Purchasing a property, being a significant consumption transaction in one's life, has always been of major concern. Although the Residential Properties (First-hand Sales) Ordinance (the Ordinance) has come into effect for 3.5 years, the Consumer Council has continued to receive complaints against the sales of first-hand properties from time to time. After reviewing the Ordinance, it is found that protection to consumers remains to have room for improvement, especially in the arrangements arising from delayed completion. Moreover, the Council calls for the authority to monitor disclosure on unconfirmed information and related sales tactics to prevent the possibility of misleading consumers, and to regulate developers in reinforcing the disclosure of their responsibilities in the property management and arrangements of common facilities and services.
After purchasing a property, home buyers naturally wish to move in at the expected delivery date. If the possession date has to be delayed, consumers may have to pay extra rent, leading to significant disruption to their budgets. The existing Ordinance allows the estimated completion date for a development specified by the developer in the sales brochure and advertisements be extended if it is granted by an authorised person (AP) after taking into account factors of special circumstances (such as strikes, Act of God, inclement weather, etc.). As the Ordinance does not stipulate the number of allowance nor limitations, completion date could be delayed time and again due to these special circumstances. If the developer fails to complete the development within a period of 6 months from the extended date, the home buyer can rescind the Agreement for Sale and Purchase and be repaid by the developer with payment and interest.
The Council is of the view that, in face of delayed delivery of the development and the extra expenditure amounting to tens to hundreds of thousand dollars, consumers are placed in a disadvantageous position as they can do nothing but wait for the vacant possession date announced by the developer, reflecting insufficient protection to consumers in the Ordinance.
The Council suggests the authority to make reference to overseas examples. For instance, in Victoria, Australia, the local government requires developers to take all circumstances into consideration which may contribute to delayed completion when setting a completion date. In the event of a delay, purchasers have the rights to reject the extension request and let the dispute resolution mechanism to handle the matter.
In Singapore, developers are requested to set a delivery date after taking into account all possible circumstances that might cause postponement. In addition, should developers fail to deliver, penalty interest shall be paid to the consumer at the rate of 10% per annum on the price or deposit paid by the consumer calculated from the day following the original vacant possession date until the actual vacant possession date. Based on the same property price, the amount of compensation in Singapore is higher than that in Hong Kong which is calculated at the best lending rate plus 2% per annum (7% in total at present).
In terms of sales tactics, developers like to promote their development by marketing its surrounding facilities and environment, and play promotional videos or display models projecting the development of the district. However, planning of land use is beyond developers' control and they should be mindful in disclosing information on a development in flux as disputes may arise if there is any amendment occurs.
Consumers should understand that pre-sale period of uncompleted properties can be as long as 30 months. If the Government changes land use near the property during this period, the developer's promotion would be differed from the actual development. No matter before or after purchasing a property, consumers are advised to pay attention to the Town Planning Board's outline zoning plan and information disclosed by the District Council, get to know the most updated plan for the surroundings of a development site.
In terms of property facilities, although the Ordinance stipulates developers to disclose in their sales brochures the information on, among other things, property management, layout of common facilities, public facilities and public open spaces, there are no specific requirements on disclosing the details of the specific design of individual facility, commencement date and usage. The Ordinance also neither requires developers to provide details of transport facilities such as shuttle bus for the housing estate during a period nor the estimated management fees that prospective purchasers should pay.
The Council believes the authority can make reference to the code of conduct adopted in the United Kingdom where developers should set out after-sales services in detail, as well as state clearly in the Deed of Mutual Covenant the property's facilities and its management and operation arrangements, clarify the rights and responsibilities between developers and property management companies.
The Ordinance came into full effect in April, 2013. It aims to enhance the transparency and fairness in the sales of first-hand residential properties, and strengthen consumer protection. For instance, the requirement under the Ordinance which stipulates that area of all first-hand residential properties must be presented in terms of "saleable area" has enabled purchasers to compare the area and price of different properties on an objective basis. The Council advises consumers, before purchasing a first-hand residential property, apart from gauging the basic information of a residential property, they should also pay attention to the following issues:
- Regardless of purchasing completed or uncompleted residential property, consumers should study the planning of a property's surrounding areas through reliable channels and do not solely rely on advertisements or promotions;
- Take initiative to grasp the important information related to the unfulfilled commitments of the property such as its facilities, feeder transport services, management fees and completion date to avoid any loss;
- Understand regulations and developer's share in the Deed of Mutual Covenant as this will determine whether Owner's Corporation and Owners' Committee can be formed to perform a function of protecting owners' rights.
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