Things to Know about Purchasing First-hand Residential Properties

There are certain things you have to pay attention to when purchasing a first-hand residential property, be it completed or uncompleted. This article will provide some tips for you.

Buying First-hand Residential Properties

To further enhance the transparency, fairness and consumer protection of the sales arrangements and transactions of first-hand (uncompleted and completed) residential properties, the Residential Properties (First-hand Sales) Ordinance came into effect on 29 April 2013.

Before buying first-hand residential properties, you are advised to refer to “Notes to Purchasers of First-hand Residential Properties” and other information about the Ordinance, published by the Sales of First-hand Residential Properties Authority (SRPA), which is available on www.srpa.gov.hk.  You can also refer to a centralized electronic database (www.srpe.gov.hk) maintained by the SRPA for information related to the sales brochures, price lists, and registers of transactions of individual first-hand residential developments the sale of which is subject to the Ordinance.

For complaints and enquiries relating to the sales of first-hand residential properties which are subject to the Residential Properties (First-hand Sales) Ordinance, please contact the SRPA.

Property Area & its Surrounding

Pay attention to the area information in the sales brochure and price list, and price per square foot/metre in the price list. According to the Residential Properties (First-hand Sales) Ordinance (Cap. 621) (the Ordinance), vendors can only present the area and price of a residential property using saleable area.  Visit the development site and get to know the surroundings of the property (including transportation and community facilities).  Check town planning proposals and decisions which may affect the property. Take a look at the location plan, aerial photograph, outline zoning plan and cross-section plan that are provided in the sales brochure.  You can also go to the Statutory Planning Portal to search for planning information of a particular area.

Saleable Area

Subsequent to the full implementation of the Residential Properties (First-hand Sales) Ordinance on 29 April 2013, the "Saleable Area" as defined in the Ordinance means the floor area of the residential property including the floor area of a balcony, a utility platform and a verandah, but excluding the area of an air-conditioning plant room, a bay window, a cockloft, a flat roof, a garden, a parking space, a roof, a stairhood, a terrace and a yard even it forms part of the residential property.

Sales Brochure

The following items are some of the information that should be included in a sales brochure:

• Information on the development
• Information on property management
• Location plan, aerial photograph, outline zoning plan, cross-section plan of building in the development, elevation plan and layout plan of the development
• Floor plans and area of the residential properties in the development
• Expected completion date of the building
• Summary of the preliminary agreement for sale and purchase
• Summary of Deed of Mutual Covenant
• Summary of land grant
• Information on public facilities and public open space
• Warning to purchasers
• Information on common facilities in the development
• Fittings, finishes and appliances
• Miscellaneous payments by purchaser
• Defect liability warranty period
• Maintenance of slopes

Government Lease and Deed of Mutual Covenant (DMC)

Don’t forget to read the Government Lease and the DMC (or the draft DMC) which contain important information for prospective buyers. A Government Lease states the lot number, lease term, user restrictions, etc. while a DMC includes provisions such as definition of common areas, principle of fixing management fee, ownership of the rooftop and external walls and specific rights reserved to the developer, etc. The vendor will provide copies of the Government land grant and the DMC (or the draft DMC) at the place where the sale is to take place for free inspection by prospective purchasers.

Consent to Sell

The Lands Department Consent Scheme is a system put in place to regulate the sale and purchase of uncompleted buildings and to ensure orderly sale of the same. Before you purchase an uncompleted unit under the Scheme, you should:

• seek confirmation from the developer whether a “Consent to Sell” has been issued or you can check it on the Lands Department website;
• note that the developer or the estate agent are not allowed to receive any deposit or “reservation fee” before the developer has obtained the “Consent to Sell”.

Signing an Agreement

Ensure that the preliminary agreement for sale and purchase (PASP) and agreement for sale and purchase (ASP) include the mandatory provisions as required by the Ordinance.  Pay attention that fittings, finishes and appliances to be included in the sale and purchase of the property are inserted in the PASP and ASP. Pay attention to the area plan annexed to the ASP which shows the total area which the vendor is selling to you. A preliminary deposit of 5% of the purchase price is payable by you to the owner (i.e. the seller) on entering into a PASP.

If you do not execute the ASP within 5 working days after entering into the PASP, the PASP is terminated, the preliminary deposit (i.e. 5 % of the purchase price) is forfeited, and the owner (i.e. the seller) does not have any further claim against you for not executing the ASP.  The deposit should be made payable to the solicitors’ firm responsible for stakeholding purchasers’ payments for the property.

Inspecting the Unit

If you have purchased an uncompleted residential unit, you may not have the opportunity to inspect the property before signing any agreement or even the assignment. As soon as you have taken possession of the property after completion of the assignment, you have to:

• carefully inspect its fittings, finishes and the workmanship;
• jot down the details of all the defects and notify the developer as soon as possible.

There is usually a defect liability period of 6 months for newly completed property.

Knowledge is Everything

Knowledge and preparation are everything when buying a home. The links below will direct you to more guidance and advice on purchasing a first-hand property.

Note: This article serves as a general guide only. In case of doubt, please refer to the relevant regulations or seek advice from the legal profession.