the entire property. The salesperson then arranged to meet with the tenant and landlords who signed the tenancy agreement accordingly.
That same day, the salesperson sent a text message to the landlords and asked for her commission. Two days later, the landlords handed the salesperson a cheque but left the payee name blank as the landlords were uncertain what the salesperson’s full name was.
The salesperson did not inform the landlords that typically, estate agents would invoice their clients for the commission and then transfer a portion of the commission to their salespersons. If the salesperson collected commission from the client first, the salesperson would have to submit the transaction and commission to his estate agent before receiving his portion later.
In this case, however, the salesperson did not submit this transaction to her estate agent, and as such, the estate agent did not receive its share of the commission.
The salesperson arranged with the tenant to hand him the keys and access card to the unit and reminded him that he had to pay her commission. The tenant, believing that the salesperson had represented him in the transaction, paid the salesperson the commission during the handover.
In October 2018, HDB and the Urban Redevelopment Authority (URA) conducted a joint inspection of the unit after receiving an anonymous tip-off that business was being conducted in the unit illegally by the tenant. As the joint inspection revealed this to be true, the landlords terminated the tenancy for breach of HDB’s regulations.
The joint inspection also brought to light the fact that the landlords had rented out the entire unit within the MOP without HDB’s consent – an arrangement that was facilitated by the salesperson. Further, the signed tenancy agreement prepared by the salesperson stated that it was a whole unit rental. The landlords were issued a letter of warning and informed by HDB that subsequent breaches of HDB regulations might lead to the compulsory acquisition of the unit by HDB.
It was during the Council for Estate Agencies' (CEA) investigation of the salesperson’s role in the breach of HDB’s regulations that it was discovered that she had also committed dual representation and had collected commission from both the owners and the tenant. The salesperson returned the commission amount to the tenant after CEA commenced investigations.
Charges
The salesperson was charged in Court with a breach of Regulation 5(1) of the Estate Agents (Estate Agency Work) Regulations 2010 of the Estate Agents Act (Cap 95A) for having both the landlords and tenant as clients and collecting commission from both parties in the same property transaction.
The salesperson pleaded guilty to the charge and was fined $9,000, in default of two months’ imprisonment.
Further, a Letter of Advice was issued by CEA against the salesperson for failing to conduct her business and work with due diligence for facilitating the lease of the entire property through the preparation of the tenancy agreement.
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Expert view on the case
By Mr Michael Tan, Key Executive Officer (KEO) & Executive Director
OrangeTee & Tie Pte Ltd
A salesperson can only represent one party in a transaction as he has an ethical and legal obligation to act in the best interest of those he represents. Representing both landlord and tenant at the same time would put the salesperson in conflict. For example, the instructions he receives from one party would not necessarily be in the best interest of the other party. As a good practice, when in doubt about whether a situation constitutes dual representation, salespersons should seek their KEO’s advice on the matter as soon as possible.
Before conducting estate agency work in a specific sector of the market, salespersons must ensure that they are competent and keep abreast of the latest rules and regulations by the relevant authorities governing that particular sector of the market. Having such knowledge will not only serve to protect the salesperson, but will also ensure that the client, who is relying heavily on the salesperson’s competency, does not suffer any losses. In this case, the salesperson should have advised the owner that it was illegal to rent out the whole unit as the owner had not fulfilled the MOP requirement.
As with all tenancy transactions, it is the duty of the salespersons to assist the landlords and tenants to conduct identity checks of the tenants and occupiers, regardless of nationality, at the point of signing the tenancy agreement. This is to ensure that the people whom they are renting properties to are indeed who they claim to be.
If there is a change in the tenant or occupier after the commencement of the tenancy, and if the salesperson has agreed to assist the landlord or tenant to facilitate the change in the tenant or occupier, he must also then conduct the same due diligence checks.
CEA has provided a checklist for the lease of residential properties via Practice Circular 01-20 on Diligence Checks to Combat Vice in our Neighbourhoods and Compliance with the Immigration Act to assist salespersons in documenting that they have conducted the necessary checks on the tenants and occupiers.
When renting out HDB flats, owners are required to conduct regular checks to ensure that tenants do not misuse the flats. When facilitating the rental of HDB properties, salespersons are to inform the HDB flat owners of this requirement. Having good neighbours to keep a lookout for the landlords will give added vigilance. Salespersons can advise landlords to consider this additional approach.
*As informed to the industry via Notice 08-23, Practice Guidelines on Due Diligence Checks Under The Women's Charter 1961 and Immigration Act 1959 (PGD) had superseded Practice Circular on Diligence Checks to Combat Vice in our Neighbourhoods and Compliance with the Immigration Act (PC 01-20,) with effect from 24 March 2023.
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Information accurate as at 16 October 2020