Property agency HSR International Realtors Pte Ltd has been fined $12,500, and banned from transacting or marketing foreign properties for a year from Sept 10 for not informing two investors of the risks involved in their purchase of units in a Bangkok condominium project that was later abandoned by the developer.
The action by the Council of Estate Agencies (CEA) follows penalties meted out in December last year for a similar offence by Dennis Wee Realty, which was fined $66,000, and banned from transacting or marketing foreign properties for a year.
In a press statement on Tuesday, the CEA said HSR was guilty of two charges of breaches to its guidelines.
Before the execution of the sale and purchase (S&P) agreements, HSR's agents, who were appointed by the developer, did not provide a written advisory message to the buyers that they must conduct due diligence nor draw their attention that risks are involved for foreign property buyers and that the transaction is subject to foreign laws and to any change in policies and rules in the country where the property is located.
The two investors had in 2014 purchased a unit each in the Manhattan Park Peninsular condo project in Bangkok, through HSR, paying a refundable $3,000 booking fee and 30 per cent of the purchase price a few days later after executing the S&P agreement, with one investor paying $32,000 while the other forked out about $20,327.
The CEA took into consideration one other charge relating to HSR's property agents failing to explain to one investor, prior to the execution of the S&P agreement, whether any dispute resolution mechanism would apply in the event of a dispute in relation to the purchase of the unit, and if so, what the dispute resolution mechanism was. They also did not explain to the investor which jurisdiction such dispute would be resolved under. As it turned out, the S&P agreement did not contain a dispute resolution mechanism or a jurisdiction for the resolution of disputes.
Subsequently, both investors were informed that the developer had abandoned the Manhattan project and they were offered units in other developments instead. The first investor rejected the offer as he felt that the locations of the other developments were not ideal and he would have to pay more for the replacement unit. He failed to obtain a refund of the amount paid. The second investor accepted the offer, paying an additional $5,000 for payment of 30 per cent of the replacement unit's purchase price.
On Tuesday, the CEA again advised buyers that foreign property transactions can be a complex affair and carry additional risks not associated with local ones.
"They should thus exercise due diligence before entering into any agreement to buy foreign properties," said the CEA. "In addition, consumers should exercise greater care and be more vigilant when purchasing foreign properties directly from foreign developers or when the intermediaries involved fall under the jurisdiction of another country."
This article was first published in The Business Times. Permission required for reproduction.