The Lands Department has threatened to take legal action if it finds buyers of Cheung Kong's controversial hotel project living in the units.
The warning came as 95 per cent of the investors in the 360-room Apex Horizon hotel had signed, or arranged to sign, the sales contract yesterday, according to the property giant. The rest have asked for a postponement.
Lands director Bernadette Linn Hon-ho said: "Anyone trying to hide the fact that they keep the hotel rooms for private residential use, whether it's the developer or buyers ... don't think we will do nothing.
"We won't rule out taking some cases to the court."
She added that officers would be dispatched to patrol the hotel to check for any misuse.
Secretary for Development Paul Chan Mo-po told a Legislative Council panel yesterday that his team was seeking legal advice.
"The matter at hand is not the sale of hotel room units per se, as this is not disallowed under the lease, but whether the seller clearly told the buyers what exactly they were buying, and whether the rooms would be used for hotel purposes after the sale," he said.
It is the first time in Hong Kong a developer has sold hotel suites, classified as commercial property, individually, allowing buyers to escape stamp duty.
Some purchasers have claimed agents had told them they could live in the units, and that the hotel would return their rent to comply with licence requirements.
But the idea that buyers could lease the hotel rooms back to themselves was "problematic", Linn said.
Furthermore, if a buyer rented his room to his children to live in, this would not be regarded as hotel use.
There is no black-and-white definition for self-use, giving the government flexibility in interpreting the law, she added.
Meanwhile, papers issued to the Legco panel revealed the developer sold the first unit as a test case in December, before undertaking a high-profile sales campaign this month. That initial sale came to officials' attention in January.
Lawmaker Frederick Fung Kin-kee criticised officials for failing to take action earlier to stop buyers being confused.
Linn said her department had reminded the developer in January that the buyers could not keep the units for private residential use.
"We did not take the case public because at that time there was no evidence of abuse or of anyone being misled," she said.
Officials were unable to tell the panel how many other hotels could be sold in a similar way and what policy change could be enacted to prevent such sales.
A receptionist at Apex Horizon yesterday said all rooms were fully occupied, and that it would take no further reservations.