At present, there are earth-shaking changes occurred in the urban construction, and the market of second-hand houses is prosperous. Most people look for housing resources via agencies due to the limitation of channels to obtain information. Countless real estate agencies rush to contend for the market. However, disputes among agencies of second-hand houses are frequently seen and rising due to lack of the relevant code of conduct and intermingled agencies. Shanghai lawyers show you the following three cases.

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Case I
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??Defrauded when purchasing a house; the court required the real estate agency to make joint compensation
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??Mr. Zhang and Mr. Wei signed a Property Transfer Contract on the use right of Mr. Wei’s basement located in Yongtai Community, Haidian District, Beijing through the introduction and representation of a real estate agency. They agreed in the Contract that the property transfer fees are RMB 220,000, the agency can receive a commission on trading services of RMB 6,600, and shall accompany both parties to handle ownership transfer formalities at Beijing Municipal Commission of Housing and Urban-rural Development, and witness the entire transaction process of both parties. Mr. Zhang paid the transfer fees and the commission as agreed after the Contract had been signed, but the agency and Mr. Wei delayed the handling of ownership transfer formalities. Through investigation, Mr. Wei doesn’t own the basement, so the formalities cannot be completed. Mr. Zhang thought Mr. Wei and the agency conducted a severe act of fraud, so he filed a lawsuit for revocation of the transfer contract, and Mr. Wei and the agency shall jointly refund the paid-in house payment and commission.
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??Justice interpretation:
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?Article 54 of Contract Law of the People’s Republic of China stipulates: if a contract is concluded as a result of significant misconception or there’s obviously unfair at the time when both parties conclude the contract, a party shall have the right to request the people’s court or an arbitration institution to modify or revoke the contract; if a contract is concluded by one party against the other party’s true intentions through the use of fraud, coercion, or exploitation of the other party’s unfavorable position, the injured party shall have the right to request the people’s court or an arbitration institution to modify or revoke it. In this case, Mr. Wei knew that the house he sold had no corresponding certificate to user the property, and still used the ownership transfer of the house as a basic clause of the contract, leading Mr. Zhang to sign the contract against his true intentions and make the house payment. Mr. Wei committed contract fraud. As a professional agency, the real estate agency was supposed to know that Mr. Wei didn’t own the house, and inform Mr. Zhang of the transaction risk of failed ownership transfer. The agency should have performed the aforesaid two basic obligations and has grave fault, so it shall jointly bear the responsibility of repayment of the house payment, and shall also refund the paid commission.
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??Case II:
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??The transaction was completed via a third party after house checking; the original real estate agency failed to claim liquidated damages
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??Dong and an agency signed a House Checking Confirmation in which they agreed that the agency recommended a house in Changping district to Dong, will show Dong the house on the spot and carry out intermediary introduction; Dong confirmed that there was no other agencies recommending and showing the house to Dong before the agency; Dong shall provide the commission to the agency as agreed herein and pay liquidated damages of RMB 50,000 if Dong and the seller close the deal privately, or Dong accepts the property information offered by other agencies and trades via a third party. Afterwards, Dong purchased the house at a lower cost via another agency after Dong had signed the confirmation and checked the house, so the original agency brought Dong to court for breach of contract.
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??Justice interpretation: As long as a client closes the deal with a house owner after the client is introduced by the agency to check the house, the client shall pay agency fees or more expensive liquidated damages as agreed in the Standard Form Contract provided by the agency, which objectively separates the intermediary behavior from the fact that whether the contract is concluded and whether the deal is closed via intermediary services. The rights and obligations between the agency and the client are unbalanced. That’s an imparity clause, which violates the principle of honesty and credibility. The court believed that, after the trial, the confirmation offered by the agency is to record the house checking in form, and shall not deprive the client of the right to choose other service institution to provide services regarding to the house just because the client has checked the house once. Therefore, Dong has the right to complete the transaction at a lower closing cost and agency fee via another agency. It was not necessary that Dong closed the deal with the seller via another agency by accepting the property information provided by the original agency, so the court dismissed the appeal from the agency due to lack of evidence of the claim in which the agency required Dong to pay the commission and liquidated damages.
