• Tue
  • Dec 23, 2014
  • Updated: 3:27am
NewsHong Kong
PROPERTY

Hotel development's buyers undeterred by 'one-sided' deals

Investors undeterred by developer's contractual clauses and a law firm's warnings that it will not be held responsible for any of their losses

PUBLISHED : Tuesday, 26 February, 2013, 12:00am
UPDATED : Tuesday, 26 February, 2013, 4:34am

About 80 per cent of the buyers in Cheung Kong's controversial hotel development in Kwai Chung have confirmed their deals, even though the contract terms have been deemed "one-sided" by some lawyers.

This emerged as the government was studying the legality of the sales, under which buyers can avoid stamp duties introduced to cool the property market.

A spokeswoman for the property giant said last night that some buyers of units in the 360-unit Apex Horizon hotel had decided to sign the formal agreement for sales and purchase before today's deadline to do so.

Government officials will discuss the issue with Legco's development panel today.

It is the first time in Hong Kong that a developer has sold hotel suites, classified as commercial property, individually, allowing buyers to escape stamp duty. Some agents are also reported to have told buyers they can get around the law and live in the units themselves, while the hotel will return the rent they pay to comply with licence requirements.

As two buyers who had paid deposits for the hotel suites approached police for help on Sunday, a document named "salient points of Hotel Operation Agreement", attached to the provisional contracts they signed, was revealed to media. The agreement will be included in the formal contract.

While the developer stipulates in the agreement that the hotel is not for private residential use, it has asked buyers to agree to several issues which would favour itself and gives itself plenty of discretion in the hotel management.

The hotel unit buyer has to "[agree] that the hotel operator shall owe no duty to any of the owners to apply for, obtain, renew and/or maintain all or any permits", including the hotel licence after it expires in 2018.

The operator will also be entitled to determine the priority for allocating the rooms to guests, meaning the buyer cannot challenge the operator's decision even though he or she wants to lease it to friends.

The buyer has to acknowledge there is no guarantee the room will be leased to any guest or whether there will be any profit.

University of Hong Kong assistant professor of law Eric Cheung Tat-ming said that the agreement appeared to be "one-sided and in favour of the operator".

"It gives the operator a lot of discretion and almost no liability," Cheung said.

If buyers could prove that they were misled, by agents, for example, into thinking they had more control over the unit than they actually did, and had barely time to read the documents, they could argue for removal of the unfair terms, Cheung added.

Solicitor-lawmaker James To Kun-sun said there was a loophole in the agreement that could allow buyers to keep the flat for their own use, by making use of a clause in the hotel-operation agreement that said it was up to the buyer to instruct the operator to set the room rate and charges.

"The buyer can set his room rate at HK$100,000 and no one will compete with him," To said.

The controversial sales have led to one law firm, one of three suggested to buyers by Cheung Kong, to issue a disclaimer stating that the firm will not be held liable should the buyer suffer any losses from the transaction.

Ambrose Lam San-keung, a solicitor specialising in property transactions, said this was not a common practice, and was used only with clients "who can afford decisions possibly to their detriment".

 

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This article is now closed to comments

donniemcm
Such an irony : They can cancel the contract by proving that the agent mislead them but guess that without written proof they are forced to signed.
Then they will whine at CY.
Devil has succeed in casting Greed to them.
joyalsofi
The current hotel occupancy tax rate is 0% but that amount could be changed by the government. Who would then be liable for the occupancy tax of these units and if someone set the rate at $100,000 in order to keep others out, wouldn't they be liable to pay tax on $100,000 if they stay there themselves? Seems like this is a step the government could take to deter future such sales not to mention another source of revenue that would have the effect of 'widening the tax base' that didn't fall solely on the least able to afford it.
SpeakFreely
I would doubt any of these buyers are first time home owner and mostly are investors. They are taking the chance with making money but also expose to risk. That's is a fair game. If they don't like the contract they can walk out too. Reporting to police is a waste of time and public resource.
mkq786
Surely, all these are speculators or greedy investors. Problem is tomorrow same people wud be on street if something goes wrong..........then who to blame ........govt or these people who want to make quick buck out of this......
mcheung
These greedy investors and speculators will be the first one to whine and protest if something goes wrong, blaming the government did not do enough to protect them, just like when the housing bubble burst back in the SARS era and they were in negative equity.
likingming
Choose the bad from the worse. Believe KS lee rather than CY.

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