Submission on the Proposed Legislation to Regulate the Sale of
First-Hand Residential Properties (28 January 2012)
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Table of
Contents
1. Executive
Summary
2. Regulatory Objectives
3. Application of the Ordinance
4. Price List
5. Saleable Area
6. Sales Brochure
7. Show Flats for Uncompleted
Development
8. Viewing of Property in Completed
Development
9. Sales Arrangements
10. Conveyancing Procedures and Related
Matters
11. Disclosure of Information on
Transactions
12. Advertising
13. Misrepresentation and Dissemination of
False or Misleading Information
14. Liability of Company Officers for Offence
Committed by Company
15. The Authority
16. Other issues
17. Conclusion
1. Executive Summary
1.1 The Council welcomes the Government's
initiative to launch the White Bill consultation and urges that the
Bill, with necessary amendments, be passed as soon as possible. It
also appreciates the willingness of the Government to legislate on
consumer and trade practice issues in first-hand residential
property sales, in recognition of the Council's past efforts at
promoting the need to protect consumers in this most important
area.
1.2 The Council has been pressing for
specific legislation to protect consumers in their dealings with
the residential property sector for many years. It therefore
welcomes this legislation which provides a long overdue regulatory
mechanism to protect potential purchasers of all first-hand
residential properties, whether uncompleted or
completed.
1.3 While the Council wholeheartedly
supports this Bill, it has made some suggestions for amendment, set
out below, and other matters suitable for future consideration.
While there are some matters that require clarification, their
existence should not be seen as a reason to unduly delay this
important piece of legislation.
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Provisions that will enhance
consumer protection
1.4 The Government has devised legislation
to systematically address specific areas that the Council has
highlighted over the years, as serious problem areas. The Council
believes that the measures will go a long way towards ensuring that
potential purchasers are able to make better informed choices in
their purchases and that as a consequence sales disputes can be
reduced. In particular, the Council notes the following worthy
initiatives:
1.5 Price lists - The Council appreciates
the requirements that developers have to make price lists public at
least 3 days before the commencement of sale, as well as to make
hard copies of the relevant price lists available for collection by
the general public at the place where the sale takes place. This
should assist in ensuring potential purchasers have price
information available to make informed decisions.
1.6 Saleable area - The Council supports
the proposal to prescribe the presentation of saleable area in a
standardized way as this serves an important and useful reference
for potential buyers. The Council believes the proposed method in
presenting area information is a more preferable option to
subjecting consumers to a wide array of non-standardized
information.
1.7 Sales brochures - The Council welcomes
the provision that only the vendor may prepare any publication for
a development that is entitled "Sales Brochure". The Council also
fully supports introducing provisions that a developer must, at
least 7 days before a date of the sale and on a date of the sale,
make hard copies of the sales brochure for the development
available for collection by the general public, at the place where
the sale takes place.
1.8 Deeds of Mutual Covenant - The Council
supports the proposed requirement that the full DMC should be
uploaded onto the developers' website to provide potential
purchasers with an overview of building management related issues
in the development concerned.
1.9 Show flats - The Council welcomes the
requirements concerning the display of unmodified and modified show
flats for uncompleted developments. This should enable potential
purchasers to get accurate depiction of the actual units. The
Council also welcomes the provision that a developer must not
restrict any person who views the show flat from taking
measurements, taking photographs or making video recordings, of the
unmodified show flat. The Council supports the provisions requiring
developers to make a particular completed residential property
available for viewing by the potential purchaser before the
developer can sell that residential property to the
purchaser.
1.10 Notification on sales arrangements -
The Council supports the provision that developers be required to
make public, at least 3 days before a date of the sale, information
on sales arrangements; and that this be available for inspection on
a website designated by the developer for the development. The
proposed legislation should work to ensure the sales process takes
place in a systematic and open manner.
1.11 Mandatory provisions in agreements -
The Bill stipulates certain major provisions as mandatory
provisions in both preliminary agreements for sale and purchase
(PASP) and agreements for sale and purchase (ASP). The Council
welcomes the certainty these provisions bring to sale
agreements.
1.12 Disclosure of information on
transactions - The Council supports the provisions requiring
developers to compile a single register of transactions into which
information on PASP and ASP have to be entered within 24 hours and
1 working day respectively, and disclosure of information on
related parties involved in transactions.
1.13 Mandatory advertising requirements -
In light of the creative and dubious approaches to the marketing of
residential developments used in the past, the Council fully
supports the proposals to tighten control over the information
presented in advertisements for the sale of residential properties.
The proposed requirements on the provision of certain mandatory
information and specific font size requirements in printed
advertisements are especially welcome.
1.14 Liability of company officers for
offence committed by company - The Council fully supports the
proposal in the Bill that those persons who have participated in,
consented to, or connived in the criminal misconduct of the company
which they manage, or those whose recklessness has allowed the
company's criminal conduct to occur, should be criminally liable
under the management liability concept. Given that the activities
of a frontline staff are ultimately the responsibility of managers
and company executives, the provision should ensure that the
principle of 'management responsibility' is maintained.
1.15 An independent authority - The Council
fully supports the establishment of an Authority with appropriate
powers to administer the provisions of the legislation, such as
dealing with malpractices in the sale of first-hand residential
properties. The Council pledges to support the Authority and work
closely with it to ensure an effective framework that will protect
consumers and maintain an efficient and competitive
marketplace.
1.16 Online property information platform -
The Council welcomes the Government's acceptance of its earlier
recommendation of establishing an electronic database (online
centralized information platform), to provide comprehensive
residential property information for public access. This platform
should provide another element in the range of information
consumers require to make efficient purchasing
decisions.
Council suggestions for improving
the Bill
1.17 Regulatory objectives - The Council
believes that the legislation should specifically indicate a clear
objective that highlights the imbalance of power between developers
and consumers, and the need for consumer protection, rather than
merely providing for various mechanisms to be employed in the
marketing of property.
1.18 Application of the Ordinance - The
Council has concerns with the proposed definition of first-hand
residential properties and the proposed exemptions to be granted
under the Bill, for example, the 'no previous agreement' provision,
'one person under one agreement' provision and 'properties sold on
an en bloc basis' provision. These types of provisions could become
loopholes for developers to circumvent the regulation. The Council
provides some suggestions for improvement.
1.19 To ensure the protection of all
potential property purchasers and procure a level playing field
between public and private vendors, the Council sees no obvious
reason why HA developments should be subject to different legal
requirements, particularly with regard to the provision of
inaccurate or misleading information to potential
purchasers.
