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HSR fined, barred from en bloc deals for one year
THE Council for Estate Agencies (CEA) said on Tuesday it has imposed a financial penalty of S$74,000 on real estate agency HSR International Realtors for two counts of acting for a client in a way that puts its interests in potential conflict with that of the client, without declaring so in writing to the client.
The disciplinary committee of CEA also imposed a condition disallowing HSR from undertaking any collective-sale work for one year from April 20, 2016.
The subject incident has to do with the en bloc attempt of Thomson View condominium, for which HSR was the marketing agent.
In October 2011, the collective sale committee received consent of 80 per cent of the total share value of the condominium and proceeded to launch the tender. A third tender in August 2012 attracted a bid of S$590 million from Wee Hur Lucrum Pte Ltd.
In the same month, however, the minority subsidiary proprietors filed objections to the collective sale. A stop order was issued in January 2013. The sales committee took the matter to the High Court, where it was found that HSR had offered incentive payments to four subsidiary proprietors to sign the collective sale agreement.
The committee had eight subsidiary proprietors.
While the Court ruled that the collective sale committee had not acted in bad faith, it said that HSR had breached its duty as an advisor to the committee by offering the incentive payments.
"These incentive payments brought about a conflict of interest on the part of HSR, which led to the agency placing its own interest (to collect the commission) and the interests of the four subsidiary proprietors over the interests of the minority subsidiary proprietors.
"The Court also ruled that HSR had breached its duty of transparency by not disclosing the incentive payments to the collective sale committee or the subsidiary proprietors.
"Since the offer of incentive payments by HSR was a clear breach of its duties and was deemed as an act of bad faith, the Court dismissed the application for collective sale by the majority subsidiary proprietors."
Subsequently, CEA's investigations revealed that the lead property agent in HSR's sales investment team had approval from HSR's management to offer the incentive payments.
"The intention was to pay out the incentives through the commission from the collective sale," it said.
CEA's disciplinary committee therefore took action against the lead property agent and HSR.
HSR pleaded guilty to the disciplinary committee on April 12, 2016, to the two counts, and was then sentenced and ordered to pay a financial penalty of S$37,000 for each count.
Disciplinary action was also initiated against the lead property agent who offered the incentive payments, but the agent died before the disciplinary proceedings could be completed.