It was a pleasure meeting you and your family again at the dinner yesterday. You told me that you were planning to buy an off-plan shop and acondominium in London, which can be used as an investment and a temporary home for your son who will go there to study soon. We did not have much time discussing this topic over the dinner table, but as the Chairman of the Estate Agents Authority, I would like to share some advice with you so that you would not commit mistakes others have made.
In recent years, the trend of Hong Kong people purchasing non-local properties is on the rise. The risk they face is high especially when purchasing uncompleted properties situated outside Hong Kong.
There is a pattern for bad property investment experiences. First, the property concerned is uncompleted. Secondly, the purchase transaction is closed on remote basis with inadequate due diligence done by the buyer. Thirdly, attractive incentives or investment returns are offered by the foreign developer. When these three factors come together, it is highly likely that the investment would turn sour.
Of the 65 complaint files opened by the Authority this year, most of them were related to uncompleted properties Some of them were about misrepresentation on the location of the properties or the identity of the developer, while some were about misrepresentation on the rental return of the properties.
Most consumers don’t realise that there is currently no relevant legislation or regulations governing the sale of non-local properties in Hong Kong. Selling properties situated outside Hong Kong is not under the purview of the Estate Agents Authority. A person or companyengaging in estate agency work exclusively in relation to properties situated outside Hong Kong is exempted from the requirement ofobtaining a licence from the Estate Agents Authority.
The risk however could be alleviated if a licensed estate agent is involved in the transaction. This is because he is required to comply with the Estate Agents Ordinance, its subsidiary legislation, Code of Ethics and otherguidelines issued by the Estate Agents Authority or else he may be subject to disciplinary actions by the Authority.
According to a practice circular issued by the Authority in 2017, estate agents are required to obtain a report issued by a reliable authority confirming the vendor’s source of funds or financial arrangement and to provide key information of the development such as the location, tenure, current ownership, subsisting encumbrances etc.
Besides, estate agents must obtain a legal opinion to ascertain whether there are restrictions on foreign ownership before they participate in the sale or the promotional activities and provide a copy of the same to the purchaser, together with a written warning statement and a sales information sheet, before they enter into any agreement with the purchaser.
Moreover, estate agents must verify the accuracy of the information contained in the advertisements and obtain the vendor’s express endorsement in writing before issuance. They must also advise purchasers to seek independent professional advice on the types and amounts of taxes and mortgage terms regarding their own case.
In spite of the above guidelines, consumers should note that the functions of the Estate Agents Authority is to regulate the practice and conduct of licensed estate agents, and discipline those non-compliant ones. It is not the Authority’s function to assist consumers in recovering their loss suffered from propertytransactions. Even if sanction in the form of a fine is imposed by the Authority on non-compliant licensees, the fine will go to the government and not the consumers. Consumers should be wary that they need to negotiate with the developers direct or seek independent legal advice by themselves in pursuing any loss against any parties.
Thus, consumers are strongly advised to do their own homework and consider thoroughly the risks they face before making a purchasedecision. They must consider various factors such as location of the property, property details, payment terms, financing arrangements, and purpose of their investment etc. Consumers may visit the website at smart.eaa.org.hk or obtain a copy of the booklet titled “Purchasing Non-local Properties Be SMART” from the Authority to learn more information about purchasing properties situated outside Hong Kong.
Though licensed estate agents are better regulated than unlicensed ones, consumer should still bear in mind that even if the transaction is handled by licensed estate agents who fulfill all the relevant guidelines in their practice, there could still be potential risks in buying properties situated outside Hong Kong, particularly the uncompleted ones.
For example, the developer may fail to complete the construction of the properties on schedule or may even fail to complete it at all. Making a trip to inspect the site and consult local professional is perhaps costly and time consuming, but it is a major investment decision worthy of the hasslesinvolved.
Another popular category of complaints is about rental return. A developer's promise of investment return is skeptical. How can itrealistically forecast the return before the development is completed, occupied, or even in operation? If the developer guarantees an attractive return, it is either taking a major business risk or is not serious with the offer.Choosing to believe the guarantee at face valueis again a risky decision.
The Estate Agents Authority has handled a real case of similar nature. A complainant purchased a shop in an uncompleted shopping mall in the Mainland and concurrently signed a “rent-back agreement” with the management company. According to the agreement, the management company would handle the leasing of the shop for the purchaser and pay him interest and rent regularly. After receiving a few rental payments,the management company stopped its payment. The purchaser then went to the shopping mall site to find out that the management company had closed down and the construction work had not yet started. A lesson learned from this case isthat consumers should consider carefully whether the guaranteed return offered is legally protected and could genuinely be honoured.
In conclusion, purchasing uncompleted properties situated outside Hong Kong is complicated and risky. There is no guarantee thatuncompleted properties would be completed in time or even completed at all. The utmost importance is to make correct decisions because taking legal actions to recover losses iscomplicated as it concerns laws of different jurisdictions. Hence, apart from relying on the professional service provided by licensed estate agents, consumers should consult their own legal advisor for their own protection.
I hope you will find the above tips useful in making your property purchase decisions. Property investment can be rewarding and therefore it is absolutely worthy of your efforts,diligence, and serious consideration. No matter how much you trust your agent and how reputable the developer is, I strongly suggest that you take a trip to inspect the properties you have in mind before you sign your name above the dotted line.