1.20 "Not for sale" units on price list -
Developers are not obliged under the Bill to offer all the units on
price lists for sale. The Council is concerned that if no such
requirement is imposed, a developer could sell just a small number
of units out of the units on the price list to test the market and
then issue another (revised) price list for the remaining ones with
higher prices, thereby legitimizing the practice of "releasing
units in small batches", and encouraging market speculation. The
Council considers that information on any "not for sale" units on a
price list would be meaningless to potential purchasers and
therefore should not be included.
1.21 Changes to sales brochures - The Bill
provides that if there is any change to the specified information
set out in the sales brochure for the development, the vendor must,
as soon as practicable after the change, revise the sales brochure
to reflect the change. However, it is not clear as to whether a
"revised" sales brochure would need to follow the proposed 7-day
disclosure requirement.
1.22 Floor-to-ceiling height - The Bill
requires the provision in the sales brochure of additional
information on the thickness of the floor slab (excluding plaster)
of each residential property. The Council considers that the
unambiguous way to make known the relevant information is for
consumers to be informed of the direct measurement taken from the
floor to the ceiling of a unit ('floor-to-ceiling
height').
1.23 Bilingual information - There appears
to be an assumption that the two versions of an agreement in both
English and Chinese will be the equivalent of each other. For the
sake of clarity, the Council suggests that provision be made in the
Bill to clearly specify that the version selected by the purchaser
of the property should prevail for the purpose of determining the
meaning and effect of certain information in a sales
brochure.
1.24 Deeds of Mutual Covenant (DMC) - The
consultation paper remarks that 'salient points' of the DMC should
be provided, however the Bill only provides that a 'summary' of the
DMC be set out. To be consistent with the intent of the
legislation, the Council suggests that the Authority should
stipulate a template of salient points to ensure protection of
purchasers' interests and proper compliance.
1.25 Ceiling height of show flat - The Bill
provides that the "floor-to-ceiling" height of a show flat should
not exceed that specified in relation to the residential property
in the sales brochure and the approved building plans. The Council
is concerned that the information printed in the sales brochure may
in fact be the "floor-to-floor" height of a unit. The Council
considers it important to apply the same measurement method across
the board, i.e. whether in a sales brochure or in a show
flat.
1.26 Certification of size - In the
Steering Committee's Report, there is a recommendation that a
developer should provide a certificate certifying that the
enclosing walls containing the saleable area of the show flat are
in accordance with the approved building plans for deposit with the
enforcement agency. This recommendation is not a new initiative but
an extension of the existing requirement in the relevant REDA
guidelines. However, this has not been included in the Bill, and
the Council urges that current safeguards be maintained, and
precedent be followed, by incorporating the existing certification
requirement in the Bill.
1.27 Measurements and photographs to be
taken - The requirement allowing photo taking or video making only
applies to unmodified show flats but not modified show flats. The
Council considers that if the developer has chosen to set up a
modified show flat of a residential property, then the same
provisions regarding photos and videos taking should equally
apply.
1.28 Sales arrangements - The Steering
Committee's Report proposed that developers should inform the
Police, the Estate Agents Authority and the enforcement agency, not
less than 7 working days prior to the commencement of sale, of the
details of a sales arrangement, the intention being to ensure an
orderly sales process. However, the Bill has not introduced this
requirement and has left it to guidelines. The Council feels that
this matter should be a requirement for developers to inform the
Police and the entities specified in Schedule 2 of the Bill before
the commencement of a sale.
1.29 Collection of money for reservation of
units - The Council is concerned that collecting money for
reservation purposes before flats are put on sale encourages
speculative activities and entices potential purchasers into making
rash purchasing decisions. In light of the lack of mechanism
available to verify the accuracy of information on reservation
rates, it can be expected that problems of releasing confusing and
possibly misleading signals to the market will remain. The Council
considers that no deposits or any consideration in connection with
the reservation of units should be accepted before the sale of the
respective units has formally commenced.
1.30 Forfeiture of deposit - The Bill
proposes that a preliminary deposit of 5% of the purchase price be
forfeited if a purchaser decides not to proceed with the buying of
a property within 3 working days. The Council maintains its view
that a period of 3 working days after signing of the preliminary
agreement for sale and purchase is not an adequate "cooling off
period". Considering the high price of properties, the forfeiture
amount of 5% of the purchase price is too high for most consumers
and should be lowered.
1.31 Disclosure of information on
transactions - While the Council welcomes the reduction of the lead
time for disclosure of transaction information to 24 hours or one
working day, it queries why there should be a time lag of that
duration. Given that the provision of that information simply
requires a notation on the electronic register, and can be
immediately effected once the transaction has taken place, it would
seem that 24 hours or one working day is an unnecessary period of
delay.
1.32 Definition of related party - The
definition of 'related party' covers a director of the vendor,
immediate family members of a director of the vendor or a manager
of the vendor. The Council considers that the definition of
'related party' should be made sufficiently wide to cover sales to
a vendor's associated corporations.
1.33 Advertising surrounding areas - The
Council proposes that additional requirements should be set out in
the Bill to provide that any forms of promotional materials
provided by developers should be true as to the facts and not give
a misleading impression. Therefore, the developer must have
reasonable grounds to believe at the time of making the relevant
presentation that, for example, a future event will occur as might
be suggested in the materials. A statement to that effect should be
included as to those grounds.
1.34 The Authority - While the Authority
has a general function as described in the Bill to administer and
supervise compliance of the new legislation, the Council considers
that additional provisions should be introduced in the Bill to
clearly specify its functions, namely - to handle complaints, to
undertake direct investigations, and to carry out public education
in respect of buying residential properties.
1.35 Power to issue rules - The Council is
concerned about the effectiveness of adopting a flexible approach
through guidelines, as non-compliance with administrative
guidelines is a feature of the current framework. The Council
proposes that in addition to guidelines, the Authority should be
empowered to make rules as are necessary for the furtherance of any
of its regulatory objectives and the performance of any of its
functions.
1.36 Floor plans - The Bill allows a
developer to provide to the general public a floor plan of any
specified residential property, other than a floor plan made
available in the sales brochure. The Council is concerned that
allowing the provision of additional floor plans can lead to
possible confusion or deception for potential purchasers. If other
floor plans are to be allowed, the Council expects that the same
specific requirements as found in the requirements for sales
brochures should apply.
1.37 Effect of contravention of the
legislation on contract - The Council considers that the Bill
should have clarity on enabling a purchaser to seek an order
voiding an agreement to purchase as a result of an offence under
the deception provisions of the legislation. This provision would
act as a strong disincentive for vendors who may consider engaging
in clearly illegal activity.
Areas requiring
clarification/elaboration
1.38 Changes to sales brochure - The Bill
provides that the developer must, within 3 working days after the
date of the revision, notify in writing a number of entities of
which the Council is one. Clarification is sought as to the role of
the Council in this regard.
