7 Crucial Tips for HK Representation Agreement

When buying or renting a property, many people are asked to sign a representation agreement by their real estate agents. What is a representation agreement, and is it necessary to sign one? Do you need to pay a commission if a relative or friend signs on your behalf? What important aspects should you pay attention to when viewing properties? Today, let's explore the 7 crucial questions about representation agreements.

What is a Representation Agreement?

A "representation agreement" refers to an essential document that buyers or tenants sign with a real estate agent before viewing residential units. Its purpose is to ensure transparency and fairness in the transaction process.

According to The Estate Agents Practice Regulation, any prospective property buyer or tenant must be required to sign this document by the relevant real estate agent before formally viewing the property. This requirement is in place to safeguard the interests of both buyers and sellers, as well as the responsibilities of the real estate agents, ensuring the legitimacy and allocation of responsibilities during the transaction.

The representation agreement contains detailed information, including but not limited to:

• Commission amount:
• Details of the property to be viewed
• Viewing date
• Explanation of agency relationship
• Responsibilities and obligations of both parties
• Validity period of the representation agreement

Is There a Validity Period for Representation Agreements?

Representation agreements typically have a recommended validity period of no more than 3 months. However, in practice, some representation agreements may be set for six months or even a year. Buyers or tenants can discuss with the real estate agent to determine a suitable duration. If the "validity period" field on the representation agreement is filled with vague terms such as "until further notice," buyers or tenants should request the agent to specify a precise date to protect their interests.

Is It Mandatory to Sign a Representation Agreement?

According to the Estate Agents Practice (General Duties and Residential Properties) Regulation, licensed real estate agents are required to sign a "real estate agency agreement," commonly known as a representation agreement, with clients before taking them to view properties, whether for renting or buying. The signing of this agreement aims to clarify the rights and responsibilities of both parties, prevent misunderstandings in the future, and safeguard the interests of the agent and their affiliated company.

The primary function of the representation agreement is to ensure that clients do not bypass the agent during the transaction process to negotiate directly with the property owner or other agents to reduce or avoid paying a commission. It also ensures that buyers or tenants are fully aware of the commission amount and the validity period of the representation agreement. Therefore, signing a representation agreement is an essential and necessary step to ensure fairness and transparency in the transaction.

When Should You Sign a Representation Agreement?

The specific timing for signing a representation agreement varies depending on the real estate agent. Some agents may choose to sign the agreement with clients before they go to the property, such as while waiting in the lobby of a housing estate for key collection. This allows both parties to clarify their rights and responsibilities before the viewing. Others may prefer to sign the agreement after the client has viewed the property to avoid pressuring the client.

To protect the interests of both parties to the fullest extent, it is advisable to spend 5 to 10 minutes reading and understanding all the contents of the representation agreement together before going to the property.

Can Spouses Sign Representation Agreements?

Signing a representation agreement is not limited to the person viewing the property in person but can extend to their immediate family members, including parents, children, spouses, and siblings. For example, if Mr. Chan is interested in a unit but cannot personally attend the viewing for some reason, he can ask his wife to view the unit on his behalf and sign the representation agreement. In this case, if Mr. Chan eventually decides to rent or purchase the unit, he will need to pay the appropriate commission to the agent who facilitated the viewing.

Transferring Representation Agreements to Other Agents

Sometimes, tenants or buyers may employ a strategy of having friends, boyfriends, or girlfriends sign the representation agreement on their behalf. If the agent discovers that the client is using this method, they have the right to request that both the client and all accompanying friends sign the representation agreement together.

After signing the representation agreement, if a buyer or tenant chooses to complete a lease or purchase of the same property with another real estate agent, the original agent can seek commission through legal means. This means that even if you change agents or use the strategy of having someone else sign on your behalf, you may still have economic responsibilities towards the initial agent. Therefore, when considering changing agents or adopting the strategy of representation, carefully evaluate the potential legal risks and consequences.

Key Considerations for Viewing Properties

What are the specific aspects to pay special attention to when viewing properties? The following key points should be clarified and thoroughly understood:

• Elevator Function: Check smoothness and maintenance.
• Staircase: Assess convenience and safety.
• Neighbors' Cleanliness: Observe nearby units for overall living quality.
• Pet Policy: Verify if pets are allowed.
• Public Facility Condition: Inspect garbage rooms, back stairs, and common areas.
• Security and Management: Evaluate building security and staff professionalism.
• Building Maintenance: Look at exterior, fire escapes, and noise insulation.
• Orientation and View: Check if it meets your preferences.
• Layout: Ensure reasonable space and layout.
• Plumbing and Leakage: Check for water damage.
• Structural Integrity: Inspect beams and ceilings for safety and aesthetics.
• Facility Upkeep: Consider the condition of windows and pipes.
• Mobile Signal: Test phone reception.
• Natural Light: Assess the natural light availability.

Want to learn more about viewing properties? Check out the most comprehensive Hong Kong rental checklist: 100 Must-Know Things for Renting (Part 1) and 100 Must-Know Things for Renting (Part 2).

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