Common rules for floor area fail to surface

One of the most marked anomalies of the Hong Kong real estate market must be the lack of a standard definition for gross floor area.

In Hong Kong, each developer or landlord can have their own definition.

'In many cases, they include the podium and the garden or footpath with the size of the flat or office,' one agent said.

So, when you go in search of your dream home or office, a browse through the sales literature, with prices based on gross floor area, tells you little about the amount of space actually available.

Ask any developer, landlord or even the ubiquitous man on the street for a definition of gross floor area and they will most likely shake their head, think for a while and talk about lift lobbies and the like.

Some might even confess they have no idea how the developer or landlord establishes the gross floor area.

It is of little or no help checking building plans at the Buildings Department because the gross floor area in approved plans could be different from the area calculated by developers when they sell the properties.

Analysts said the definition in the building ordinance was not applied to property sales.

Most agents said the lack of a common definition had led to myriad problems.

In some cases, people buying according to a developer's area specifications found they had bought considerably less living space than had been advertised.

For builders redeveloping older residential premises on small sites, some valuation experts said they had seen buildings with efficiency ratings of below 50 per cent in the worst cases reported.

Nobody appears to know exactly why developers and the Government have never come up with a workable definition of gross floor area for property sales.

As a result, situations where gross floor area has no relation to actual living space 'is a tradition with the Hong Kong market', one valuer said.

'There were few rules concerning the selling of property or what constituted the saleable area or net area,' he said.

Disagreements over what constituted common areas and how the share of these areas should be allocated to individual units of a development were cited as a hurdle.

For instance, most developers counted a bay window as part of the gross floor area of a unit on sale, but a bay window was not included in the floor area of an approved plan, analysts said.

In the past few years, thanks to complaints from the public and calls from the Law Reform Commission and the Consumer Council, things are beginning to change.

While developers still sell flats based on the gross floor area, sales literature for uncompleted flats in the majority of today's residential developments under the Government's consent scheme, must also include the saleable area.

Thankfully, this saleable area does have a common definition which allows the buyer to compare one development to another.

Developers agree the saleable area 'means the floor area exclusively allocated to the unit including balconies, but excluding common areas such as stairs, lift shafts, lobbies and communal toilets.

Estate agents said this definition allowed themselves and buyers to compare different sized flats in different locations on a 'like-by-like basis'.

However, landlords redeveloping older sites in Hong Kong which are not covered by the government consent scheme need not provide saleable area in the sales literature.

In a report published in April last year, the Land Reform Commission recommended the Government standardise in law the term gross floor area and make the inclusion of saleable area mandatory in sales brochures.

It also proposed there should be criminal sanctions, from fines to imprisonment, for regulation breaches.

The commission began deliberations on the problem in November 1992. The Government has decided to adopt most of its recommendations and hopes to table the legislation to the Legislative Council next year, which is expected to address the failure to use a standard gross floor area measure.

The commission said: 'The definition of gross floor area should exclude such common areas as air-conditioning and mechanical rooms, refuse chambers and pump rooms, transformer rooms, water tanks, lift machine rooms, lifts and staircases passing through car parking floors, but include clubhouses, management offices and a caretaker room.' As the initial focus of the commission's report was on residential property, it is unclear whether the new legislation would extend to other sectors.

In the office sector, for instance, it is again up to the discretion of the developer to decide on the gross floor area.

'It is only when leasing that people talk about usable area,' another valuation expert said.

A number of agents said most grade A office buildings in Hong Kong were about 70 to 80 per cent efficient with some developers including the footpath in the gross floor area.

One of the more bizarre features of the local office market happens when a floor is subdivided and then sold.

The gross floor area of the sections could be exaggerated to eventually add up to more than the originally stated floor area, analysts said.

Agents said this was 'normal' practice and arose from landlords simply 'inventing' the floor area of the subdivided floors to suit their economic interests.

While most analysts expected the new legislation on floor measurement to enhance consumer protection in property sales, some argued it represented a further intervention by the Government.

They said home-buyers were now more aware and informed of the properties on offer and the 'shrunk flat' syndrome was no longer popular or a serious problem.

Even Consumer Council officials said consumers today were smarter and that the saleable area information contained in sales literature was enough for people to do comparison shopping.

By the same token, many agents still said home-buyers should be diligent in checking the efficiency of developments they were looking at.

It is believed the new Estate Agents Bill will make it mandatory for agents to measure the space they are selling or leasing.

A radical proposal floating in the industry is to have an overhaul of the property sales tradition in Hong Kong by pricing on the basis of saleable area instead of gross area.

Some analysts said saleable area was the most meaningful definition to go by but such a move would possibly face strong resistance from the public, estate agents and developers.

One analyst said selling properties on the basis of gross floor area was a long-standing habit in the territory and would be difficult to change.

'It could be like the change from the imperial system to the metric system in measurement,' he said.