[BUYING AND SELLING REAL ESTATE IN HONG KONG]
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KEY FACTS OF REAL ESTATE ACQUISITIONS UNDER HONG KONG LAW
Introduction Hong Kong is one of the most densely populated cities over the world. Due to historical reasons, almost all lands in Hong Kong are leasehold tenures. Over the centuries, the Government leased or granted to individuals or corporations pieces of land for use or for development. Therefore, a sale and purchase of landed property in Hong Kong is in fact a transfer or assignment of a lease. In a sale and purchase transaction, the vendor agrees to sell, and the buyer agrees to purchase both the legal estate and the equitable interest of and in the landed property. This article provides a brief introduction to land law in Hong Kong and sets out a summary of the procedures of the sale and purchase of landed properties in Hong Kong. System of Deeds Registration Unlike other common law jurisdictions, the Hong Kong registration system is not one of registration of title but a deeds registration system. Registration of instruments alone does not confer title but only serves as a notice of having an interest in the landed properties which are affected by the instruments. Instruments affecting landed properties are required to be registered at the Land Registry in Hong Kong in order to have priority over any other subsequent registrable interests in land. While the general rule is that the priority of the registrable instruments shall be determined by the sequence of their respective dates of registration, there is a special rule that priority shall take effect by reference to the date of execution instead of the date of registration if such registrable instruments (excluding charging orders and lites pendentes) are registered within one month after the date of execution. Failure to register a registrable interest will render the same to be null and void
against any subsequent bona fide purchaser or mortgagee for valuable consideration but will not affect the legality, validity and enforceability of the instrument as between the parties of the unregistered registrable instrument. The Procedures of the Common Sale and Purchase of Landed Properties in Hong Kong Provisional Agreement for Sale and Purchase Before a potential purchaser decides to purchase a landed property, he/she usually inspects the landed property (flat/apartment/house) through the arrangement by an estate agent first and considers if he/she requires any financing when purchasing the property. It is advisable that, at least, a rough estimate verbal valuation of the relevant property should be obtained beforehand in order to apply to bank(s) for mortgage loan. Nowadays, a mortgage loan of around 50%-90% (depending on the value of the landed property) of the market value of the property can be obtained. In the circumstance, a purchaser should consider carefully whether he/she can afford to pay for the remaining purchase price and the Ad Valorem Stamp Duty. When a purchaser agrees to purchase and a vendor agrees to sell a landed property, both parties will enter into a written agreement. In Hong Kong, the preliminary agreement, also known as the provisional agreement for sale and purchase (the “PASP”), is not required by law but commonly used. Such written agreement is usually prepared by estate agents which contains the basic terms such as details of the subject property, parties, consideration and completion date Upon signing of a PASP, the purchaser will pay to the vendor or the vendor’s solicitors (as stakeholders) a sum being the initial deposit (which is usually 3%-5%
ILN Real Estate Group – Buying and Selling Real Estate Series
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