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?Case III:
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??The agency shall return part of the payment if the buyer fails to apply for a housing loan after a Sale and Purchase Agreement is signed
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??Ms. He wanted to purchase a house, so she signed an Intermediary Agreement on Real estate Purchase with an agency. The agency shall return the received remunerations of intermediary services if Ms. He doesn’t acquire the house property due to flaws of the intermediary services provided by the agency as agreed in the Agreement. On the same day, Ms. He and the seller, Zhang, signed a Beijing Stock Housing Sales and Purchase Contract at the agency. Before the Contract was signed, the agency informed Ms. Zhang of the fact that Zhang hadn’t cancelled the mortgage loan. On the next day, Ms. He and the agency signed a Service Confirmation and an Ownership Transfer/Loan Confirmation. Ms. He paid the agency a commission and consulting fees of drafting legal documents for the client of RMB 12,500, loan service fees of RMB 3,500 and ownership transfer fees of RMB 3,000, which is RMB 19,000 in total. Afterwards, the ownership transfer and loans couldn’t be applied for because the mortgage loan hadn’t not been paid off. Therefore, Ms. He filed a lawsuit due to flaws of the intermediary services provided by the agency, and required the agency to return the service fees of RMB 19,000. The agency argued that it had contributed to the contract signing between Ms. He and the seller, and completed the obligations stipulated in the intermediary contract, so Ms. He should pay remunerations of intermediary services. As for the fees of ownership transfer and loans, the agency believed that it was not the agency’s fault that the ownership was not transferred and the loan couldn’t be applied for. Hence, the agency refused to return the service fees.
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??Justice interpretation: An intermediary contract is concluded when a broker facilitate reports an opportunity of contract conclusion or provides intermediary services for contract conclusion to the client who shall pay remunerations. Article 426 of Contract Law of the People's Republic of China says, “Where the broker facilitates the formation of the proposed contract, the client shall pay the remuneration in accordance with the intermediary contract.” In this case, Ms. He alleged that flaws existed in the intermediary services provided by the agency, therefore she shall prove that her interests were damaged due to the agency’s incomplete performance of its intermediary obligations. However, the court didn’t sustain that flaws existed in the intermediary services provided by the agency for Ms. He hadn’t offered relevant evidence. It should be highlighted that Ms. He and the agency detailed the intermediary service fees, including remunerations of intermediary services, ownership transfer fees and loan service fees. Ms. He shall pay remunerations of intermediary services to the agency as a client because the agency provided intermediary services of contract conclusion to Ms. He and the seller, Zhang, and facilitated the two parties to formulated the Beijing Stock Housing Sales and Purchase Contract. The agency had received the ownership transfer fees and loan service fees. However, it didn’t provide services concerning ownership transfer and loans for the Beijing Stock Housing Sales and Purchase Contract couldn’t be further performed. Therefore, the agency shall return the illegal profits consisting of the ownership transfer fees and loan service fees.
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??The agency industry urgently needs to be managed normatively and reorganized
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??Real estate agencies make positive contributions to the development of the real estate market, but a series of foul plays made by some agencies disturb market order, bring unnecessary troubles to customers and negatively influence house prosperity transactions in the current real estate market. The reasons are as follows:
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?1. The market entry threshold is low. A real estate agency shall be established with the following basic conditions in accordance with Decision of the Ministry of Housing and Urban-Rural Development for Amending the Provisions on the Administration of Urban Real Estate Intermediary Services, including its own name and institutional framework; a fixed business site; specified quantity of assets and funds; specified quantity of real estate brokers if engaging in real estate brokerage. In addition, a real estate agency shall file in the real estate administration department of the local people’s government above the county level where the registration authority is located within a month after the agency obtained its business license. However, the establishment of a real estate agency only needs to apply to the administration for industry and commerce for registration and a license before it goes into operation in accordance with Article 57 of Urban Real Estate Administration Law of the People's Republic of China. Low risks, costs and market entry threshold as well as large income of real estate agencies lead to lag of management, non-standard operation, insufficient competitiveness and low credibility of such agencies.
