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"I want to set off firecrackers to thank the gods when I receive the commission!" Mr. Chen (pseudonym), a veteran real estate agent, held up a three-centimeter-thick commission receipt and showed reporters the transaction records of Jingjun handled in 2020. This Tuen Mun Nano Building project, which is nicknamed the "Dragon Bed", has become the "eye of the debt storm" in the real estate agency industry. Our newspaper's exclusive investigation found that Jing Jun, jointly developed by Stan Group controlled by the "Shop King" Deng Chengbo's family and Jiayuan International (02768), has owed more than HK$16.2 million in agency commissions since it joined the business in 2019, exposing the long-standing commission exploitation system in the real estate industry. (Introduction)
The devil is in the details
Looking back at the "Cooperative Promotion Agreement" signed between Jingjun and the agent that year, Clause 7.3 states: "The developer reserves the final right to adjust the time and method of commission payment." Legal experts pointed out that this kind of "unfair clause" actually gives developers unlimited right to delay. "The contract is essentially a unilateral protection for the developer. When an agent signs the contract, it is like signing a contract to sell himself." Barrister Luk Wai-hung explained that there are major loopholes in the current Estate Agents Ordinance, and the time limit for commission payment depends entirely on the commercial decision of the developer.
What is even more shocking is that an agent provided internal documents to this newspaper showing that Stan Group has implemented a "commission priority system" since 2021: the first phase of 10% commissions is paid to bank mortgage institutions, the second phase of 30% is used to pay construction contractors, and agency commissions are listed as third-level debts. This financial arrangement directly leads to the agent becoming the victim at the end of the debt chain.
Unwritten rules of the industry: Commission arrears become the norm
According to the latest survey by the Association of Estate Agents, 68% agents in Hong Kong have experienced delayed commission payments by developers, with the average delay period reaching 9.8 months. Based on the total transaction volume of new properties in Hong Kong in 2022 of HK$320 billion and the average commission of HK$2.5%, the commission frozen for the whole year is as high as HK$8 billion, which is equivalent to the annual income of 4,000 agents being withheld.
"This is basically an interest-free loan!" Mr. Zhang, former regional sales director of Centaline Property, exposed the industry's unspoken rules: "Developers often use delayed commissions as a cash flow management tool, especially during the downturn in the property market. We tried to collect the commissions from a domestic real estate project for three full years." He revealed that some developers even required agents to sign a "voluntary delay in commission payment consent form" in exchange for future cooperation opportunities.
A bloody story in a regulatory vacuum
At a real estate agency in Lai Chi Kok, the reporter met Ms. Lin, who had just been in the industry for two years. With red eyes, she showed her mobile banking records: "For the two Elite Units sold last year, the agreed commission of 128,000 has not yet been received. The company said that the developer did not pay, so our work was in vain." What's even more ridiculous is that some agents had to pay for lawyers at their own expense to recover the commission. "The cost of recovering the commission is higher than the commission. It's basically double exploitation."
In response to this newspaper’s enquiries, the Estate Agents Authority once again emphasised its position that “developers are not regulated entities”. However, a review of the bureau's 2022 annual report showed that it received 463 complaints of commission disputes throughout the year, but the successful mediation rate was only 12.3%. Legislative Council member Kong Yuhuan pointed out the flaws in the system: "The current regulations are like traffic police who only catch speeding and ignore hit-and-run cases. It is completely putting the cart before the horse."
The butterfly effect of Deng's financial difficulties
The core of this commission storm lies directly in the financial landmines buried by the Deng Chengbo family's aggressive expansion in recent years. According to financial statements, the total liabilities of Stan Group, a subsidiary of Stan Group, soared to 8.76 billion yuan in 2022, and the current ratio fell below the dangerous level of 0.4. In order to ease debt pressure, the Deng family has been frantically selling properties in recent years. In the first quarter of 2023 alone, they have sold assets worth 2.3 billion, including the sale of Ting Lan Residence in Tsuen Wan to a Singapore fund at a "shocking price" of 850 million.
Senior surveyor Chen Dongyue analyzed: "Dang's transformation into the hotel industry coincided with the epidemic, which was unfortunate. The average occupancy rate of its nine hotels has been below 40% for a long time, and the monthly loss is more than 20 million yuan." What's more serious is that several of the group's industrial building conversion projects were nailed by the Buildings Department for violating the terms of the land lease, involving an amount of 430 million yuan.
The battle for survival in the legal gray area
In a law firm in Tsim Sha Tsui, reporters witnessed a legal struggle of "small shrimp versus big whale". Agent Li is filing a lawsuit with the Small Claims Tribunal to recover the 87,000 yuan commission for the Jingjun project. "This is my third case of this kind, and each time it takes half a year," he said with a wry smile. Data from judicial institutions show that the number of real estate commission recovery cases in 2022 increased 3.2 times compared to 2019, but the success rate was less than 40%.
Legal professionals revealed the cruel reality: even if the case is won, the developer can still delay payment by continuing to appeal. Worse still, some groups will liquidate the project company, leaving the agent with no way to seek recovery. This "legal war of attrition" strategy has caused many agents to choose to swallow their anger.
Hong Kong's shame in global comparison
Compared with other international metropolises, Hong Kong's commission protection system is clearly lagging behind. Singapore's "Real Estate Brokerage Act" clearly stipulates that developers must pay commissions within 60 days after the transaction; the UK has even established a "commission escrow account" system; even the mainland revised the "Real Estate Brokerage Management Measures" in 2021, requiring that commissions must be settled within 30 days after the online signing. In contrast, in Hong Kong, the Land Registry still adheres to the principle of "commercial agreement autonomy", which is ridiculed by the industry as the "21st century indenture".
Calls for reform and the game of vested interests
Voices for reform among the public are gathering momentum. The Real Estate Agents Industry Alliance launched the "Commission Justice Campaign", calling on the government to amend the Estate Agents Ordinance to set commission payment periods and penalties for breach of contract. However, the relevant initiative was strongly opposed by the Real Estate Developers Association, which even wrote to the Legislative Council saying that "rigid regulations will seriously affect the flexibility of property sales."
Behind this tug-of-war over reform is a huge game of interests. Based on the new home market in 2022, the interest-free loans obtained by developers through deferred commissions are sufficient to cover the construction costs of two medium-sized projects. Industry insiders revealed that some developers even used the deferred commission funds as deposits for land investment, forming an absurd cycle of "agents paying for building construction."
A future with both light and darkness
Amidst the difficulties, reporters found encouraging cases. Sino Land (00083) has been implementing the "Instant Commission Payment System" since 2023, which uses blockchain technology to achieve automatic transfer of funds 72 hours after the transaction. This innovative model has received support from many agency banks and may become a breakthrough in industry reform.
However, for the hundreds of agents who are still seeking compensation for their commissions from Jingjun, the reality remains cruel. On the rooftop of an industrial building in Kwai Chung, dozens of victims formed a "commission recovery alliance" and covered the walls with receipts for unpaid commissions, with the total amount now accumulated to HK$23 million. Convener Ajie (pseudonym) expressed his inner thoughts: "We don't want charity, we just want to get back the hard-earned money we deserve. This industry needs not only supervision, but also the most basic respect."
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