1.39 Scope of the online property
information platform - The Bill empowers the Authority to delegate
its power in respect of establishing and maintaining the electronic
database to a public officer or any person whom the Authority
thinks fit. The Council considers that the criteria to be used in
determining "whom the Authority thinks fit" and the details of the
data scope of the electronic database, should be set out in
guidelines and made public for the purpose of ensuring transparency
and accountability.
Matters for post-legislative
review
1.40 The Council proposes that the
Government should set a schedule for future review of the
provisions in the legislation, for example, within five years of
the passage of the legislation. The Council stresses that these are
for future consideration and would not wish to cause of any delay
in the passage of this important legislation.
1.41 Internal floor area - In order not to
delay passage of the Bill, the Council accepts that the issue of
providing internal floor area information could be addressed at a
later stage. If there is any abuse of the measurement method, for
example by including unnecessarily thick walls into the saleable
areas to boost the assumed sizes of flats, the Government should
take proactive action to deter abuse and to consider re-examining
the means of measuring saleable area. The Council suggests that the
Government should stipulate this be reviewed in 3 to 5 years or
such earlier date as the circumstances may require.
1.42 "Cooling off period" - The Council
considers that the issue of introducing a "cooling off right" in
property transactions, i.e. by lowering the monetary threshold for
the forfeiture, should be reviewed by the Authority.
1.43 Mandatory provisions in agreements -
There are other important subject matters to be brought up for
future discussion in regard to provisions in ASPs, such as
providing for the extension of time for completion; a defect
liability period; procedures in the event of winding up of the
developer; and a means of redress.
1.44 Powers of the Authority - The Council
is of the view that the powers of the Authority should be broadened
along the line of other enforcement agencies. In particular, the
Authority, should have powers of entry and search, if it has
"reasonable cause" as defined in the legislation. The Council
suggests that the Authority should have the powers to issue
reprimands and to publish any of its finding of any malpractice or
improper conduct by developers in its website.
Non-legislative matters for further
consideration
1.45 Authority structure - To ensure that
the Authority commands credibility and independence, the Council is
of the view that this enforcement agency should be transformed to
an independent statutory body outside the civil service at the
earliest possible time.
1.46 Viewing of property in completed
development - The Council considers that measures such as spot
check and public education activities should be carried out by the
Authority to ensure regulatory compliance, and that home purchasers
do not sign off their right due to the lack of knowledge that the
developers should provide on-site units for their viewing before
selling the units to them.
1.47 Saleable area description - Consumer
education should be carried out by the Authority, particularly at
the stage of transition to the new legislation, to help members of
the public become accustomed to the use of 'saleable area' and to
educate potential purchasers on how to compare flat prices of
different residential developments using the same basis.
Future Issues
1.48 The draft legislation presented by the
Government is a welcome first step. Future issues that will need to
be addressed, after the current safeguards are firmly settled, are
as follows:
1.49 Statutory protection for all home
purchasers could be provided at all stages of the sales process,
just as there is the need to protect purchasers from unfair trade
practices in the sale of goods and services generally.
1.50 A fully independent redress scheme and
a user-friendly complaints handling procedure could be introduced
for purchasers of all types of residential property, enabling them
to obtain redress in cases of detriment and for the efficient
handling of consumer complaints.
1.51 Competition in the development of
property could be enhanced. There does not seem to be any strong
competition at the developmental stage, in terms of product quality
or innovative design features, to the point where developers are
apparently in a position to "sell anything built". The Council
considers that the Government should examine the means by which the
underlying structural characteristics of the residential property
sector can be improved to bring about a more competitive
marketplace.
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The specific comments that the Council
wants to put forward in relation to the proposed provisions in the
Bill are as follows.
2.
Regulatory Objectives
2.1 The consultation paper puts considerable
emphasis on enhancing information transparency, and achieving a
balance between consumer protection and allowing developers
flexibility to make commercial decisions based on the market
situation.
2.2 The Council accepts that consumers have a
responsibility to look after their own interests. However, for most
consumers, it is highly unlikely that they have the ability or the
resources to fully protect themselves from the various pitfalls
arising in the course of purchase of a property.
2.3 The Council believes that the legislation
should specifically indicate a clear objective that highlights the
imbalance of power between developers and consumers, and the need
for consumer protection, rather than merely provides for various
mechanisms to be employed in the marketing of property, such as
provision of sales brochures, price lists and show flats.
2.4 The Council therefore proposes that the
following regulatory objectives should be stated in the Bill
-
a) promoting fairness, efficiency, competitiveness, transparency
and orderliness in the residential property market;
b) fostering market confidence;
c) providing protection to home purchasers;
d) safeguarding against market malpractices in the residential
property sector; and
e) facilitating the development of a competitive market.
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3.
Application of the Ordinance
Definition of first-hand
sale
3.1 Whilst agreeing that the Bill should cover
the sale of all first-hand completed and uncompleted residential
properties, the Council has concerns with the proposed definition
of first-hand residential properties and the proposed exemptions to
be granted under the Bill.
3.2 The Council considers that sections 4(1) and
4(7) of the Bill are likely to become loopholes for developers to
circumvent the regulation.
No previous agreement
provision
3.3 Section 4(1) provides that the Bill applies
to any residential property in a development situated in Hong Kong
in respect of which property no agreement for sale and purchase has
ever been entered into. The criterion of whether an "agreement for
sale and purchase has ever been entered into" is adopted in the
Bill to define first-hand sale.
3.4 In the Council's view, the 'no previous
agreement' approach adopted is not the best approach as it would be
too narrow to cover all foreseeable scenarios. It would seem easy
to avoid the application of the Bill by creating a scenario where
there has been agreement(s) for sale and purchase in respect of a
residential property.
One person under one
agreement
3.5 Referring to the phrase "one person under one
agreement for sale and purchase" in section 4(7) of the Bill, the
Council considers that if the Government assumes that phrase will
catch properties processed through "a number of persons or
agreements", the assumption is not correct. The use of "one" here
might disapply the related regulations in the Bill.
3.6 For example, developer A might sell a
property to its subsidiaries B and C. In this case, the property
could not be regarded as sold to "one person" or "under one
agreement for sale and purchase". Another scenario is developer A
selling some of the units (i.e., not "en bloc" sale) of a
development to its subsidiary B and B then selling to another
subsidiary C. In such a case, C could sell the units to the public
without complying with the legislation.
Held under lease
3.7 With regard to section 4(3), the Council has
previously pointed out that the term "held under lease" is too
loose as all land is held under government land lease. There is a
need to re-draft the provision to make it clear that lease in the
nature of tenancy is referred to.
Sales to the general public
3.8 In order to further remove uncertainty or
room for manipulation, the Council suggests that the Bill should
specify that it applies to first-hand sale of residential
properties to "the general public", so as to deter developers from
making use of loopholes to sell properties in blocks to selected
individuals or subsidiary companies in order to circumvent
legislative control.