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??2. Systems of code of conduct are inconsistent. At present, the relevant laws and regulations to regulate real estate agencies fall behind the development rate of such agencies, and new issues of intermediary services lack bases for solutions. It is reported that there are thousands of agencies in Beijing, and each has its own standard form contract. Although contents of the contracts are not the same, most of them focus on enlarging the consumers’ obligations and evading the agencies’ responsibilities. Consumers lack the right to make independent choices and the right of supervision when concluding the contracts. Intermediary services provided by agencies have no standard procedures for there is not a uniform sample of the contracts concluded by agencies. Hence, unreasonable imparity clauses can be frequently seen in a consignment agreement or a house checking confirmation, leading to an imbalance in the rights of both parties to a contract.
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??3. Regulation by relevant departments is inadequate. At this stage, agencies are mainly supervised by Commissions of Housing and Urban-Rural Development (Housing Management Bureaus) at the county or district level, but the supervision by the Commissions (Bureaus) is mainly on registration, filing and complaints received passively, lacking the initiative of management and integrated supervision. At present, plentiful unqualified agencies exist in the market. Media have exposed numeral “hidden rules” in the industry. Disadvantages of insufficient supervision have been prominent in the complicated and disordered agency market.
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?4. Self-discipline is lacked in the industry. Agencies continue to march to a different drummer and try every means to attract clients in order to take a piece from the intensely competitive agency market. Earnest money, low-cost housing and various promises puzzle consumers who only gain an insight into these terms after spending extra money. In addition to external environmental factors, chaos in the agency market is largely related to the lack of self-discipline and supervision of associations in the industry.
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??The judge suggests that, for the current status of real estate agencies, better laws, higher entry threshold, wider right-defending channels for consumers and stronger executive force are urgently needed. In addition, associations in the industry shall bear responsibilities to actively formulate industrial standards, play the organizational role of the industry, prepare an industrial convention of self-discipline and strengthen self-discipline.
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??Judge’s tips for right defending:
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?1. Target and choose a formal agency. The buyer and seller shall choose a formal agency during the transaction in order to avoid disputes. Consumers shall check the business license, practicing certificate and other documents of the agency before it provides any service, and may verify the certificates in the business sector and housing management department if necessary. It is recommended that the buyer and seller choose well-known brokerage companies with large scale of operation which have standard contract templates and strict operation process to better ensure the rights and interests of clients.
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?2. Sign an intermediary contract with an agency in a proper time. It’s better for a buyer to sign the contract after the buyer checks the house, negotiates with the seller and the intermediary party on relevant matters, and determines to buy the property. Some agencies require buyers to sign a house checking confirmation before showing them the property, during which an intermediary contract is concluded in this form in advance. The right of buyers to purchase the house via other agencies is limited.
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3. Carefully review the contract provided by any agency. Most of intermediary contracts are standard texts, including many professional clauses. Therefore, it’s important to carefully review the standard form contract provided by an agency, meticulously read all clauses, and ask the intermediary party to interpret relevant clauses, so as to avoid the case in which the agency leverage standard form clauses to sign an unequal contract with the client. Put forward in time and ask for correction if there is any objection: all contents that meet the key requirements of the contract shall be written in the contract, including ads of the real estate agency, posts on the shopfront and other materials for publicity, to constrain the other party and avoid “verbal promises”.
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??4. Take the initiative to master the house status frequently. Some agencies may be satisfied merely with going through formalities when they perform the obligation of investigation. Buyers shall take the initiative to learn about the status of house property in order to reduce disputes and ensure a smooth purchase of a house. They can check the property ownership certificate, ask property management companies, security-guard companies and neighbors, and inquire about the records on real estate register in a housing registration department, to ensure that the purchased property has no right over the property of another, tenant or common proprietor, so as to prevent the agency from providing false information when it introduces the ownership of property and community facilities. The ownership shall be transferred as soon as possible after a Sale and Purchase Agreement is signed.
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??5. Don’t be greedy. Refuse improper recommendations of an agency. For intermediary fees, some agencies do their utmost to recommend buyers to purchase indemnificatory housing, houses with limited property rights and other properties whose transactions are restricted or prohibited. Some suggest the buyer and seller to sign duplicate contracts for catering to the buyer’s thought of tax avoidance. Buyers shall not take petty advantages and shall refuse improper recommendations and encouragement of an agency in order to avoid disputes arising from illegal operation when performing the contract.
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??Be cautious when you purchase a house! Contact Shanghai lawyers if needed. Shanghai lawyers will serve you online.