Concrete Analysis | What risks do Hongkongers face while buying uncompleted property abroad?

Over the past few years, it is becoming more popular for Hong Kong people to purchase non-local properties. The risk they face is high, especially when those properties are still under construction, or are yet to be completed.

Currently, there is no relevant legislation governing the sale of non-local properties in Hong Kong. Selling properties situated outside Hong Kong is generally beyond the purview of the Estate Agents Authority (EAA). A person or company engaging in estate agency work exclusively in relation to properties situated outside Hong Kong is exempt from the requirement of obtaining a licence from the EAA.

However, if a person or company does estate agency work in relation to properties both in Hong Kong and outside, the person or the company is required to hold a licence issued by the EAA. In this regard, the conduct of this licensee, irrespective of the locations of the properties that the person or company deals with, is regulated by the EAA and the person or company must comply with the relevant regulations, or else they may be subject to disciplinary action by the EAA.

According to the practice circular issued by the EAA in 2017 (Circular No. 17-03 (CR)), licensed property agents are required to obtain a report issued by a reliable authority confirming the vendor’s source of funds or financial arrangements, and to provide key information about the development, such as the location, tenure, current ownership, subsisting encumbrances, etc.

Also, licensed property agents must obtain legal opinion to ascertain whether there are restrictions on foreign ownership before they participate in sales or promotional activity, and must provide a copy of the same to the purchaser, together with a written warning and a sales information sheet, before they enter into any agreement with the purchaser.

In addition, licensed property agents must also verify the accuracy of information contained in advertisements and obtain vendors’ express endorsement in writing before issuances. They must also advise purchasers to seek independent professional advice on the types and amounts of taxes and mortgage terms regarding their own case.

Notwithstanding the above guidelines, consumers should note that the functions of the EAA do not include assisting consumers with recovery of losses suffered from property transactions. Hence, consumers should beware that they need to negotiate with the developers directly and seek their own independent legal advice on pursuing any party for any losses.