New rules crack down on misleading flat marketing

PUBLISHED : Monday, 29 April, 2013, 12:00am
UPDATED : Monday, 29 April, 2013, 4:11am

Misleading marketing of new flats by developers has prompted the government to introduce complex and strict new regulations covering the sale of homes.

The Residential Properties (First-hand Sales) Ordinance takes effect today and aims to shield buyers from dishonest sales practices.

Developers who contravene the regulations are liable to imprisonment for up to seven years and a fine of up to HK$5 million.

Under the ordinance, property agents and the media may also be liable to face criminal charges if they make fraudulent misrepresentations.

To administer the new regulations, oversee sales practices and check on show flats and the information contained in sales brochures, the Transport and Housing Bureau has set up the Sales of First-hand Residential Properties Authority.

The new ordinance spells out rigid requirements including the size of typeface used in brochures.

Developers also have to state the relationship between the parties involved in the development.

Developers are prohibited under the new regulations from mentioning the gross floor area of new flats in their sales brochures and price lists. They may mention the saleable area and price of the flat in terms of saleable area only. The regulations define saleable area as the internal flat space, balcony, utility platform and verandah.

In the past, developers inflated flat sizes by including common areas and marketing this size as the gross floor area of the flats being sold.

Another change is that developers may no longer refer to "intended" prices.

"Previously, developers liked to express high 'intended' prices before they launched their projects. They would then launch the project at lower prices which helped them to create the idea in the buyers' minds that the prices were now more attractive or had been reduced," a manager at a property agency said.

Developers have complained about some of the new rules including a provision that home-seekers should be able to access sales brochures around the clock.

"We have no choice but to hire security guards to work overnight to ensure potential buyers can come in at anytime," a developer said.

It is also a stipulation under the new ordinance that the sales brochure of a new property is required to show every street, building, facility or structure that is situated within 250 metres of the project. To fulfil this requirement, developers are required to make "field trips" to ascertain the use of the surrounding buildings, facilities, and structures to update the information every three months.