Hong Kong regulator sets rules for sale of uncompleted overseas property for the first time
Estate Agents Authority issues guidelines after numerous complaints by buyers
The regulator of property agents in Hong Kong has issued guidelines for the sale of uncompleted overseas properties by local agents following repeated complaints by buyers, a move supported by companies in the sector.
The Estate Agents Authority issued a practice circular on the sale of uncompleted properties situated outside Hong Kong after numerous complaints about such properties not being completed and the misrepresentation of property information by agents, said Horace Cheung Kwok-kwan, chairman of the Practice and Examination Committee at the authority.
The guidelines include: a requirement to confirm the existence, legal rights and capital of the seller; provision of local legal advice; warnings about the risks associated with the purchase; legal and warning documents for buyers; no use of promotional language that gives the impression that the purchase is safe with easy and high returns; and not making any assurances about mortgage terms.
“Out of 11 complaints received this year, eight were about properties in the United Kingdom. Six are still under investigation, four were found invalid and one could not be grounded by enough evidence,” said Cheung.
In 2014, a property agent was reprimanded and fined HK$50,000 (US$6,397) by the authority for selling an incomplete property in mainland China without required approval in Hong Kong. Currently, there is no regulation of the sale of overseas properties in Hong Kong – anyone can engage in the sale of such properties with or without licences issued by the authority.
After the new guidelines come into effect in April, licensed agents who are found in breach of the regulations may be subject to disciplinary action by the authority.
As far as agents without a licence from the authority are concerned, Cheung said affected buyers can complain to the police or the Securities and Futures Commission, while potential buyers can select licensed agents instead.
In March, police and the securities regulator looked into overseas property projects that had gone into default, costing more than 1,000 investors from the mainland, Hong Kong, Taiwan and Malaysia as much as HK$500 million in losses.
In December 2016, more than 50 Hong Kong investors in Manchester’s Angelgate luxury flats approached the police after they had put more than £30 million (US$40.35 million) into the suspected development scam.
Companies that sell overseas properties in Hong Kong said they supported the new guidelines.
“The regulations can protect the interests of potential buyers. Many buyers do not visit the sites themselves, or are not familiar with the market. They are highly dependent on the information provided by agents,” said Thomas Lam, senior director at real estate consultancy Knight Frank.
“These can show Hong Kong’s ability to protect consumer interests in transactions of overseas properties. The city will no longer be a hot bed of the sale of overseas properties that can never be completed,” said Vincent Cheung, deputy managing director of global commercial real estate company, Colliers International.