3.9 Whilst it might be regarded by some that the
term 'general public' might be difficult to define, the Council
notes that it is in fact used in sections 15 and 20 of the Bill.
Moreover, guiding principles could be provided to draw up a clear
definition and delineation for easier interpretation in regard to
both provisions.
Exemption for Housing Authority's (HA)
developments
3.10 It has been proposed in section 4(5) of the
Bill that developments constructed by HA should be exempted from
the application of the Bill. The reason given is that Home
Ownership Scheme (HOS) flats are subsidized flats and that HA has
to follow set parameters in disposal of these flats.
3.11 To ensure the protection of all potential
purchasers and procure a level playing field between public and
private vendors, the Council sees no obvious reason why HA
developments should be subject to different legal requirements,
particularly with regard to the provision of inaccurate or
misleading information to potential purchasers.
3.12 The Council considers that first-hand
residential properties sold by HA should not be given a 'broad
brush' exemption status, unless there are certain characteristics
with regard to the HA properties that render the legislation
inapplicable, or where more stringent requirements than are
required under the proposed legislation have already been complied
with.
3.13 The Council is of the view that HA should
not be automatically granted any exemption except where and when
the Government considers that it is in the public interests to do
so and on a case-by-case basis. Any government authorities or
quasi-government authorities should also follow the same law that
promotes good practices and protects citizens and consumers.
Properties sold on an "en bloc"
basis
3.14 The proposed legislation exempts vendors
from requirements with regard to sales brochures, price lists and
show flats, where the properties are sold 'en bloc'. The
consultation paper notes at paragraph 45 that this is because the
purchaser(s) in this case would not be 'general members of the
public'.
3.15 As previously pointed out, the Council is of
the view that the provisions as they are currently drafted are not
able to address the issue of initially selling properties to a
person or a company which are later sold as "second-hand" flats to
individual consumers, for the sake of circumventing the application
of the legislation.
3.16 Notwithstanding the fact that the developer
will be required under the Bill to make the transaction information
public, it is not clear as to how the policy intent (as stated in
the consultation paper) of requiring the person who subsequently
re-sells the properties to individual flat purchasers to observe
all the requirements, would apply under the Bill. Some clarity in
this regard should be made in the Bill.
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4.
Price List
Provision of price list
4.1 The Council appreciates the draft provisions
in Division 3 of Part 2 of the Bill, setting out comprehensive,
detailed and specific requirements that developers have to make
price lists public at least 3 days before the commencement of sale,
as well as to make hard copies of the relevant price lists
available for collection by the general public at the place where
the sale takes place. This should assist in ensuring potential
purchasers have price information available to make informed
decisions.
"Not for sale" units
4.2 Regarding the proposal in section 18 on
setting a minimum number of units to be covered in a price list,
the Council notes that developers are not obliged under the Bill to
offer all the units on the price lists for sale. The Council is
concerned that if no such requirement is imposed, a developer could
sell just a small number of units out of the units on the price
list to test the market and then issue another (revised) price list
for the remaining ones with higher prices.
4.3 For instance, if a developer issues a price
list that covers 50 units but actually only offers a far smaller
number for sale (for example, 10 units), this would give consumers
a confused, if not misinformed, impression of the market.
4.4 The Council considers that information on any
"not for sale" units on a price list would be meaningless to
potential purchasers and therefore should not be included. Although
there is a requirement relating to logistical arrangements that
developers make public, at least 3 days before sale, key
information (including the number of units to be offered for sale)
this does not necessarily serve to ensure that developers would not
withhold sale of units on a price list.
4.5 According to the relevant guideline issued by
the Real Estate Developers Association of Hong Kong (REDA) , the
units to be included in the price list will be the number of units
"put up for sale". Compared with the proposed requirement under the
Bill, the requirement imposed in the REDA guideline provides more
certainty to potential purchasers.
4.6 Notwithstanding that there is an additional
requirement in the Bill that when a vendor sells units they have to
follow the prices shown on the price lists, adjustments to the
prices could be made through issuing revised price lists and the
units concerned could then be sold 3 days subsequent to the issue
of the revised price lists. In other words, by for waiting only 3
days, a vendor could sell the remaining units at the new prices.
Such a practice would exactly replicate the existing questionable
sales tactic of releasing units in small batches.
4.7 The Council is of the view that requiring
developers to publish a price list without requiring them to offer
all the units on the price list for sale, thereby allowing them to
adjust the prices for the remaining units 3 days later would
legitimize the practice of "releasing units in small batches", and
therefore encourages market speculation. The Council urges the
Government to consider this issue further.
4.8 The Council considers that in deciding on
prices for a price list, developers will have taken into account
the costs of building the units and the need for a reasonable rate
of return, before setting prices for the units accordingly. By the
time the units are put up for sale, most of the building costs
should have been under control. The Council would not wish to see a
situation where developers can selectively limit releases and
increase prices where they recognize an "up market" situation. The
Council considers that the issue of a price list should represent a
commitment to a price, and once a price list is published,
developers should honour the commitment and sell all the units at
the prices as specified in the price list. Addressing this concern
would not affect the ability of vendors to address changes in
market condition, as they would be free to lower prices.
4.9 This would be consistent with the legislative
intent that the prescribed minimum number or percentages of units
should be made available for sale to the public.
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5.
Saleable Area
Use of standardized area
definition
5.1 It is proposed in the Bill to use for
presenting area information only "saleable area" the coverage of
which is defined. As a result, gross floor area (GFA) information
should no longer be quoted in a sales brochure or price list.
5.2 The Council supports the proposal to
prescribe the presentation of saleable area in a standardized way
as this serves an important and useful reference for potential
buyers.
5.3 Over the past 30 years, there has not been
any progress made on the standardization of a GFA definition. Given
the lack of a commonly adopted definition for GFA, different
developers could have different way of including common areas in
describing the GFAs of individual flats, leading to a confusing or
misleading situation. Unless and until a standardized GFA
definition is arrived at, the Council believes use of saleable area
in presenting area information is a more preferable option to
subjecting consumers to a wide array of non-standardized GFA
information.
5.4 In any event, the Council considers that unit
price based on GFA would not be a useful tool for potential
purchasers to compare unit prices of flats in different
developments.
5.5 Since GFA has been used in the residential
property market for some time, the Council strongly urges that
safeguards be put in place to avoid market confusion arising from
the change from using GFA to 'saleable area', for price quotation.
Consumer education should be carried out by the proposed Authority,
particularly at the stage of transition to the new legislation, to
help members of the public to become accustomed to the use of
'saleable area' and to educate potential purchasers on how to
compare flat prices of different residential developments using the
same basis.
