Three Important Things to Tell Your Clients about Estate Agency Agreements

February 2023 - 3 min read

CEA has eight prescribed Estate Agency Agreements which can be used in a variety of residential transactions and these are available on CEA's website. While the use of these template agreements is not mandatory, we strongly encourage consumers, estate agents (EAs) and real estate salespersons (RESs) to adopt them to protect the interests of both EAs/RESs and consumers.  

Through our consumer education efforts, CEA works with relevant government agencies and online property portals to educate property consumers about the purpose of signing an Estate Agency Agreement, the difference between exclusive and non-exclusive Estate Agency Agreements, and consumers’ obligations under each type of agreement. We also advise consumers to choose and sign the type of estate agency agreement based on their needs and preferences. 
 
CEA encourages RESs to play your part in reinforcing these messages to ensure a smooth transaction experience for you and your client. Here are three important things that you should tell your clients about Estate Agency Agreements.  

1. Objectives of an Estate Agency Agreement

You should highlight that an Estate Agency Agreement is a contract between the consumer and the EA/RES for the performance of estate agency work. The key benefit of signing the agreement is that it protects the interests of both parties by providing contractual clarity on the engagement of the RES’s services by the consumer. 

Do share with your clients that the agreement stipulates your duties as an RES, the agreed commission rate, and requires you to declare if there is any conflict of interest in your capacity as an RES appointed by the client. In addition, you should let your clients know that they can negotiate the terms of the agreement, or add clauses that do not contradict the prescribed clauses in the agreement.

Do encourage your clients to sign an Estate Agency Agreement before you start performing any estate agency work.

2. Types of Estate Agency Agreements

You should inform your prospective client that he can choose to use either an exclusive or non-exclusive Estate Agency Agreement.

In an exclusive agreement, the consumer will appoint one EA/RES during the validity period of the agreement. In a non-exclusive agreement, the consumer can appoint RESs from different EAs to assist him.

Consumers are free to choose and sign either type of agreement – exclusive or non-exclusive - depending on their preferences and needs. It is important that you highlight the key terms of each type of agreement to your client, which brings us to the next point below.

3. Terms of the two different types of Estate Agency Agreements

Under CEA’s Code of Ethics and Professional Client Care (CEPCC), RESs must explain to their client the meaning and consequence of signing the Estate Agency Agreement. RESs must also give their clients sufficient time to read and understand the content, so that the clients can make an informed decision whether to enter into the agreement. RESs who fail to do so may be issued a warning letter, imposed with financial penalties and/or have their RES registration suspended or revoked.

You should highlight the following key terms to your client: 

Exclusive Estate Agency Agreement 

• Under this agreement, a consumer is committing to appoint one EA to represent him for his property transaction during the validity period of the agreement.

• The validity of the prescribed exclusive agreement cannot be more than three months. After the agreement has lapsed, the consumer can renew or sign another agreement.

• During the validity period, the consumer will be liable to pay commission to the EA/RES that he had signed the exclusive agreement with, even if the consumer eventually buys/sells/leases the property through another EA/RES or completes the transaction on his own. This applies regardless of whether the other party was introduced by the RES engaged on an exclusive basis.     

Non-exclusive Estate Agency Agreement  

• Consumers can appoint RESs from different EAs.

• Consumers will only pay commission to the EA whose RES helped to close the deal.     

As signing an Estate Agency Agreement is often one of the first touchpoints an RES will have with a client, keeping the above pointers in mind will help create a positive first impression of you as an RES who is professional and ethical.

Do remember to spend some time explaining the terms of the two different types of agreements to your clients and encourage them to sign the one that best suits their needs.

Information accurate as at 3 February 2023