Local Completed Residential Properties: Sales Descriptions and Pre-contractual Matters

The Law Reform Commission was established by the Executive Council in January 1980. The Commission considers such reforms of the laws of Hong Kong as may be referred to it by the Secretary for Justice or the Chief Justice.

The Secretary of the Commission is Mr Stuart M I Stoker and its offices are at:

THE LAW REFORM COMMISSION
OF HONG KONG

REPORT

Chapter	*Page*

Preface	1

Background and terms of reference	1
Scope of deliberations	2
Views against regulating the second-hand market	3
Views in favour of regulating the second-hand market	3
Sub-committee membership and method of working	4
Definition of "completed residential property"	6

Part I – Second-hand Market

1. The general approach to the second-hand market and existing legal protection for purchasers of completed units in the second-hand market	8

The general approach to the second-hand market	8
A brief review of the existing law governing the protection of purchasers in the second-hand market	8

2. Disclosure of information by vendors	15

Existing law provides insufficient protection for purchasers of second-hand units	15
The Vendor's Information Form	15
Public views on the introduction of a VIF	18
The advantages of a VIF	19
The disadvantages of a VIF	20
Contents of VIF	21
Should the VIF be voluntary or compulsory?	26
Centralised property information system	30

3. Standard clauses in preliminary agreements	32

Introduction	32
Standard clauses for protection of homebuyers	32
Cooling-off period	33
Contract subject to finance	36
Survey report	38
Right of inspection	39
How should a standard clause be inserted into the preliminary agreement?	40

Part II – First-hand Market

4. The general approach to the first-hand market and the provision of sales brochures	42

Meaning of completed properties in the first-hand market	42
The general approach to the first-hand market	42
Availability of sales brochures for first-hand completed flats	43
Advertisements other than sales brochures	47

5. Methods of measurement of floor area to be used by developers	48

Introduction	48
Saleable area（出售面積）	48
Gross floor area（建築面積）	51
Quoting of lowest price	51

6. Disclosure requirements for completed units offered for sale by developers	53

Introduction	53
Floor plan	53
Fittings and finishes	55
Location and layout plans	59
Misleading artistic impressions	61
Management of clubhouse and communal facilities	62
Date of completion	62
Sub-sale by original purchaser to sub-purchaser	64
Financing arrangements	65
Interest chargeable for late payment of purchase price	66
Changes in market conditions and bank lending policies	66
Cooling-off period	66
Preliminary agreement for sale and purchase	67
Right of inspection prior to signing of preliminary agreement	68
Defect liability period	69
Deed of Mutual Covenant	71
Conditions of the Government lease	75
Prices and number of units for sale	78
Miscellaneous matters	78
Enforcement of the recommendations	80

7. The importance of public education	85

8. Summary of recommendations	87

Recommendations applicable to completed units sold in the second-hand market	87
Recommendations applicable to completed units sold in the first-hand market	89
Recommendations applicable to all completed units, both in the first-hand and second-hand markets	98

Glossary of terms	100

Annex I List of those who made submissions on the Consultation Paper on Local Completed Residential Properties	105

Annex II Relevant text of Legal Advisory Conveyancing Office Circular Memorandum No 40	107

Annex III Text of the Legal Information Form published by the Law Society of England and Wales	117

Annex IV Text of the Ontario Seller Property Information Statement	122

Hong Kong Law Reform Commission

THE LAW REFORM COMMISSION OF HONG KONG

REPORT

LOCAL COMPLETED RESIDENTIAL PROPERTIES:
SALES DESCRIPTIONS AND PRE-CONTRACTUAL MATTERS

September 2002

THE LAW REFORM COMMISSION
OF HONG KONG

REPORT

CONTENTS

Chapter

Page

Hong Kong Law Reform Commission

THE LAW REFORM COMMISSION OF HONG KONG

REPORT

September 2002

THE LAW REFORM COMMISSION OF HONG KONG

REPORT

CONTENTS

Chapter

Page

LOCAL COMPLETED RESIDENTIAL PROPERTIES:
SALES DESCRIPTIONS AND PRE-CONTRACTUAL MATTERS

THE LAW REFORM COMMISSION
OF HONG KONG