Property agency HSR International Realtors has been fined $12,500 and banned from marketing foreign properties for six months from Sept 10, the Council for Estate Agencies (CEA) said yesterday.
The firm was convicted of two charges of breaching the CEA's guidelines for failing to provide a written advisory to two investors to draw their attention to risks involved in buying units in a Bangkok condominium project that was later abandoned by the developer.
Analysts said the CEA's move is a timely reminder to agents and buyers as foreign property marketing has intensified after the latest round of cooling measures.
"Some overseas developers don't even have escrow accounts to hold monies they collected, so there is no protection for local investors," OrangeTee executive director Alex Oh said.
Last December, Dennis Wee Realty was fined $66,000 for a similar offence and banned from marketing foreign properties for a year.
In HSR's case, the two investors had purchased a unit each in the Manhattan Park Peninsular condo project in Bangkok in 2014 through the agency. They paid a refundable $3,000 booking fee and 30 per cent of the purchase price a few days later after executing the sales and purchase (S&P) agreement. One investor paid $32,000, while the other paid $20,327.
The HSR agents, who were appointed by the developer, had breached the CEA's guidelines on several fronts before the execution of the S&P agreement.
Among other things, they did not provide a written advisory to the two buyers that they must conduct due diligence, or draw their attention to risks for foreign property buyers and that their transactions are subject to foreign laws and to any change in policies and rules in Thailand. HSR also did not tell one of the investors that the S&P agreement did not contain a dispute resolution mechanism or a jurisdiction for the resolution of disputes.
Both investors were later informed that the developer had abandoned the Manhattan project, and they were offered units in other developments instead. The first investor rejected the offer and did not get a refund.
The second investor accepted the offer, paying an additional $5,000 for payment of 30 per cent of the replacement unit's purchase price.
Rajah & Tann deputy head of corporate real estate Norman Ho said agents who are marketing foreign properties must conduct due diligence on the vendor and its claims in relation to the foreign property. This would include the guaranteed rate of return and rental yield.
If there are potentially adverse findings, they must make this known in writing.
Ms Sharon Koh, key executive officer of HSR, said the events in 2014 had occurred under prior ownership and management. "Since the new administration took over in May 2015, there has been a complete revamp of compliance procedures and personnel to ensure that all CEA guidelines are being strictly adhered to," she added.
Yesterday, the CEA advised that foreign property transactions carry additional risks not associated with local ones.
"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," it said.