Greetings from Hong Kong. You said you have been confused by media reports about Hong Kong’s national security law. I don’t blame you. What you read in the Western media have a lot to do with geo-politics and little with the freedoms of the Hong Kong people.
First, One Country Two Systems is alive and well. So are the freedoms that Hong Kong people enjoy. Those who claim that we are losing our freedoms would not swap their residency in Hong Kong for any city in the Mainland of China, or for that matter, any other city in Asia.
On the question of safeguarding national security, if not for the One Country Two Systems principle, the Central Authorities of China would have simply extended to Hong Kong the coverage of the national security laws that have been in force on the Mainland. So think twice when you hear Western politicians say that One Country Two Systems is dead in Hong Kong.
Secondly, perhaps when critics say One Country Two Systems is dead, they actually mean that the autonomy that Hong Kong enjoys has been terminated by the Chinese Government. Here let’s look at the basic facts. The autonomy that Hong Kong enjoys is not the “full autonomy” as Nancy Pelosi, speaker of the United States House of Representatives, once publicly claimed. It is the high degree of autonomy that the Basic Law confers under many of its 160 articles. And so far, no one in Hong Kong or elsewhere has alleged that the enactment or the substance of the national security law breach the Basic Law. I know this question has been asked: why did the National People’s Congress passed the law for Hong Kong, bypassing the Legislative Council? Is that not taking away the autonomy of Hong Kong? The answer can be found in Article 18 of the Basic Law which states “national laws shall not be applied in the Hong Kong SAR except for those listed in Annex III to this Law. The laws listed therein shall be applied locally by way of promulgation or legislation by the Region.” The key words are “promulgation or legislation”. The national security law has taken the promulgation route.
Without going as far as accusing the Chinese government of breaking the Basic Law, some foreign governments have pointed their fingers at the 1984 Sino-British Joint Declaration. Let us then look at the Joint Declaration. There one of the articles states as follows, “The above-stated basic principles of the People’s Republic of China regarding Hong Kong and the elaboration of them in Annex I to this Joint Declaration will be stipulated, in a Basic Law of the Hong Kong Special Administrative Region... ”. Simple logic tells us that insofar as the Chinese Government’s basic policies regarding Hong Kong are concerned, there can be no breach of the Joint Declaration because there is no breach of the Basic Law.
Let me stay on the Basic Law for a while longer. As part of Hong Kong’s high degree of autonomy, at the time of promulgating the Basic Law, Hong Kong was given the autonomy and the responsibility of enacting its own laws to safeguard national security. This is found in the well known Article 23, which starts with the words “The Hong Kong Special Administrative Region shall enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government.....”. In 2003, the first and only attempt to fulfil this obligation failed. Since then the often-used filibustering tactic of the pan-democrats meant that any attempt by the Hong Kong SAR Government to enact Article 23 laws would inevitably fail. In recent years the pan-democrats moved the goal posts by insisting that Article 23 laws can only be enacted after Hong Kong has accomplished direct election of the Chief Executive. Indeed as you remember, when I as the Chief Executive tried to reform the electoral system in that direction, the goal post was moved yet again. The pan-democrats with their Occupy Central supporters wanted civic nomination of Chief Executive candidates instead of nomination by a nomination committee which is the requirement under the Basic Law. They also wanted to do away with the power of the Central Government in appointing or not appointing the elected candidate.
So for 23 years Hong Kong did not utilise its autonomy
to fulfil its national security obligations. In the absence of such laws, we have seen in recent years increasing threats to national security, particularly threats to the integrity of Chinese sovereignty over Hong Kong. Both the Chinese Government and the people on the Mainland are rattled. Hong Kong as a whole was seen as abusing its high degree of autonomy and allowing itself to be used as a base and recruitment centre of subversion.
Such people as Jimmy Lai who claim that they are being targeted by the national security law label themselves as leaders in a pro-democracy movement. So let me say something about the nature of democracy in Hong Kong. Hong Kong is not a country. We are a city. But the powers vested in the Chief Executive are much broader compared to those held by the mayors of London, Tokyo and New York, for example. Where do the broader powers of the Hong Kong Chief Executive come from? Not from the Hong Kong electorate. By appointing the elected candidate if it sees fit, the Central Government confers onto the Chief Executive additional powers. So it is the combination of the two mandates, one from the Hong Kong electorate and the other the Chinese Central Government that gives the Chief Executive wide ranging powers and Hong Kong the high degree of autonomy. The pan-democrats wanted to remove the Central Government from this equation and maintain the powers of the Chief Executive. This is not democracy. It is secession by any definition.
Are there other signs of relegating Chinese sovereignty over Hong Kong? Yes. The most recent example was the attempt to frustrate the coming into force of the national anthem law. Filibustering by the pan-democrats wasted months. The goal was to frustrate the passage of the Bill all the way into the summer when Legco would finish its term.
Now that the law has come into force, what’s next? The opposition ironically has been as rowdy and Apple Daily as anti-China as before, despite their claim of being targeted. Roy Kwong Chun-yu, a vocal LegCo member of the Democratic Party happily declared that he had bought a brand new apartment for over HK$10 million and would soon move out of his public rental housing unit. I am glad that the HK$5 million income that he will have received by the end of his 4-year term as LegCo member has been put to good use. Of course he is not alone in the market. Recent offers by real estate developers have done very well. So much for “The end of Hong Kong”. You should be confused. As I said at the beginning, I don’t blame you for it.