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Hong Kong housing

Judge declares developer ignorance no defence in second real estate malpractice case

No 1 Team Limited slapped with HK$720,000 fine as magistrate finds the company guilty of 19 charges relating to breaches of residential properties ordinance

PUBLISHED : Wednesday, 03 August, 2016, 5:41pm
UPDATED : Thursday, 04 August, 2016, 9:57am

A developer was handed a HK$720,000 fine in court on Wednesday after what was just the second successful prosecution since tough new laws were introduced targeting real estate sales malpractice.

After pleading innocence at an earlier hearing, No 1 Team Limited, a subsidiary of Tung Chun Soy Sauce, was found guilty of 19 charges relating to breaches of the Residential Properties (First-hand Sales) Ordinance by Kwun Tong magistrate Peony Wong Nga-yan.

Wong found the company had not taken precautions or demonstrated due diligence when it failed to provide price lists or sales brochures to buyers and the Sale of First-hand Residential Authority while selling flats at Full Art Court, Sham Shui Po in 2014.

The finding came after Oriented Style Limited was fined HK$200,000 last month for a string of malpractices, including omissions in its sales brochures about the presence of public toilets and a power plant near the housing development it had sold.

The Residential Properties (First-hand Sales) Ordinance, which came into effect in 2013, prohibits misrepresentations and the dissemination of false or misleading information by developers. It demands that developers provide sales brochures and price lists, and sets clear guidelines around information provision during the sale of new residential properties.

Wong said the intent of the law was to provide buyers with more information not commonly available during site visits.

One of the points of contention raised during the earlier trial was that the Sham Shui Po flats were built a decade ago, but that not every flat had been leased before, calling into doubt whether the new law regulating first-hand properties should even apply.

The court heard that although No 1 Team had sought advice from a solicitor, who said the flats could be sold, the firm did not specifically raise attention to issues arising from the ordinance. Only general details were conveyed via a phone call and an email exchange before the solicitor reached the conclusion.

The magistrate said given Hong Kong’s lack of space and expensive housing, “it is not too much to ask that developers take up this responsibility”.

Hong Kong housing sales law misses the mark

Wong said the new law had been heavily promoted since its introduction, and it was not infeasible for the firm to seek advice from the relevant authorities.

“Ignorance is no defence,” Wong said.

She stopped short of imposing an even harsher penalty, saying that the firm had not misled buyers.

A representative from the firm declined to comment.

A spokesman said the authority had received 195 complaints since the ordinance came into effect, with 154 related to the ordinance. “The [authority] looks into every complaint case and carries out investigations when necessary,” he said.

The Consumer Council said the court decision came as a warning, after a review it conducted in 2014 found false demand had been created at some property projects, with agents resorting to issuing “non-official” brochures.

The consumer watchdog reminded developers that it was their responsibility to provide buyers with clear and comprehensive information. Consumers were advised to carefully scan contracts and relevant documents and make site visits to ensure what they were buying matched the information with which they were provided, a council spokesman said.