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Hong Kong Law Reform Commission |
4.1 As we have defined completed properties as those having an
Occupation Permit (OP),[55]
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.
4.2 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.
4.3 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.[56]
4.4 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 way as if they were
still uncompleted. Our First Report made a number of recommendations 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.
4.5 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. The Sub-committee therefore recommended in the consultation paper that
the provision of sales brochures for local completed residential properties sold
for the first time should be made mandatory.
4.6 One respondent to the Consultation Paper pointed out that making
it mandatory for developers to provide sales brochures for all completed units
would lead to inequality of treatment between developers and private vendors in
regard to the provision of sales brochures. This submission cited the example
of a newly completed building in which the developer offers for sale first-hand
flats while private vendors simultaneously market second-hand flats (having
previously bought them from the developer). The developer would, under the
proposal in the consultation paper, provide sales brochures for all units he
currently offers for sale. On the other hand, the private vendors would instead
provide a VIF to prospective purchasers under our earlier recommendations. A
VIF may contain less sales information than a sales brochure. Hence, it would
look strange to prospective purchasers that there is one set of disclosure rules
for developers and another less stringent set for private vendors in concurrent
transactions on flats within the same building.
4.7 We consider that
this submission has raised a valid concern. It does not seem logical and fair
that the developer has to produce a sales brochure whilst a private vendor
marketing second-hand flats in the same development need not do so. One may
argue for differential treatment of developers and private vendors on the ground
that developers have more resources available to them than private vendors. In
our view, however, this inequality of treatment between developers and private
vendors selling concurrently completed flats in the same development may in fact
work against the interests of private vendors. Other things being equal,
prospective buyers will go to the developers to make their purchase as there
will be a detailed sales brochure.
4.8 One solution to rectify this
apparent inequality would be to allow developers to provide a VIF in the same
way as private vendors. We do not consider that this solution is feasible,
however. Most completed units offered for sale by developers are
“left-over” flats, meaning those flats which were first marketed
when uncompleted but are left unsold after issue of the OP, thus becoming
completed flats. We recommended in the First Report that sales brochures should
be mandatory for all uncompleted flats.
4.9 On balance, we are drawn to
a mid-way solution which will, on the one hand, ensure the consistency of
disclosure requirements for “left-over” units before and after the
completion of the development, and equality of treatment between developers and
private vendors in respect of completed units in the same building. We propose
that for the “left-over” units, developers should be required to
make available the latest sales brochures and a VIF. That is to say, developers
will be able to use the same sales brochures used when the flats were marketed
as uncompleted flats. No updating of the sales brochures will be required. The
VIF will provide the up-to-date sales particulars. However, up-to-date sales
brochures should always be made available for completed flats marketed for the
first time after the issue of the OP. We consider that sales brochures are a
prerequisite for flats marketed for the first time.
4.10 The First and Second Reports made different recommendations for
local and overseas uncompleted residential properties as to when sales brochures
should be made available to prospective purchasers.
4.11 For local
uncompleted residential properties, the First Report 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.[57]
4.12 For overseas uncompleted residential properties, the Second Report
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.[58] 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.
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Recommendation 6 We recommend that for “left-over” flats (ie flats which were first marketed when uncompleted but are left unsold after issue of the occupation permit) the developer should make available the latest sales brochures and a Vendor’s Information Form. However, up-to-date sales brochures should always be made available for completed flats marketed for the first time after the issue of the occupation permit. The sales brochures (and the Vendor's Information Form, where applicable) must be made available by developers from the time the completed properties are offered for sale. All the information in the sales brochure (and the Vendor's Information Form, where applicable) must be accurate at the time the flats are first marketed. |
4.13 As there could be a time lapse between the printing of the sales
brochure and the time of sale of the units, the First Report recommended that,
in respect of local uncompleted residential properties, 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.[59]
4.14 We take
the view that a similar recommendation should be made for local completed
residential properties.
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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. |
4.15 In the First Report, we recommended that the developer may apply
to the relevant authorities in certain circumstances for exemption from the
requirement to produce a sales
brochure.[60] 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.
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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. |
4.16 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 treated in the
same way as a developer so as to make them responsible for the provision of
sales brochures. The White Bill published by the Housing Bureau in April 2000
in relation to sales descriptions of uncompleted residential properties defined
a developer as the person who commissions the construction, owns the property
and offers the residential properties in a public
sale.[61] That definition is
equally valid for the purposes of our present study, but we consider that it
should be modified as necessary to ensure that persons who purchase a large
number of units from a developer incur the same obligations as the developer in
respect of the provision of sales information.
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Recommendation 9 We recommend that the obligation on a developer to provide sales brochures should apply equally to someone buying in bulk from the developer at the first sale of completed residential properties involving strata title. |
4.17 Publicity for 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.
4.18 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, (and the Vendor's Information Form where applicable).
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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 (and the Vendor's Information Form, where applicable). Information given in the advertisement must be consistent with that given in the sales brochure (and the Vendor's Information Form, where applicable). |
[55] However, in the case of the Housing Authority's Home Ownership Scheme, the completion certificate takes the place of an OP for the purpose of defining completed properties.
[56] 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 formal 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 758A-C.
[57] 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).
[58] See the Second Report, at paragraph 1.34.
[59] The First Report, at paragraph 14.13.
[60] The First Report, at paragraph 14.16.
[61] Consultation Paper on the Sales Descriptions of Uncompleted Residential Properties Bill, Housing Bureau, April 2000, at page 3.