SINGAPORE: The High Court on Thursday (May 8) dismissed a claim by a beauty salon operator against a property agent and her agency ERA Realty Network for misrepresenting the size of a commercial unit the salon purchased.
The salon, Crystal Beauty, sued estate agent Jasmine Xu and ERA Realty Network, accusing both of misleading its director Madam Pan Ying into buying the unit under the impression that it was larger than it actually was.
The discrepancy only came to light after Mdm Pan took over the premises and had it measured for renovations. The usable floor space was less than what was expected due to the unusual upward sloping walls at the new premises.
Mdm Pan argued that as a result of the space limitation, she had to operate the business from both her original unit and the new unit concurrently, as she has been unable to consolidate operations in the latter. Both units are situated in D’Leedon condominium.
Crystal Beauty sought S$591,255.38 in damages from Ms Xu for fraudulent, negligent and/or innocent misrepresentation, and argued that ERA Realty Network was liable as her employer.
The sum includes the rental from the original premises and the cost of hiring four employees there, according to a judgment issued by Judicial Commissioner Mohamed Faizal on Thursday.
HOW THE SITUATION AROSE
Crystal Beauty began operating at D’Leedon in 2019 and Ms Xu was a customer. She came to know Mdm Pan as their children attended the same kindergarten.
Around September 2018, Mdm Pan told Ms Xu about her intention to expand the salon, with an eye on the unit directly across her original premises.
The first attempt to purchase the new unit fell through, purportedly due to Mdm Pan’s difficulties in obtaining the necessary financing.
A second attempt was made around January 2020, when the new premises were still occupied by a clinic.
After negotiations, the initial listing price of S$1.57 million was cut to S$1.49 million without Goods and Services Tax.
The clinic continued to occupy the premises until late 2021 even as the purchase went through. Throughout the process, Mdm Pan and Ms Xu assumed the new premises were about 818 sq ft based on past transaction history data on property portals PropertyGuru and EdgeProp, and a title search which yielded the same figure.
The discrepancy came to light after late 2021 when Mdm Pan hired an interior designer to renovate the premises.
The interior designer who measured the new premises found that the actual usable floor space was only about 619 sq ft, only slightly larger than Mdm Pan’s original unit which was 603 sq ft.
The discrepancy arose in part from the irregular shape of the property, which had upward-sloping walls, resulting in the ceiling area being larger than the floor area.
“For such properties, the lot area (as is set out in the title documents and in the commercial listing portals) is calculated based on the larger of the two,” said Judge Faizal.
“In this case, therefore, it was the ceiling area that was 818 sq ft, and not the floor area. This is apparently a novel situation and arises because the intended new premises comes with upward-sloping walls.”
Mdm Pan’s original premises had the opposite configuration of downward-sloping walls such that the ceiling area was smaller than the floor area.
She contended that the size discrepancy significantly hampered the expansion of the business as it had to do away with one treatment room and an intended manicure or pedicure area in the new unit. She also had to make use of her original premises.
Apart from Ms Xu and ERA Realty Network, Crystal Beauty also sued three others: The vendor of the new unit PLS Holdings, its estate agent Eric Kwek, and his agency Propnex Realty.
However, the lawsuit against PLS Holdings was discontinued as the company has been struck off, while Mr Kwek and Propnex Realty entered a confidential settlement agreement with Crystal Beauty.
FINDINGS
During the court hearing, Adjunct Associate Professor at the Department of Real Estate in the National University of Singapore’s Business School Tay Kah Poh was appointed as a joint expert to address questions on the duties of an estate agent. Mr Tay is a real estate agent himself.
He issued a detailed expert report which Judge Faizal relied on for his findings.
The judicial commissioner held that Ms Xu had acted reasonably, conducting all the typical due diligence checks for a regular property, including cross-checking the area with property search portals.
In his judgment, he asked what additional measures Ms Xu could possibly have taken given the situation, which involved an unusually shaped unit.
“Simply put, the present case involved a perfect storm of factors and represented a rarity and an aberration of sorts that even Mr Tay himself confessed to never having seen before,” Judge Faisal said.
There was no evidence that Ms Xu knew that the usable floor area would have been less than the official area and Judge Faizal found that she did not make any false representation.
The judge also took issue with the “considerably inflated” damages sought by Crystal Beauty, noting a lack of evidence showing actual financial loss.
In conclusion, the judicial commissioner said: “Given the novelty of the situation, all the parties were caught unaware about the disparity between floor space and the strata lot size listed on the title search, and there was little a conscientious property agent could have done to have been more alive to a problem that simply was not viewed as a concerning feature in Singapore’s property market.”
He noted that in Singapore’s real estate market, “ambiguity represents the exception rather than the rule”.
“Clear, principled regulatory frameworks, market transparency, and standardised industry practices have engendered an environment where transactions overwhelmingly follow well-established norms,” said the judicial commissioner.
“Yet, once in a rare while, as this case illustrates, situations arise where the parameters vastly deviate from the convention. When that happens, the role of the property agent and the property agency … come to the fore. Where does their responsibility to safeguard begin and how far does their duty to guide extend?”