A proposed new law will punish developers with a fine of up to HK$500,000 if they receive deposits from flat buyers before announcing prices - a practice long criticised as a ploy to create false impressions of sales and prices.
The bill, which will be made available for public consultation before becoming law in 2013, proposes two possible points at which deposits could be collected: three days before the sales launch when the initial price list for a development is released, or the first day of sales.
'The law will specify a clear date before which developers cannot receive any deposits from buyers,' a spokeswoman for the Transport and Housing Bureau yesterday told a media briefing on the proposed law.
Although current guidelines forbid developers from receiving deposits before announcing prices, some agents still do this on the sly, with or without the developers' knowledge. The practice is intended to test market demand. However, because of the lack of transparency over how many cheques are cashed and who pays, the tactic has also helped create rumours and false impressions about flats' popularity and prices.
Lawrence Poon Wing-cheung, representing the Institute of Surveyors in the government-steering committee that produced the bill, said the latter option for collecting deposits was better, 'because once a sale begins, all transactions will have to be disclosed within 24 hours. It doesn't matter how many cheques you boast you have collected.'
The head of a leading property agency said the new rules would make agents more cautious. 'The new regulations will inevitably slow flat sales and bring us less business. We will also be careful and won't [accept work] from developers who want us to take the legal risk.'
The bill is scheduled to be scrutinised and passed by lawmakers by next July. Other aspects of the bill include a maximum penalty of HK$5 million and seven years' jail for developers who give false or misleading information. The bill covers all levels of developers' staff, including directors, managers and secretaries.
Leung Chi-kin, chairman of the executive committee of the Real Estate Developers Association, said yesterday that he had no objections after expressing caution two weeks ago about the proposed jail penalty.
Lee Wing-tat, a member of the steering committee, said a developer could avoid legal sanctions by appointing low-ranked staff as directors of a subsidiary that oversees the developments.
The bill also requires developers to release a price list three days and sales brochures seven days ahead of the sales; to end the quotation of gross floor areas when describing flat sizes, as it includes common areas; to include all special offers, such as gifts and bonuses, in the price list; to set up an unmodified show flat; and to give a three-day cooling-off period.
Ambrose Ho Pui-him, the vice-chairman of the Consumer Council, said the percentage of the forfeiture amount during the cooling-off period would fall to below five per cent of the purchase price.
He said that in Singapore the amount was 1.25 per cent of the purchase price.