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Hong Kong property
Business
Ruby Hon Yuen-ping
Ruby Hon Yuen-ping

Concrete Analysis | What you need to know when purchasing properties with a previous deed of gift

  • Potential risks include the purchasers not being able to obtain any, or sufficient, mortgage loan to complete the purchase
  • Estate agents should bring the buyer’s attention to the possible risks when handling transactions involving such properties

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Risks exist in the purchase of properties where there was a previous assignment at nil consideration or a deed of gift. Photo: Bloomberg
Ruby Hon Yuen-ping
Risks exist in the purchase of properties where there was a previous assignment at nil consideration or a deed of gift, as the transaction could be set aside should the previous owner go into bankruptcy or liquidation within five years of the or winding up petition.
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To protect the interests of their clients, estate agents should bring the purchasers’ attention to the possible risks when they are handling transactions involving such properties.

Potential risks associated with purchasing properties involving a deed of gift or an assignment at nil consideration could include the purchasers not being able to obtain any (or sufficient) mortgage loan to complete the purchase, or acquire good title to the property, such that they could resell the property without difficulty.

Therefore, to enhance the professionalism of estate agents and promote the interest of consumers, a relevant practice circular (No. 13-01(CR)) was issued by the Estate Agents Authority (EAA) in 2013 to remind estate agents of the points to note when handling properties involving a deed of gift or an assignment at nil consideration.

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According to the circular, estate agents should conduct a historical and current land search of the property to see if its current land search reveals that the vendor has been the current registered owner of the property for less than five years; and if so, to check if there was any registration of a deed of gift or assignment at nil consideration.
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If such a document has been registered, estate agents should inform the clients of its existence, alert them that the deed of gift or assignment at nil consideration may affect the title of the property and that there is a risk that the purchaser may not be able to obtain sufficient mortgage loan to complete the purchase, and advise clients to seek legal advice on the risk of selling or purchasing the property before entering into any agreement.

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