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Part II - First-hand Market. Chapter 7 - The
general approach to
the first-hand market and the provision of sales brochures
_________________________________________
Meaning of completed
properties in the first-hand market
| 7.1 | As
we have defined completed properties as those having an Occupation Permit
(OP),[50] completed properties in
the first-hand market refer to those properties with an OP being offered for
sale by developers to the public. Although these properties have an OP, they
may or may not have a Certificate of Compliance (CC) at the same
time. |
| 7.2 | The
issuance of a CC requires the developer to comply with all the conditions in the
Government Lease. These conditions may include the provision of community
facilities such as a swimming pool or footbridges. It may not always be
possible to complete these facilities in time to comply with the lease
conditions when the OP is issued. Where a large development is completed and
offered for sale by phases units in the latter phases may not have been
completed when units in the first or second phases are offered for sale. This
being the case, units in the first or second phases will be offered for sale in
the absence of a CC. There are in fact some developments where the owners have
occupied their units for years without a CC or with only a Consent to
Assign. |
| 7.3 | The
Government will issue a Consent to Assign to those developers who wish to sell
their units with an OP but not the CC. The Consent to Assign is sufficient
authority to enable developers to sell their completed units to the public even
in the absence of a CC.[51]
|
The general approach to
the first-hand market
| 7.4 | As
mentioned, completed units in the first-hand market are those uncompleted units
which have become "completed" with the issue of the OP. These units are offered
for sale by developers in much the same ways as if they were still uncompleted.
The Commission made a number of recommendations in the First Report on ways to
improve the quality of sales particulars and other matters relating to local
uncompleted flats. The majority of those recommendations focus on the contents
of the sales brochure. We are of the view that many of these recommendations
can be extended to cover local completed flats in the first-hand market, subject
to necessary modifications. We shall take this general approach in dealing with
completed properties in the first-hand
market. |
Availability of sales
brochures to be mandatory
7.5 The sales brochure is the most common means by
which developers provide sales information to prospective buyers in the
first-hand market. Sales brochures can provide comprehensive information to
prospective purchasers as, theoretically, they could be of any length to contain
as much information as desired. We therefore take the view that the provision
of sales brochures for local completed residential properties sold for the first
time should be made mandatory.
When sales brochure
should be available
| 7.6 | The
Commission made different recommendations for local and overseas uncompleted
residential properties as to when sales brochures should be made available to
prospective purchasers. |
| 7.7 | For
local uncompleted residential properties, the Commission recommended that the
sales brochures should be accurate at the time of the first sale of units in a
development but did not specify when sales brochures should be made
available.[52] |
7.8 For
overseas uncompleted residential properties, the Commission recommended that
sales brochures must be available from the time the properties were first
advertised for sale. Any invitation to buy could only be made if sales
brochures were available to prospective purchasers at that
stage.[53] We prefer the latter
approach in that it specifies when sales brochures should be made available.
For local completed residential properties, we take the view that sales
brochures should be available when the completed properties are offered for
sale. Recommendation
6We recommend that sales brochures must
be available from the time the completed properties are offered for sale. All
information in sales brochures must be accurate at the time the completed
properties are offered for sale.
Material changes
between date of printing and time of sale
| 7.9 | As
there could be a time lapse between the printing of the sales brochure and the
time of sale of the units, the Commission recommended, for local uncompleted
residential properties, that material changes taking place between the date of
printing and the time of first sale should be disclosed in a note attached to
the sales brochure.[54]
|
| 7.10 | We
take the view that a similar recommendation should be made for local completed
residential properties. |
Recommendation 7
We recommend that if there have been any material
changes in the information in the sales brochure between the date of its
printing and the time of sale, a note to that effect should be attached to the
sales brochure or the price list.
Exemption from
requirement to produce sales brochures
| 7.11 | In
the First Report, the Commission recommended that the developer may apply to the
relevant authorities in certain circumstances for exemption from the requirement
to produce a sales brochure.[55] We
are of the view that a similar recommendation should be made for local completed
residential properties. Such a recommendation provides a degree of flexibility
in the case of, for instance, bulk purchases where there is no intention to
resell to the public. However, it may be difficult to ascertain whether the
bulk purchaser has the intention to re-sell or not. We consider it desirable to
require that an application for exemption be accompanied by a written
undertaking from the purchaser not to re-sell the units within a specified
period. We shall leave it to the Government to decide the duration of the
undertaking. |
Recommendation 8
We recommend that the developer may apply to the
relevant authorities in certain circumstances for exemption from the requirement
to produce a sales brochure. For instance, where a purchaser buys in bulk from
the developer with no intention to re-sell any of those units to the public,
there should not be any need for the developer to produce a sales brochure in
respect of those units. The application for exemption should be accompanied by
a written undertaking from the purchaser not to re-sell the units within a
specified period to be determined by the
Government.
7.12 Some bulk purchasers
of a large number of units from developers will keep the units for some time
before reselling them to the public. In our view, this category of bulk
purchasers should be brought within the definition of a developer so as to make
them responsible for the provision of sales
brochures.
Recommendation
9
We recommend that the definition of a
developer should include someone buying in bulk from the developer at the first
sale of completed residential properties involving strata
title.
Advertisements other
than sales brochures
| 7.13 | Publicity
on properties often takes the form of newspaper advertisements and radio or
television commercials. It is obviously not feasible to apply all the
disclosure requirements for sales brochures to other means of advertising. For
instance, it is unrealistic to require a radio or television commercial, which
lasts for a few minutes or even seconds, to disclose all the sales information
contained in the sales brochure. |
| 7.14 | To
make sure purchasers do not rely on the limited sales information in such
advertisements, we recommend that purchasers should be advised to refer to the
sales brochure which contains fuller property
information. |
Recommendation
10
We recommend that if developers, by
themselves or through estate agents, advertise the sale of local completed
residential properties otherwise than by means of a sales brochure, the
advertisement should advise purchasers to refer to the sales brochure.
Information given in the advertisement must be consistent with that given in the
sales brochure.
[50]
However, in the case of the Housing Authority's Home Ownership Scheme, the
completion certificate takes the place of an OC for the purpose of defining
completed
properties.[51]
However, if there is no CC, the purchaser may only be buying an equitable
interest rather than the legal interest in the property. In these
circumstances, the vendor may need to specify in the ASP that he is selling only
the equitable interest in the property to avoid the purchaser subsequently
claiming to rescind the ASP for failure to pass good title. See Court of
Appeal, Civil Appeal No 194 of 1997; [1998] 2 HKLRD 751 at page
758A-C.[52]
See the First Report, at paragraph 14.13. The Commission however recommended
that the price lists should be available at least three days before the day of
registration of prospective purchasers for balloting (paragraph 12.6 of the
First
Report).[53]
Law Reform Commission of Hong Kong, Report on Sales Descriptions of Overseas
Uncompleted Residential Properties (September 1997) ("the Second Report") at
paragraph 1.34.[54]
The First Report, at paragraph
14.13.[55]
The First Report, at paragraph 14.16.