Property firm fined $74,000 over conflict of interest in en bloc deal

Property firm HSR International Realtors has been fined $74,000 over the behaviour of its sales investment team during the unsuccessful en bloc attempt of Thomson View Condominium.

HSR has also been barred by the Council for Estate Agencies (CEA) from undertaking any collective sale work for a year from April 20.

The firm had been appointed as marketing agent for the sale in September 2010.

The condo's collective sales committee (CSC) awarded the tender that month to developer Wee Hur-Lucrum, which was prepared to pay $590 million for the condo.

But the deal was challenged in the High Court by minority owners.

It later emerged during the discovery process that HSR had offered incentive payments to four owners to sign the collective sale agreement.

One was offered an additional 10 per cent of the purchase price of her shop unit in exchange for her signing the agreement for her 10 residential units, two were offered more money and a fourth was enticed by having his wife's business class return air ticket from Europe reimbursed.

The High Court found in 2013 that HSR had breached its duty as an adviser to the CSC by offering the incentive payments.

It said this created a conflict of interest on the part of HSR as the agency placed its own interest in collecting the sale commission and the interests of the four owners over the interests of the minority.

The Court ruled that HSR had breached its duty of transparency by not disclosing the incentive payments to the CSC or the owners.

The Court also halted the collective sale.

Investigations by the CEA later revealed that the lead property agent in HSR's sales investment team had approval from the firm's management to offer the incentive payments. The intention was to fund the incentives through the commission from the collective sale.

On April 20, the CEA's disciplinary committee found that HSR had committed two breaches of acting on behalf of a client without declaring in writing that there was a conflict of interest.

HSR was ordered to pay a penalty of $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 disciplinary proceedings were completed.

Dr Patrick Liew, HSR partner and the majority shareholder since last year, told The Straits Times yesterday that the company has reorganised to "keep only professional salespersons", has introduced a code of honour and now conducts training to ensure salespeople are competent.

A version of this article appeared in the print edition of The Straits Times on May 18, 2016, with the headline 'Property firm fined $74,000 over conflict of interest in en bloc deal'. Print Edition | Subscribe