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Hong Kong Law Reform Commission |
| 1.1 | When the Sub-committee was appointed in November 1992, their terms of reference were confined to uncompleted residential properties. The Sub-committee was given an additional reference in 1996 to consider completed residential properties in Hong Kong. There are a number of reasons for making this additional reference relating to pre-contractual matters and sales descriptions. |
| 1.2 | When the consultative document on local uncompleted residential properties was issued in April 1994, there was strong public demand in the responses for the introduction of controls over sales descriptions of completed residential properties. |
| 1.3 | In its First Report published in April 1995, the Commission made a number of recommendations in respect of local uncompleted residential properties. The Government published the Sales Descriptions of Uncompleted Residential Properties Bill as a White Bill in the Government Gazette on 7 April 2000. The White Bill, on which the public's views were sought for a three-month consultation period ending on 6 July 2000, aims largely to implement the Commission's recommendation in the First Report. It will create anomalies if some of these recommendations apply only to uncompleted but not completed properties. For example, standard definitions for measuring floor area are recommended for uncompleted properties. It would create confusion if the measurement methods were not extended to completed properties offered for sale by developers. |
| 1.4 | There are a growing number of first-hand completed residential units being offered for sale. Although these flats have been "completed", they are offered for sale in much the same way as if they were still uncompleted. Prospective buyers may not be given the opportunity to view the particular flats themselves, but instead are usually only able to view one or more show or mock-up flats. As in the case of uncompleted properties, prospective purchasers have to rely largely on the information in the sales literature. There thus seems little reason that less protection should be given to purchasers of such completed properties than those of uncompleted properties. |
| 1.5 | The present study relates to completed residential properties in Hong Kong. Unlike uncompleted flats (which are mostly sold by developers), completed residential properties are sold either by developers in the first-hand market or by private property owners in the second-hand market. |
| 1.6 | Many of the sales descriptions of completed flats are provided by developers in much the same way as those for uncompleted flats. There is thus an obvious reason to regulate the sales descriptions and other pre-contractual matters of local completed flats in the first-hand market. The question is whether or not that regulation should extend to the second-hand market. |
| 1.7 | Reservations have been expressed in some quarters to extending the study to the second-hand market and to individual flat owners. The view taken is that a sale in the second-hand market is primarily a transaction between two individual owners. For transactions in the second-hand market, the Government has introduced a scheme to regulate estate agents. It is hoped that the scheme will improve the quality of sales information provided to purchasers. Moreover, it is doubtful whether or not individual owners will have the necessary time and resources to provide the required information. It may also be difficult for them to check the property details of some older flats. |
| 1.8 | Furthermore, unlike purchasers of uncompleted properties, purchasers of second-hand completed flats can view or check the properties. It is in the first-hand or primary market that purchasers need more protection. In the second-hand market, purchasers are on an equal footing with the vendors. Hence, there is little need for additional legislative measures to protect purchasers. |
| 1.9 | The Sub-committee take the view that their terms of reference are wide enough to cover the second-hand market. Purchasers of second-hand completed flats, just like those buying in the first-hand market, are in need of protection. The present law does not provide enough positive protection for purchasers. For example, the burden of proof of an actionable misrepresentation would be on the aggrieved party and it will be difficult and costly to discharge that heavy burden. The Sub-committee believes that there is a need to impose positive duties on private vendors to provide fuller information before the Agreement for Sale and Purchase ("ASP"). |
| 1.10 | In the second-hand market, verbal representations are often made by vendors and estate agents. It is difficult and costly for purchasers to verify certain important property information, including the age and size of the property. The property is not always available to prospective purchasers for inspection. Investors may buy property subject to an existing tenancy without the chance of viewing the property. |
| 1.11 | It is noted that the Estate Agents Ordinance (Cap 511) requires estate agents to supply certain sales information to purchasers in the second-hand market. The duties of estate agents are confined to the provision of seven basic property particulars.[1] There are many other types of property information of interest to purchasers of completed second-hand flats, such as, the level of management fees. Vendors should therefore also have some responsibility for providing property information to ensure its accuracy. |
| 1.12 | We have therefore come to the view that the present study should cover completed residential properties offered for sale not only by developers in the first-hand market but also those offered for sale by private vendors in the second-hand market. |
| 1.13 | In the First Report, the Commission recommended that "uncompleted residential property" should refer to: |
| 1.14 | We are of the view that the definition of "completed residential property" should also take the Occupation Permit as the demarcation point. |