Internal floor area
5.6 Section 3(2) of the Bill proposes that the
measurement of saleable area is to be taken from the exterior of
the enclosing walls of a residential property.
5.7 The Council is aware from the many dealings
it has had with consumers that many potential purchasers would
regard the calculation of saleable area to include walls and
partitions enclosing and within the properties as inadequate. The
Council firmly believes that consumers would prefer to be informed
of the internal floor area of properties instead.
5.8 In order not to delay passage of the Bill,
the Council accepts that the issue of providing internal floor area
information could be addressed at a later stage. The Council
recommends that the Government sets a timetable for review of the
legislation in due course after its enactment. If there is any
abuse of the measurement method, for example by including
unnecessarily thick walls into the saleable areas to boost the
assumed sizes of flats, the Government should take proactive action
to deter abuse and to consider re-examining the means of measuring
saleable area. The Council suggests that the Government should
stipulate that the situation be reviewed after 3 to 5 years or such
earlier date as the circumstances may require. A provision should
be introduced in the legislation to stipulate that the area
measurement cannot be misleading.
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6.
Sales Brochure
Changes made to sales
brochure
6.1 The Council welcomes the provision in section
8(1) of the Bill that only the vendor may prepare any publication
for a development that is entitled "Sales Brochure". It is
important to bring in this control so as to ensure that potential
purchasers will be able to differentiate between sales brochures
prepared by vendors and promotional materials prepared by estate
agents on their own or on behalf of developers.
6.2 The Bill at section 8(2)(a) provides that if
there is any change to the specified information set out in the
sales brochure for the development, the vendor must, as soon as
practicable after the change, revise the sales brochure to reflect
the change. However, it is not clear as to whether a "revised"
sales brochure would need to follow the 7-day disclosure
requirement as proposed in section 15. Greater clarity should be
made in the Bill in this respect.
6.3 The Council is of the view that making
changes promptly is an important aspect of information gathering,
but making purchasers aware of those changes, and to know what
changes have been made, are equally important. Additional
requirements should be introduced to require developers to reflect
the changes in a prominent manner so that potential purchasers can
be aware of the changes.
6.4 Section 8(2)(b) of the Bill provides that the
developer must, within 3 working days after the date of the
revision, notify in writing each of the entities specified in
Schedule 2 of the revision. The Council has been included as one of
the entities specified in Schedule 2 for purposes of sections
8(2)(b), 15(4)(a) and 20(4)(a). Clarification is sought as to the
role of the Council in this regard. For example, whether there is a
role for the Council to report non-compliance, such as late
delivery or inaccurate information to the Authority under these
sections.
Provision of sales brochure
6.5 Section 15 of the Bill addresses the
circumstances under which a sales brochure is to be provided to
potential purchasers to enable them to have the necessary
information before making purchase decisions.
6.6 The Council fully supports introducing
provisions in the Bill to require that the developer must, at least
7 days before a date of the sale and on a date of the sale, make
hard copies of the sales brochure for the development available for
collection by the general public, at the place where the sale takes
place.
Floor-to-ceiling height
6.7 Section 10(2)(b)(iv) of Part 1 of Schedule 1
requires the provision in the sales brochure of additional
information on the thickness of the floor slab (excluding plaster)
of each residential property. It is assumed that this information
is to enable potential purchasers to assess the ceiling height of a
unit. The Council is of the view that this is insufficient because
the actual ceiling could, depending on the method of construction,
be some distance below the bottom of the floor slab.
6.8 The Council considers that the unambiguous
way to make known the relevant information is for consumers to be
informed of the direct measurement taken from the floor to the
ceiling of a unit ('floor-to-ceiling height'). The Council suggests
that provision of such information be required in the
legislation.
Bilingual information
6.9 It is noted that section 14 of the Bill
requires that where a sales brochure is made available in respect
of a residential property, any information contained in the sales
brochure should have an English version and a Chinese version. It
seems that there is an assumption the two versions will be the
equivalent of each other. However, the Council is aware from
experience that it is not uncommon for differences to exist between
the English and Chinese versions of supposedly the same
document.
6.10 There is no specific guideline in the Bill
to deal with the situation where two versions, on comparison, show
differences in meaning. For the sake of clarity, the Council
suggests that provision be made in the Bill to clearly specify that
the version selected by the purchaser of the property should
prevail for the purpose of determining the meaning and effect of
certain information in a sales brochure. This should not pose any
problem if the English and Chinese versions are in fact equivalent
to each other.
Deeds of Mutual Covenant
(DMC)
6.11 The Council supports the proposed
requirement in section 36 that the full DMC should be uploaded onto
the developers' website to provide potential purchasers with an
overview of building management related issues in the development
concerned.
6.12 The Council considers that important
features of the DMC should be highlighted for ease of reference by
potential purchasers, and notes that paragraph 17 of the
consultation paper remarks that 'salient points' of the DMC should
be provided. However, the Bill only provides, at section 10(2)(n),
that a 'summary' of the DMC be set out.
6.13 To be consistent with the intent of the
legislation (as noted in the consultation paper) the Council
suggests that the Authority should stipulate a template of salient
points to ensure protection of purchasers' interests and proper
compliance. Reference can be drawn from the Securities and Futures
Commission in relation to investment products. There is also a
requirement to use plain and simple language and in both Chinese
and English.
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7.
Show Flats for Uncompleted Development
Setting up of show flat
7.1 The Council welcomes the requirements in
Division 4 of Part 2 concerning unmodified and modified show flats
for uncompleted developments. This should enable potential
purchasers to get accurate depiction of the actual units.
7.2 The Council fully supports the specific
provisions in the Bill requiring that if developers choose to
provide any show flats, an unmodified show flat should be provided
for a particular type/size of units before a modified show flat of
that same type/size of units can be shown.
Ceiling height of show flat
7.3 Sections 23(1)(c) and 24(1)(c) of the Bill
provide that the "floor-to-ceiling" height of a show flat should
not exceed that specified in relation to the residential property
in the sales brochure and the approved building plans. The Council
finds such requirements acceptable but is concerned that the
information printed in the sales brochure may in fact be the
"floor-to-floor" height of a unit. The Council considers it
important to apply the same measurement method across the board,
i.e. whether in a sales brochure or in a show flat.
Certification of the size
7.4 The average purchaser relies on the provision
of show flats to enable them to visualize the actual flats and it
is common for purchasers to make their purchase decisions after
visiting the show flats. Show flats are therefore of more immediate
concern and relevance to their purchasing decisions.
7.5 Under the Bill, developers will be held
accountable for ensuring that the size or dimensions of the show
flats they provide should be the same as those depicted in the
sales brochure. That is, developers should provide show flats of
handover standards.
