Sales of hundreds of public flats could be at risk because a law firm used the wrong mortgage documents, it has emerged. The Housing Department, which oversees the sales, has written to the firm warning that it is responsible for correcting the error. The department says the Land Registry may not accept the documents, putting the mortgages in jeopardy. The homes affected are part of a scheme to sell public housing flats to sitting tenants. It is believed hundreds of home-buyers are involved because each law firm handles a large volume of transactions and usually uses a standard form. Some solicitors claim such 'technical mistakes' are not surprising, as law firms have slashed costs to be able to offer low prices to win conveyancing contracts. It is understood the firm charged about $2,000 for each transaction - $1,000 less than the market price during the property boom. The department letter sent to the firm, and seen by the South China Morning Post, says: 'There are discrepancies in the executed Legal Charge [mortgage document] from our standard format [so] the Legal Charge is considered as unauthorised and void.' The department warned the firm that amending the documents might not provide a solution. 'Our concern is whether the Land Registry will accept the amendments for re-registration. The Land Registry will not accept [any] re-registration of the amendments which alters the legal effect of the original document. This letter serves to remind you that it is your responsibility to decide the method of rectification,' the letter says. 'Unauthorised and void' mortgage documents would mean the banks would not receive their usual guarantee from the Housing Department if the home-buyers defaulted. Lawyer Thomas Tse Lin-chung said transactions could be interrupted if the mortgage documents fell into that category. Conveyancing fees for the tenant-purchase scheme have dropped by 60 per cent, from $1,250 per transaction last year, to $480 this year under a tendering system. Extra legal fees for mortgage arrangements vary, but one firm charges $988 for full services, including mortgage. Lawyers said mortgage fees could not be set too high because of the low prices of public rental housing - an average of $300,000. Legal sources said of the controversy: 'If you pay peanuts, you get monkeys.' They described the incident as a scandal and warned of more mistakes to come. Department assistant legal adviser Handa Lam Ching-fan said the firm was not the first to make mistakes. She said the department had received 22 applications from law firms for rectification of mortgages this year, compared with 17 last year. Ms Lam admitted other applications might not have reached the department, but she disagreed prices reflected quality of work. Law Society vice-president Ip Shing-hing refused to link the errors to poor service quality. 'It really depends on whether a law firm is careful in handling the cases,' he said. About 30 law firms have taken on work with the tenant-purchase scheme. More than 50,000 flats have been sold since the scheme was launched in early 1998. The Housing Authority said last month it would review the tendering system for conveyancing services amid fears low prices could result in substandard services.