image

Focus

Nothing to see here: Cheung Kong stands by 'no viewing' policy for tiny Hong Kong flats

Is it legal for Cheung Kong to make would-be buyers of flats at Mont Vert agree they can't view them? And with 8,000 vying for one, does it matter?

PUBLISHED : Thursday, 24 July, 2014, 10:55pm
UPDATED : Friday, 25 July, 2014, 11:20am

Netty Cheung was overjoyed when she first heard the news of the cut-price sale of new flats at Mont Vert, a housing development in Tai Po.

"A new flat in Hong Kong that costs less than HK$2 million? It must be a miracle," said the retiree in her mid-60s. She lives alone in a 300 sq ft flat in Yau Ma Tei for HK$10,000 a month.

"If I could get one of those cheap flats, there is no worry about my landlord increasing rents every two years."

But the developer, Cheung Kong (Holdings), has made a controversial requirement for buyers: they must sign agreements promising to buy without personally inspecting the flats before closing on the deal.

Officials, lawmakers, academics and property analysts condemned the demand, with some accusing the company of violating a law designed to prevent such requests.

Cheung Kong said in a statement that "the personal safety of those prospective buyers will be endangered" if flats ready in the first phase were opened for viewing while there was ongoing construction on the second phase.

A grave site is normally located in an area with good fung shui
JUSTIN CHIU, CHEUNG KONG

The Sales of First-hand Residential Properties Authority (SRPA), which regulates real-estate sales practices - including checking display flats and information in sales brochures - has criticised the company's sales arrangement as "a serious departure" from the spirit of legislation protecting home buyers.

The demand could be "seriously harming the interests of the prospective purchasers", the authority said. The SRPA was set up last year to enforce the Residential Properties (First-hand Sales) ordinance.

Cheung Kong, chaired by Li Ka-shing, Asia's richest man, is a Hong Kong-listed company that is the city's largest developer by market value. The company has insisted that it is not breaching the law and plans to proceed with a sale of flats on Saturday. More than 8,000 prospective buyers have signed the "no viewing" agreement to be eligible for the 492 flats available.

A spokeswoman from the SRPA refused to say if there were plans to seek legal action to stop the no-viewing agreement. She said the authority had asked Cheung Kong for more information on its sales arrangement.

Some lawmakers are urging the government to halt the Mont Vert sales.

"In this circumstance, Cheung Kong should not offer the project for sale. The authority should take legal action once it finds [vendors] in breach of the rule," said Democratic Party lawmaker Albert Ho Chun-yan, a practising solicitor. "It is a serious matter and I will approach the authority to urge a probe."

The spokeswoman said the authority could not order a developer to suspend sales if a violation occurred, but could impose penalties for violating the property viewing requirements. The maximum penalty is HK$500,000 and a possible jail term.

"If we've found a serious breach of the ordinance, we will refer [the matter] to the Department of Justice to take further action," she said.

Under Section 44 of the residential properties ordinance, which took effect in April of last year, developers of a newly completed project are required to make every flat - or a comparable flat - available for viewing by potential buyers. If a developer is unable to do this, it needs to seek written consent from prospective buyers. The legislation was introduced in response to misleading marketing by developers.

In May, the authority said it had opened an investigation into the tactics of private developer Tung Chun Group, which was selling flats in Full Act Court in Sham Shui Po. The authority would not release further details.

Mont Vert, at 9 Fung Yuen Road in Tai Po, first drew the public's attention because of the size of some of its units. Some studios will be as small as 177 sq ft.

The development is close to a 200-year-old grave site belonging to the Mak family, whose descendents live in Fung Yuen village. Project brochures point out the graves' existence.

"A grave site is normally located in an area with good fung shui. If you do not do anything bad, there is nothing to worry about," said Justin Chiu Kwok-hung, the company's executive director, while offering tours to the press at the weekend.

In recent days, Cheung Kong launched a public-relations campaign, inviting the media to tour the project site. The company has denied press requests to see flats.

Some circumstances exist that would prevent a developer from showing flats for sale, such as if a flood or landslide made access unsafe, said Lawrence Poon Wing-cheung, a City University lecturer in building science and technology, and an adviser on the city ordinance's language.

In such a case, the developer could simply postpone sales or stop construction to allow prospective buyers to view flats safely, he said. "It is feasible for the developer to make special arrangements if it insists on proceeding with the sale [on Saturday]," he said. "The construction work would just temporarily stop for one week.

"Cheung Kong's explanation is unconvincing," he added.

Last year, another Cheung Kong project invited government scrutiny.

Critics accused the developer of using a legal loophole that allowed prospective buyers at its Apex Horizon project to avoid paying a stamp duty aimed at cooling the property market. The loophole was that the duty does not apply to hotel rooms.

The Securities and Futures Commission found that the sales were a collective investment scheme - a project involving a group of investors.

Such transactions require commission approval to ensure that investors realise the requirements and risks before laying down money.

An agreement between the commission and Cheung Kong cancelled all sales and refunded deposits to 360 buyers.

Cheung Kong executive director Chiu, who showed media the Mont Vert phase one and phase two developments last weekend, defended the no-viewing policy.

He said that with work still continuing on phase two of the project, which shared a common entrance with phase one, the hundreds of prospective buyers wanting to view flats would be at risk from heavy vehicles.

There was little need to show the studio flat, he added. "There is nothing to see, as it is small anyway."

Cheung, the retiree, said she remained interested in buying a studio unit - even if she can't see the place.

"I have no choice but to accept not seeing the flat," she said. "It's hard to buy a unit for below HK$2 million in Hong Kong."


By the numbers

Developer: Cheung Kong (Holdings)

On sale: 492 flats in phase one. No details yet on phase two

Unit size for sale: 194 sq ft studio to 945 sq ft three-bedroom

Micro spaces: the smallest flats, 177 sq ft, aren’t included in the first
sales round

Storeys: 22 to 26 in six blocks

Total number of flats: 1,071

Estimated land cost per square foot : HK$2,800 per square foot

Price per square foot: HK$8,128 to HK$11,162

Unit price: HK$1.94 million to HK$10.24 million (before discount)

Discounts: 5 per cent for all buyers

3.25 per cent for cash payments

3 per cent for contracts signed by Aug. 31

3.75 per cent to offset double stamp duty

Unit price after maximum 15 per cent discount: HK$1.65 million to HK$8.7 million

Second mortgage: up to 30 per cent of the purchase price, offered by Winchesto Finance Company on the condition that applicants seek consent from the first mortgagee bank.

Cannot exceed 80 per cent of transaction price.

Interest rate for second mortgage: Hibor plus 2.25 to 2.75 per cent, or 1.5 per cent below prime rate, now 5.25 per cent.

Requirement to buy: prospective buyers must submit a HK$100,000 cheque and sign an agreement not to see an actual unit before purchase.

Interior finishings: natural stone walls and floors; ceramic tile; plywood kitchen cabinetry; natural stone counter tops; gas hobs; gas water heaters; washing machine connections.

Number of prospective buyers as of July 24: more than 8,000

SOURCE: CHEUNG KONG