7.6 In paragraph 9.15 (p) of the Steering
Committee's Report , there is the recommendation of requiring
developers to provide a certificate to be signed by an Authorized
Person (AP) certifying that the enclosing walls containing the
saleable area of the show flat are in accordance with the approved
building plans for deposit with the enforcement agency. This
recommendation is not a new initiative but an extension of the
existing requirement in the relevant REDA guidelines. However, this
has not been included in the Bill.
7.7 The Council considers it is not appropriate
to leave show flats without certification, before they are shown to
potential purchasers. The Council therefore urges that current
safeguards be maintained, and precedent be followed, by
incorporating the existing certification requirement in the
Bill.
Measurements and photographs to be
taken
7.8 The Council welcomes the provision in section
29 of the Bill to clearly specify that the developer must not
restrict any person who views the show flat from taking
measurements, taking photographs or making video recordings, of the
show flat. However, the requirement allowing photo taking or video
making only applies to unmodified show flats but not modified show
flats.
7.9 The Council considers that if the developer
has chosen to set up a modified show flat of a residential
property, then the same provisions regarding photos and videos
taking should equally apply. If there is a concern with
intellectual property regarding the modified show flat, that the
developer should reach agreements with its designated designers
beforehand.
7.10 The Council is of the view that every effort
should be made to eliminate any 'loopholes' which may enable
developers to impose any conditions or restrictions (including but
not limited to registration of personal details and photo-taking)
on potential purchasers who view a show flat and wish to freely
assess whether the flat can meet their needs, and to make
comparisons with other flats in a convenient way.
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8.
Viewing of Property in Completed Development
Viewing of on-site units
8.1 The Council supports the introduction of
provisions in section 31(1) of the Bill to require developers to
make a particular completed residential property available for
viewing by the potential purchaser before the developer can sell
that residential property to the purchaser.
8.2 The Bill provides that if it is not
reasonably practicable for the specified residential property to be
viewed by potential purchasers, the developer can arrange a
comparable unit for viewing, or if it is not possible to do so then
the developer should obtain a written consent from the purchaser
for a viewing to be waived before the developer can sell the
unit.
8.3 Whilst allowing a certain degree of
flexibility for special circumstances may be necessary, the Council
considers that measures such as spot check and public education
activities should be carried out by the Authority to ensure
regulatory compliance, and that home purchasers do not sign off
their right due to the lack of knowledge that the developers should
provide on-site units for their viewing before selling the units to
them.
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9.
Sales Arrangements
Notification on sales
arrangements
9.1 The Council supports the provision in section
34 of the Bill that developers be required to make public, at least
3 days before a date of the sale, information on sales
arrangements; and that this be available for inspection on the
website designated by the developer for the development. The
proposed legislation should therefore work to ensure the sales
process to take place in a systematic and open manner.
9.2 It is proposed in paragraph 11.12(c) of the
Steering Committee's Report proposed that developers should inform
the Police, the Estate Agents Authority and the enforcement agency,
not less than 7 working days prior to the commencement of sale, of
the details of a sales arrangement, the intention being to ensure
an orderly sales process. However, the Bill has not introduced this
requirement.
9.3 The Council feels that this matter should not
be left to guidelines. In order to ensure that orderly sales will
take place, there should be a requirement for developers to inform
the Police and the entities specified in Schedule 2 of the Bill
before the commencement of a sale.
Collection of money for reservation of
units
9.4 Paragraph 34 of the consultation paper seeks
public views on whether collection of money for reservation
purposes should be disallowed either
(i) before the issuance of the price list (as
proposed in section 21 of the Bill) or
(ii) before the commencement of sale.
9.5 The Council is concerned that collecting
money for reservation purposes before flats are put on sale
encourages speculative activities and entices potential purchasers
into making rash purchasing decisions. The ability to reserve
purchases would also make room for the creation of rumours about
how many people have shown their "intention" to buy flats in a
particular development. For example, by making public announcements
on the number of reservation forms received.
9.6 In light of the lack of mechanism available
to verify the accuracy of information on reservation rates, it can
be expected that problems of releasing confusing and possibly
misleading signals to the market will remain. The collection of
money as such could become a marketing tool to boost sales and
prices.
9.7 Furthermore, accepting a reservation of units
with promise of priority status (which has happened before) is of
no effect where multiple deposits are accepted, because the
multiplicity of deposits lessens any notion of exclusivity. In
addition, any exclusive arrangement or priority reservation may put
some potential purchasers at a disadvantaged position and make the
commencement of official sales redundant, because the sales process
has actually started well before the public sales process.
9.8 If some form of reservation is to be allowed,
the Council considers that in order to ensure better sales order
and fairness to all potential purchasers, option (ii) is preferable
to (i) in terms of consumer protection. The Council considers that
no deposits or any consideration in connection with the reservation
of units should be accepted before the sale of the respective units
has formally commenced.
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10.
Conveyancing Procedures and Related Matters
Forfeiture of deposit
10.1 As proposed in section 39 of the Bill, a
preliminary deposit of 5% of the purchase price would be forfeited
if a purchaser decides not to proceed with the buying of a property
within 3 working days after the date on which the preliminary
agreement for sale and purchase has been signed. The proposed
arrangement allows purchasers to withdraw from the transaction at a
cost.
10.2 The consultation paper states that the
reason for setting 5% of the purchase price as the forfeiture
amount is to address a unique Hong Kong situation in that the Hong
Kong property market is relatively volatile and highly speculative.
Thus, a high level of forfeiture is expected to help in preventing
abuse by speculators and deter hasty purchase decisions by
potential purchasers.
10.3 Notwithstanding the benefit of extending the
existing cancellation arrangements under the Consent Scheme to
cover all sales of first-hand residential properties, the Council
maintains its view that a period of 3 working days after signing of
the preliminary agreement for sale and purchase is not an adequate
"cooling off period". Moreover, considering the high price of
properties, the forfeiture amount of 5% of the purchase price is
too high for most consumers and should be lowered. Reference can be
made to Singapore and Australia where the forfeiture amount is
relatively smaller.
10.4 The Council considers that the issue of
introducing a "cooling off right" in property transactions, i.e. by
lowering the monetary threshold for the forfeiture so as to reduce
financial risk and/or extending the time period to give enough time
for home purchasers to consider their course of action, should be
reviewed by the Authority at a later stage, after the Bill has been
enacted.
Mandatory provisions in preliminary agreements
for sale and purchase (PASP) and agreements for sale and purchase
(ASP)
10.5 The Bill stipulates certain major provisions
as mandatory provisions in both a PASP and ASP. The Council
welcomes this. Notwithstanding that these provisions are generally
based on existing practices under the Consent Scheme and those
mandated by the Law Society of Hong Kong, the Council considers
that there are important subject matters to be brought up for
discussion. These provisions should provide for:
-
the extension of time for completion;
-
a defect liability period (DLP);
-
procedures in the event of winding up of the
developer; and
-
a means of redress.
