Yuan Chih Real Estate Brokerage Ltd.

Case:

Key Words:

broker, offer letter, negotiation deposit

Reference:

Fair Trade Commission Decision of September 23, 2009 (the 933rd Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 098131

Industry:

Real Estate Agencies (6812)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. This case originated with a complaint in which the complainant claimed that he entered into a real estate sales contract with the homeowner (seller) and paid the security deposits after he was shown the house through Yuan Chih Real Estate Brokerage Ltd. (hereinafter referred to as Yuan Chih). Later Yuan Chih requested the complainant's spouse to sign the complainant's name on behalf of the complainant on the offer letter and the buyer's commitment letter to pay commissions. However, Yuan Chih did not explain the substitutive relations between the letter of intent for real estate sale (negotiation deposit agreement) and offer letter, nor did Yuan Chih explain the meaning and legal effects thereof to the complainant or his spouse before they signed the documents. The complainant therefore submitted this complaint to the FTC.

2. Findings of the FTC after investigation: Yuan Chih failed to follow the normal procedure which required the brokers to have the complainant sign an offer letter or letter of intent for real estate sale prior to the negotiation with the homeowner on the complainant's behalf. To the contrary, Yuan Chih, in order to finalize the procedure, provided the offer letter and buyer's commitment letter to pay commissions to the complainant's spouse after the complainant and the homeowner completed signing the sales contract. The complainant and the respondent did not deny these facts. Yuan Chih claimed that it did inform the complainant of the rights to select between Ministry of Interior Sample of the Offer Letter and negotiation deposit, their differences and substitutive relations before the sales contract was signed, which was denied by the complainant.

3. Grounds for disposition:
   (1)Pursuant to Article 24 of the Fair Trade Law, "in addition to what is provided for in this Law, no enterprise shall otherwise have any deceptive or obviously unfair conduct that is able to affect trading order." In light of the characteristic of information asymmetry in the housing brokerage, the FTC enacted the "Fair Trade Commission Policy Statements on Real Estate Brokerage" to require a real estate broker to, before signing a contract with a buyer, fully disclose the differences between the negotiating deposit agreement and the Ministry of Interior Sample of the Offer Letter and their substitutive relations. Failing to do so might violate Article 24 of the Fair Trade Law.
   (2)Pursuant to the general brokerage procedure, Yuan Chih was supposed to fully disclose to the buyer the differences between the negotiating deposit agreement and the Ministry of Interior Sample of the Offer Letter and their substitutive relations and present the letter of intent for real estate sales or offer letter to the buyer for getting his signature prior to the negotiation. Due to the variety of the needs of the homebuyers, the brokerage procedure might be adjusted on a case-by-case basis. However, no matter which document, namely the sales contract, the letter of intent for real estate sales, or the offer letter, was signed by the buyer first, Yuan Chih was still supposed to explain the differences and substitutive relations between the negotiation deposits and the offer letter before accepting the commission of the buyer and negotiation with the seller. In the present case, Yuan Chih only presented the offer letter and buyer's commitment letter to pay commissions to the complainant's spouse after the buyer and seller had signed the real estate sales contract to finalize the brokerage procedure and had the spouse sign the complainant's name on these two documents. Though the offer letter and buyer's commitment letter to pay commissions contained the complainant's name, they were provided only after the complainant had entered into the real estate sales contract. Therefore it is no proof at all that the complainant had learned the differences and substitutive relations between the negotiation deposits and the offer letter before he commissioned Yuan Chih to negotiate or entered into the real estate sales contract.
   (3)With regard to the complainant's statements that Yuan Chih failed to inform the complainant of the differences between the negotiating deposit agreement and the Ministry of Interior Sample of the Offer Letter and their substitutive relations when the complainant commissioned Yuan Chih to provide the brokerage services, Yuan Chih could not provide any written documents to prove that it had performed its duties as mentioned above. Moreover, since the complainant lacked the experience in purchasing real estate, it was not unreasonable that he did not understand the differences between the negotiating deposit agreement and offer letter and their substitutive relations. As a result, Yuan Chih's failure to inform the complainant of the differences between the negotiating deposit agreement and the Ministry of Interior Sample of the Offer Letter and their substitutive relations was found a concealment of important trade information. Such a conduct was a deceptive one sufficient to affect the trading order. Yuan Chih's conduct violated Article 24 of the Fair Trade Law and was subject to an administrative fine of NT$200,000.

Appendix:
Yuan Chih Real Estate Brokerage Ltd.'s Uniform Invoice Number: 80446996
Summarized by Yang, Chung-Lin; Supervised by Hung, Shui-Hsing