PropNex Takes Home Buyers To Court Over Fee Dispute

Source : The Straits Times, Apr 29, 2008

Case hangs on whether flat buyers who deal without agents should pay a commission, too

A COUPLE who bought a home and refused to pay the seller's agent the 1 per cent commission are being taken to court by a property company.

PropNex associate director Ricky Low Yong Sern is seeking about $4,000 in commission or a service fee in a case that is likely to turn the spotlight on the issue of whether home buyers should pay a fee to sellers' agents.

He was the exclusive agent handling the sale of a terrace house in Whampoa built over 30 years ago and classified as a Housing Board flat.

Marketing specialist Loh Yi Min, 29, and his wife, polytechnic lecturer Ariel Wee, 33, bought it for $400,000 in April last year. They had acted on their own without engaging an agent.

In documents submitted to court, Mr Low claimed that he had a right to collect a commission as he had exclusive rights to market the property. He also claimed that he had provided services to the buyers.

However, the couple refused to sign the commission agreement when they inked the sale last year. They claim they had made no deal to pay him a fee in the first place.

Both sides will attempt to reach an agreement when they attend a court dispute resolution session next month.

This is the first lawsuit of its kind started by eight-year-old PropNex.

The issue of commissions payable by independent buyers, or buyers who deal without agents, has been hotly debated in recent years.

While there is no law fixing the fees payable, property sellers typically pay their agents a 2 per cent fee, while buyers pay their agents a 1 per cent fee.

Many agents marketing HDB flats also charge independent buyers a 1 per cent fee, but this is not practised in private property deals. Property veterans said this disparity was due to the lower prices of HDB flats, which amount to a lower commission for agents.

Some independent buyers have complained that sellers' agents inform them that they have to pay a commission just before the purchase documents are signed, leaving them with little time to find out about their rights.

Once the buyers sign the commission agreements, they are bound to pay the fee.

However, agents have countered that independent buyers often leave the paperwork to the sellers' agents but refuse to pay a service fee.

Major real estate agencies contacted by The Straits Times have varied responses to such situations, although all maintain that independent buyers of HDB flats should pay a fee.

HSR property group chief executive Patrick Liew said his company takes three to four independent buyers to the Small Claims Tribunal each year for similar claims and has won payment each time.

ERA Singapore's assistant vice-president Eugene Lim said his company does not take independent buyers to court when no commission agreements are signed.

Meanwhile, the Consumers Association of Singapore has, in recent years, questioned the practice of agents taking commissions from both buyer and seller in the same transaction, citing a possible conflict of interest.