10.6 In particular, there is an issue of concern
associated with late completion of a development. This can be
distressing and may cause severe difficulties for purchasers if
they are advised that the date of completion is not guaranteed and
that actual completion of the development could be sooner or later
than the date intimated by the vendor. Delays of up to several
months are not uncommon, which can result in families needing to
find temporary accommodation at short notice and at their own
expense. There is also the question of whether the standards used
in determining "inclement weather", which is a common ground used
by vendor, are appropriately set.
10.7 Another concern is the extent of
responsibilities for the warranty or guarantee of the building
works, i.e. whether the 6-month defect liability would constitute
adequate time for fixing persistent problems. New properties take
time to bed-in, with problems that are not immediately apparent on
the completion date. Sometimes even if they become known early
after completion, they take months, or longer, to fully emerge.
10.8 Consideration also needs to be given to the
appropriateness of applying the 6-month defect liability period
across the board to all types of residential properties. At
present, it is common practice for stand-alone houses to be
provided with at least a 12-month defect liability period. If the 6
month period is standardized for all properties, purchasers of
stand-alone houses will be disadvantaged compared to what they now
have.
10.9 Yet another concern is that it is not
uncommon for a developer to be subsequently wound up after
completion of a building project. Latent defects may surface after
the winding up of such developers. In such cases, the individual
flat owners may have no recourse to the developer concerned. In
order to protect the consumers, it should be part of the mandatory
provision to include a guarantee by the parent company in situation
where the residential development is undertaken by a special
purpose vehicle (or a shelf company) which has practically no
assets to meet any future claims.
10.10 The Council understands that the above
subject matters are not directly relevant to the Bill under study.
However, the Council would urge the Government to carry out
specific review at a later stage, with a view to providing better
protection for home purchasers. The Council suggests that the
Government should stipulate that a specific review be carried out
after 24 to 36 months or such earlier date as the circumstances may
require.
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11.
Disclosure of Information on Transactions
Lead-time for disclosure
11.1 Information is at the centre of an efficient
market. In particular the timely release of information is
critical. It enables home purchasers to make informed decisions and
helps maintain a level playing field among market participants.
11.2 The Bill proposes, in Division 8 of Part 2,
that developers should compile a single register of transactions
into which information on PASP and ASP have to be entered within 24
hours and 1 working day respectively. It is noted that the
disclosure time for indication of transaction cancellation has been
shortened from 7 days to 4 days.
11.3 While the Council welcomes the reduction of
the lead time for disclosure of this piece of information to 24
hours or one working day, the Council queries why there should be a
time lag of even that duration. Given that the provision of that
information simply requires a notation on the electronic register,
and can be immediately effected once the transaction has taken
place, it would seem that 24 hours or one working day is an
unnecessary period of delay.
Definition of related party
11.4 Section 42(1)(g) of the Bill provides that
the register of transactions for the development should disclose
whether a transaction would involve a person related to the vendor
concerned. The definition of 'related party' covers a director of
the vendor, immediate family members of a director of the vendor or
a manager of the vendor.
11.5 The Council considers that the definition of
'related party' should be made sufficiently wide to cover sales to
a vendor's associated corporations. The term "associate
corporation" as defined in Part 1 of Schedule 1 could be considered
for inclusion into the definition of a 'related party' under the
Bill.
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12.
Advertising
Mandatory advertising
requirements
12.1 In light of the creative and dubious
approaches used in the marketing of residential developments, the
Council fully supports the proposals to tighten control over the
information presented in advertisements for the sale of residential
properties. The proposed requirements on the provision of certain
mandatory information and specific font size requirements in
printed advertisements are especially welcome.
12.2 Requiring that the source of information
contained in an advertisement be indicated would enable consumers
to identify whether an advertisement is made by or on behalf of a
developer, and who is responsible for the accuracy of information
provided in the advertisement. Stating the district and the name of
the street in which the development is situated, as specified in
the outline zoning plan (OZP) or other approved plan, in an
advertisement should also resolve complaints with regard to
inaccurate description of the location of a development. It is to
be expected that if the development is located in Tai Hang
according to an approved plan, it should not be allowed to be
stated as located in Jardine's Lookout, etc.
Additional advertising
issues
12.3 The Council notes that Bill has not
introduced any rules on the use of artistic impressions and
pictures or graphics in advertisements for residential properties.
If improperly used, these can sometimes be the cause of consumer
complaint and allegations of deception.
12.4 If an advertisement contains a picture,
image, drawing or sketch showing an artist's impression of a
development or its surrounding area, the Bill provides that the
advertisement must contain a prominent statement to the effect that
pictures or graphics presented are only the artist's impression of
the development concerned and its surrounding areas, and that the
presentation may not tally exactly with the actual surrounding
areas.
12.5 The Council stresses however that the
statement should not be construed as a disclaimer by developers to
exclude liabilities for disseminating misleading information to
potential purchasers.
Advertising surrounding
areas
12.6 The Council is of the view that if a
developer chooses to make representations in any promotional
materials regarding the surroundings of a property development, it
is doing so to attract consumers by pointing to an attribute of the
development. Therefore:
-
the presentations must be an accurate
representation of the actual environment existing at the time of
making the representations; and
-
if the matter presented relates to a future
event, the developer must have reasonable grounds to believe at the
time of making the relevant presentation that the future event will
occur, and a statement should be included as to those grounds.
12.7 Surrounding areas including existing and
future facilities or developments are of significant concern and
relevance to a purchase decision. They should therefore be set out
clearly by developers, regardless of whether they are in the form
of sales brochures or promotional materials. These representations
are capable of inducing potential purchasers into entering sale and
purchase agreements and are therefore important issues to be
considered under the legislation.
12.8 The Council therefore proposes that
additional requirements, as noted above, should be set out in the
Bill to provide that any forms of promotional materials provided by
developers should be true as to the facts and not give a misleading
impression.
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13.
Misrepresentation and Dissemination of False or Misleading
Information
13.1 The Council fully supports that the proposed
maximum penalty of $5 million and the term of 7 years' imprisonment
are appropriate to provide a deterrent, for an offence in relation
to the provision of misleading and deceptive advertising and
representations.
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14.
Liability of Company Officers for Offence Committed by
Company
14.1 The Council fully supports the proposal in
section 62 of the Bill that those persons who have participated in,
consented to, or connived in the criminal misconduct of the company
which they manage, or those whose recklessness has allowed the
company's criminal conduct to occur, should be criminally liable
under the management liability concept. Given that the activities
of a frontline staff are ultimately the responsibility of managers
and company executives, the provision should ensure that the
principle of 'management responsibility' is maintained.
