SINGAPORE: Dennis Wee Realty was fined S$66,000 for failing to properly advise investors of the risks involved in purchasing foreign properties, after which the investors did not receive returns promised to them.
This is the largest such fine imposed so far to a property agency for failing to abide by regulations related to estate agency work involving foreign properties, the Council for Estate Agencies (CEA) said in a media release on Wednesday (Dec 6).
Dennis Wee Realty faced a total of 18 charges spanning violations including failing to advise investors of risks involved in foreign property transactions and for making "false representations" in its advertising.
It was eventually found liable for six charges for failing to provide a written advisory message to investors to "draw their attention to the risks involved in purchasing foreign properties", said CEA, with the other charges taken into account in CEA's sentencing.
The property agency is also not allowed to transact or market foreign properties for 12 months with effect from Nov 24 this year.
INVESTORS NOT PAID RETURNS PROMISED TO THEM
In 2014, nine sets of investors bought 21 units in two Ibis Budget Hotel developments located in Lymm and Knutsford in the United Kingdom through Dennis Wee Realty, handing over a total of about £1.9 million (about S$3.96 million based on 2014 currency rates).
The agency had exclusive rights to sell these in Singapore and was entitled to commission from the developers of about 10 per cent of the units sold.
The investors bought the units at £94,500 and £82,500 each for the Lymm and Knutsford projects respectively, having been promised specific returns on their investments by Dennis Wee Realty.
These included annual returns ranging from eight to 12 per cent for the first three years following their purchase, after which each investor would receive a capital uplift on the purchasing price ranging from nine to 20 per cent.
The developers would also guarantee to buy the property back at the end of the three years.
However, in early 2015 Hotel Options entered into administration in the United Kingdom.
"To date, the investors have not been paid the remaining guaranteed annual monthly returns and the capital uplift on the purchase price that they were promised," said CEA.
It added that throughout the property marketing process, the agency "did not provide the investors with a written advisory message, stating that they must conduct due diligence, drawing their attention that risks are involved for foreign property consumers, and that the transaction is subject to foreign laws and to any changes in policies and rules in the UK".
This contravenes guidelines for estate agents and salespersons marketing foreign properties.
However, the property firm told Channel NewsAsia that matters that had to be laid out in the written advisory messages were contained in other documents, such as booking forms and contracts that were signed by the buyers.
"All clients had the benefit of solicitors to explain the entire contract to them and were at liberty to pose queries and/or seek clarifications from the solicitors. This representation came at no cost to the buyers as it was an additional service provided by DWG (Dennis Wee Group)," said Denka Wee, the son of Dennis Wee.
The younger Mr Wee also noted that there was no industry standard set out for advisory messages in booking forms.
"We believe that such inadequacy can be overcome if the relevant authority develops a standard form for foreign purchases, just as there are standard forms for local sales and purchases."
The property agency also made "false representations" in their advertisements, which the CEA took into account in its sentencing.
It ran public seminars to market the projects and placed advertisements in The Straits Times to publicise them.
In these advertisements, the agency made false "meet the developer" claims among other claims, said CEA.
"This was despite the fact that DWR (Dennis Wee Realty) had known that the developers would not be attending the seminars," it added.
"DUE DILIGENCE WAS DONE": DENNIS WEE REALTY
According to Mr Wee, the company has a legal team that looks into carrying out "rigorous due diligence checks" and supporting clients, and that these measures had been taken.
"Despite the disciplinary action, we would like to reiterate that full due diligence was done for this and all projects marketed by DWR as well as DWG as a group," said Mr Wee.
"DWG has always placed our clients’ interest as our top priority. We deeply regret the events which have culminated in these disciplinary proceedings," he added.