The government says it will "follow up" on Cheung Kong's sales of hotel suites, but experts say it will be difficult to check if buyers are breaking hotel regulations by treating their units as homes.
Chief Secretary Carrie Lam Cheng Yuet-ngor issued the warning yesterday before leaving for Beijing, and Chief Executive Leung Chun-ying is said to be closely monitoring the situation.
The government is studying the potential risk faced by buyers, for instance having to share renovation costs for the hotel. They may also have to pay a hefty premium when the land lease of the hotel expires.
Cheung Kong has exploited a legal loophole, not plugged until July 2003, that allows hotels to be sold in parts. It sold all 360 units in the Apex Horizon hotel in Kwai Chung on Monday and Tuesday. The units are classified as commercial properties so buyers do not have to pay stamp duty, including the 15 per cent special duty introduced on non-locals last year to cool the market.
Secretary for Development Paul Chan Mo-po said on Tuesday the government would take over the site if the designated hotel space was not maintained. Last night he said the Lands Department had written to the developer requesting information to ensure the premises would still be used as a hotel.
The executive director of the Hong Kong Hotels Association, James Lu Shien-hwai, said the hotel's licence could be breached if the rooms were occupied by the buyers, turning them into "residential use".
But he said inspectors would face a thankless task conducting daily checks on the identity of each occupant.
Civic Party lawmaker Dennis Kwok Wing-hang, a barrister, agreed. He said even if the government had the authority to conduct such checks, it would take enormous manpower to do so.
The Home Affairs Department said last night it had already sent inspectors to the hotel to find out if it was maintaining its operation as a hotel.
Civic Party legislator and barrister Alan Leong Kah-kit said he would ask the government to explain the situation in a meeting of the Legislative Council's development panel on Tuesday.
Cheung Kong tried to ease the concerns of buyers by saying the company spent more than a year studying the land lease and deed of mutual covenant of Apex Horizon, as well as the Hotel and Guesthouse Accommodation Ordinance on how to manage the property before putting the units on sale.
Cheung Kong's executive director Justin Chiu Kwok-hung said: "We've spent more than one year preparing for the sale, even before the chief executive was elected. It's legitimate to sell the hotel units … everyone knows it's a hotel, not a residential property."
He said the developer had no plans to sell other hotels as it had other projects in the pipeline.
According to the ordinance, guests can stay in hotels for "a period of less than 28 continuous days".
Lu, however, said it was lawful for customers to stay for longer than this, and in one instance an expatriate lived in a five-star hotel in the city for 20 years.
Cheung Kong said it raised HK$1.4 billion from the sales and that about 95 per cent of buyers were Hongkongers.
Andy Jim, a manager at Ricacorp Properties, said about 50 of the flats were available in the secondary market. A two-bedroom unit was resold for HK$3.7 million after the buyer bought it for about HK$3.4 million. "About 90 per cent of the buyers are using it for investment, while more than 70 per cent are looking to speculate. There will be more flats released for re-sale," Jim said.
Other developers including Sun Hung Kai Properties and Henderson Land said they had no plans to follow suit.