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15.
The Authority
Setup of an independent body
15.1 The Council fully supports the establishment
of an Authority set out under section 64 of the Bill to administer
the provisions of the legislation, such as dealing with
malpractices in the sale of first-hand residential properties. The
Authority is proposed to be established within the Government
structure to facilitate the early implementation of the
legislation.
15.2 To ensure that the Authority commands
credibility and independence, the Council is of the view that this
enforcement agency should be transformed to an independent
statutory body outside the civil service at the earliest possible
time.
Specific functions
15.3 The Council believes that effective
regulation begins with a clear understanding, on the part of those
being regulated, of the purpose of regulation and the role of the
Authority.
15.4 While the Authority has a general function
as described in the Bill to administer and supervise compliance of
the new legislation, the Council considers that additional
provisions should be introduced in the Bill to clearly specify its
functions, namely -
(i) to handle complaints,
(ii) to undertake direct investigations, and
(iii) to carry out public education in respect of buying
residential properties.
15.5 It is noted that the above-proposed
functions are recommended in the Steering Committee's Report.
15.6 To achieve effective supervision, the
Council urges the Government to regularly police the sales of
residential developments to ensure compliance with the legislation
and more importantly, to maintain public confidence in the
Government's willingness and determination to protect the home
purchasers' interests.
Power to issue rules
15.7 As stated in the Bill, any guideline to be
published by the Authority is not subsidiary legislation. While
this will enable the Authority to react quickly to market changes,
with respect to procedural and logistical arrangements, the Council
is concerned about the effectiveness of adopting a flexible
approach through guidelines, as non-compliance with administrative
guidelines is a feature of the current framework.
15.8 The Council proposes that in addition to
guidelines, the Authority should be empowered to make rules as are
necessary for the furtherance of any of its regulatory objectives
and the performance of any of its functions.
15.9 For example, the Council believes that the
maintenance of order at sales offices would be an important area
where specific rules may need to be set by the Authority and would
be appropriate in order to ensure a fair and orderly sales
environment. Regulations should be made in the Bill to provide that
a contravention of any such rule would constitute an offence.
Scope of the online property information
platform
15.10 The Council welcomes the Government's
acceptance of its earlier recommendation of establishing an
electronic database (online centralized information platform), to
provide comprehensive residential property information for public
access.
15.11 Section 67 of the Bill empowers the
Authority to delegate its power in respect of establishing and
maintaining the electronic database to a public officer or any
person whom the Authority thinks fit. The Council considers that
the criteria to be used in determining "whom the Authority thinks
fit" and the details of the data scope of the electronic database,
should be set out in guidelines and made public for the purpose of
ensuring transparency and accountability.
Proactive investigation
powers
15.12 The current drafting of section 68 of the
Bill provides that the Authority may exercise its investigation
powers if it has "reasonable cause to believe that a person may
have contravened a provision", in which case it can take action to
require a person
-
to produce a record or document;
-
to give answers to questions; or
-
to respond to any written question.
15.13 These powers of the Authority are welcomed.
However, the Council is of the view that the powers of the
Authority should be broadened along the line of other enforcement
agencies. In particular, the Authority, which is in effect an
"enforcement authority" as referred to in the consultation paper,
should have powers of entry and search, if it has "reasonable
cause" as defined in the legislation.
15.14 Providing this power would enable the
Authority to quickly react to any situation where a serious offence
is believed to have been committed, and there is a concern that
evidence related to the offence might be destroyed if the person
concerned is made aware of the Authority's impending
investigation.
15.15 To effectively enforce the new legislation,
the Authority needs to be equipped with a full range of
investigatory powers befitting an enforcement authority, to enable
it to effectively deal with malpractices in the sale of first-hand
residential properties. In addition to existing powers, the Council
suggests that the Authority should be vested with appropriate
disciplinary powers such as the power to issue reprimands, require
the publication of corrective advertising and suspend property
sales to address improper conduct by developers.
15.16 Other than the proposed power to issue
reprimands, the Council suggests that for post-legislative review,
the Authority should also have:
-
the power to publish any of its finding of any
malpractice or improper conduct by developers and/or to publish any
of its investigation reports in respect of the practice and conduct
of the developers in its website; and
-
the disciplinary powers similar to the
disciplinary powers of the professional bodies.
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16.
Other issues
Other miscellaneous
provisions
16.1 It is noted that section 71 of the Bill
allows a developer to provide to the general public a floor plan of
any specified residential properties, other than a floor plan made
available in the sales brochure.
16.2 The requirements to be complied with are
that the floor plan must be drawn to the scale on that plan and any
furniture shown on the floor plan must be drawn to the scale, and
with dimensions of the furniture marked on the floor plan. However,
there is no requirement as to whether any partition wall within a
unit is allowed to be removed from the floor plan (whether or not
the approval of the Building Authority is required for its
removal). The Icon case is one example.
16.3 The Council is concerned that allowing the
provision of additional floor plans would create a loophole for
market manipulation and lead to possible confusion or deception for
potential purchasers. If other floor plans are to be allowed, the
Council expects that the same specific requirements as found in the
requirements for sales brochures should be made.
Effect of contravention of the
legislation on contract
16.4 While a purchaser might have certain common
law rights under contract in regard of voiding an agreement for
sale due to misrepresentation, the Council considers that the Bill
should have clarity on such an important aspect.
16.5 A specific provision, enabling a purchaser
to seek an order voiding an agreement to purchase as a result of an
offence under the deception provisions of the legislation, would
assist purchasers to obtain appropriate redress. The provision
would also act as a strong disincentive for vendors who may
consider engaging in clearly illegal activity.
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17.
Conclusion
17.1 The Council urges that the Bill, with
necessary amendments, be passed as soon as possible. The Council
believes an appropriate regulatory mechanism for this area of
consumer protection has been long overdue.
17.2 There are some issues that remain
unresolved, for example, representations as to 'gross floor area'
and internal floor area, which are major subjects of public
concern. However the Council accepts that no easy resolution can be
reached at this time and they should not be used to delay the
progress of the current legislation.
17.3 Moreover, there are issues, such as the
adequacy of penalty and the adequacy of the investigation power of
the Authority (including how it is set-up), which remain a concern.
The extent to which these may become a major problem will become
apparent after the legislation has come into effect for a period of
time.
17.4 The Council therefore proposes that the
Government should set a schedule for future review of the
provisions, for example, within five years of the passage of the
legislation. The Council would not wish to pose a cause of any
further delay in the passage of this important legislation which
attempts to protect consumers in making what is likely to be the
single most expensive purchase in their lives.
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