Corrective measures regarding construction firm's request that pre-sold housing unit buyers sign a promissory note as security
Chinese Taipei
Case:
Corrective measures regarding construction firm's request that pre-sold housing unit buyers sign a promissory note as security
Key words:
abuse of advantageous position, loan
Reference:
Fair Trade Commission Decision of January 14, 1998 (the 324th Commission Meeting); Letters (87) Kung Yi Tzu Nos. 8506556-008, -009, -010
Industry:
Housing Unit Construction Industry (4601)
Relevant Laws:
Article 24 of the Fair Trade Law
Summary:
In practice, the buyer of a pre-sold housing unit often obtains a loan from the bank to pay for the unit; however, the bank will not release the loan until the title is transferred to the buyer and the mortgage is properly registered. In other words, to collect the final payment, the construction firm [seller] must transfer the title of, and deliver, the housing unit to the buyer. At this point, with the buyer holding the deed of the title, the seller could not exercise its right to claim against the buyer. Therefore, it is common practice for the seller to request the buyer to sign a promissory note for the final payment amount as security. It seems reasonable for the seller to seek security for its credit; however, there are various types of security other than a promissory note, and the buyer was given no other choice under the standard contract. In addition, if the buyer had obtained the loan from the bank that the seller designated, the buyer might [have been forced to] authorize the bank to release the loan directly to the seller's account. If the seller still demanded a promissory note from the buyer, the seller would be suspected of obtaining double security. The seller would then be considered as abusing its advantageous position to impose unfair trading terms upon its trading counterpart, which would constitute a violation of Article 24 of the Fair Trade Law.
The Fair Trade Commission’s 324th Commission Meeting decided to recommend the following corrective measures for construction firms:
(1) There should be reasonable choices available to the buyers to provide as security; not just the promissory note should not be the only type of security acceptable to the construction firms.
(2) Construction firms shall not obtain double security. If the construction firm has obtained security in one form, it should not demand additional security.
If a similar situation occurs in the future, the FTC will decide on a case-by-case basis whether the provisions of the Fair Trade Law have been violated.
Summarized by Lin Hsing-wen
Supervised by Hu Kuang-yu