The Real Estate Agency Designated the Land Administration Agent to Handle Real Estate’s Transfer Registration in the Standardized Contract, and violated the Fair Trade Law

Chinese Taipei

Case:

Key Words:

Agency, standardized contract, land administration agent, real estate

Reference:

Fair Trade Commission Decision of January 26, 2006 (the 742nd Commissioners’ Meeting), Letter Kung Yi Tzu No. 0950001142 of February 10, 2006

Industry:

Real Estate Agencies (6612)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. This case originated from a complaint received from the Association of Real Estate Attorney, Taiwan, ROC, indicating that most real estate agencies have stipulated in the standardized contract that the agencies shall designate a land administration agent to handle the registrations of ownerships transfer after the signing of sales and purchase agreement. Such stipulation has deprived the rights and interests of consumers to select land administration agent according to their wishes and impeded the fair market competition for land administration agents.
2. Upon the investigation, the Fair Trade Commission (FTC) found that in practice, there were various instances of land administration agent designated by a real estate agency through special agreement. Some real estate agencies have requested that in the case that performance guarantee or similar kind of trading security system has been used; the real estate’s transfer registration must be handled by the designated land administration agent. Some real estate agencies generally designate or recommend a land administration agent, but agree that consumers can make requests to appoint other land administration agent. The small-scale agencies in general did not involve in the selection of land administration agents. The relevant competent authority of Ministry of Interior expressed that because different land administration agents have different professional trainings and service qualities, the assurance of trading security, protection of consumers’ rights and interests and trading efficiency seemed not affected by whether the registrations of ownership transfer were handled by the designated land administration agents of the real estate agencies.
3. Grounds for non-disposition:
1. Standpoints from the land administration agents’ market trading order:
1. In accordance with the current laws and regulations, both real estate agency and land administration agent must acquire licenses respectively, and their legal scopes of business are different as well. The real estate agency primarily provides intermediary service in real estate negotiation between the seller and the purchaser prior to the signing of sales and purchase agreement. The land administration agent primarily provides the service of processing registration of ownership transfer after the signing of sales and purchase agreement. The services provided by the real estate agency and the land administration agent constitute two markets that are not competing with each other. Therefore, the conduct in this case indeed is question of cross-market cooperation for both enterprises. From the real estate agency’s viewpoint, it has nominally provided complete services to consumers, starting from the contract discussion until the conclusion of contract performance because of the said cooperation. Hence, the said cooperation will increase its competitiveness. From the land administration agent’s viewpoint, it will have more sources of business and reduce the cost of soliciting for customers because of the cooperation. In another word, the said cross-market cooperation has increased the competitiveness of both enterprises in their respective markets. In addition to the reduction of costs for consumers, the cooperation also improves the service efficiency and quality of real estate trading as a whole. It is deemed that such cooperation is beneficial.
2. The Association of Real Estate Attorney has raised the question that at present the overwhelmingly majority of sales and purchases of real estate are concluded through real estate agencies. Each real estate agency does not have many special land administration agents, and thus may lead to the market monopolization by a small number of land administration agents. However, there are many designated land administration agents in the market and hence may lead to price war among them. Nevertheless, such scenario is a result of industry and service transformation, and market competition. In other words, because of the competition from many other land administration agents, and in order to continue the business operation, the individual land administration agent has either reduced the service charge or looked for cooperation with the real estate agency to increase his or her competitiveness. It is indeed reasonable for an enterprise to adopt the aforementioned measures when it faces competition. Furthermore, other than the real estate agency, the land administration agent also has other sources of soliciting for clients. Therefore, it is difficult to deem that the cooperation between the real estate agency and some selected land administration agents has adversely influenced the market competition of land administration agents.
2. Standpoints from the consumers’ rights and interests
1. Presently, most real estate agencies in practice do not enforce the designation of land administration agent. Furthermore, the real estate agencies that have enforced such requirement gave reasons that they have adopted the performance guarantee trading security system. When consumers have selected the said system, the real estate agencies requested that the designated land administration agents must handle the complementary measures because the seller, buyer, real estate agency, land administration agent, financial institution or building manager and company are parties involved in the said system. Therefore, it is still difficult to deem that the said requirement is unjustifiable. Furthermore, as the said system has included responsibility of indemnification, hence there is no reason that the consumers must personally select the land administration agent.
2. Even though the designation of land administration agents by the real estate agency may have impeded the consumers’ freedom to choose, but in essence it is not necessarily that their rights and interests will be adversely affected. After signing the sales and purchase agreement, the real estate agency will not have any interests in the matters of contract performance, but the interests for the buyer are contrary to that of the seller. Thus, the designation of land administration agent by either party alone inevitably may raise doubts that the other party is not protected. Therefore, it is not easy for both parties to reach a consensus on the candidate of land administration agent. As a result, an appointment of the designated land administration agent by the real estate agency to handle the registration of ownership transfer at this time shall generally be deemed impartial under these circumstances.
3. Nevertheless, even though some real estate agencies did not enforce the designation of land administration agent in effect, but its contract has included the consumer consent clause. Moreover, the contract was not supplemented with the clause that an appointment of land administration agent other than the designated one is permissible. Consequently, it is likely that the consumers did not know that they could appoint other land administration agent. Therefore, the FTC has written to every real estate agencies notifying them that they should duly add the relevant clauses in the contracts. Such clauses include a notice to consumers about their exercises of options related to the selection of land administration agents or the performance guarantee system, and a disclosure of the remunerations and expenses charged for service provided which consumers will take into consideration in their decision of trading. The addition of such clauses at the same time will ensure the opportunities for the land administration agents to take part in competition are not affected indirectly.

Summarized by: Lin, Hsin-Wen;
Supervised by: Chen, Yuhn-Shan

Appendix: Nil