[BUYING AND SELLING REAL ESTATE IN HONG KONG]
consent from the relevant bank or financial institution prior to the execution of a POA for use in a landed property transaction. Title Requisitions: Proving & Investigating Title The parties shall abide by the terms and conditions set out in the Formal ASP and prepare for completion after the execution of the Formal ASP. If the landed property is subject to any existing mortgage, the vendor will have to arrange for discharge or release of the existing mortgage before completion to ensure that the landed property shall be sold to the purchaser free from all encumbrances. The purchaser is advised to apply for mortgage loan from the relevant mortgage bank reasonably in advance of completion if he/she requires financing to pay the balance of the purchase price of the landed property. Prior to completion, unless otherwise agreed by the parties, the vendor shall be under a duty to prove good title to the purchaser of the landed property by (1) delivering to the purchaser all relevant title deeds and documents in respect of the landed property; and (2) satisfactorily answering requisitions on title raised by the purchaser. As previously mentioned, one cannot prove his/her title of the landed property under the said deeds registration system. Hence, it is always the duty of the purchaser’s solicitors to check the title to the landed property by perusing all the relevant title documents provided and delivered by the vendor’s solicit ors. This also explains why lawyers are actively involved in a sale and purchase transaction in Hong Kong. The rights of the purchaser’s solicitors to investigate title and to raise requisitions are also generally set out in the Formal ASP. The vendor’s so licitors have to satisfy the purchaser of the vendor’s good title to the property or the vendor’s title agreed to be delivered to the purchaser. The purchaser has the right to insist on a good title
being proved and showed, and the vendor is obliged to clear all title encumbrances or to remedy all the title defects upon completion. Mortgage Financing In Hong Kong, if the purchaser requires financing for payment of the balance of the purchase price, the purchaser will apply for the mortgage loan as soon as practicable before completion and/or even get an indication from the bank(s) before entering into the PASP. When choosing a bank or financial institution for mortgage loan, the purchaser should consider the following (not exhaustive) :- (i) the landed property valuation and mortgage amount to be offered; (ii) the repayment term, number of installments and the amount of each installment;
the criteria for determining interest rates; and the early redemption penalties and the notice period.
Depending on the value of the landed property, the banks or financial institutions usually offer the purchaser a loan of up to 60%-70% of its market value. Usually, the purchaser’s solicitors also act for the purchaser’s mortgagee in respect of the mortgage transaction by preparing all the relevant mortgage and security documents. Preparation before Completion: Apportionment of the Outgoings Before completion, purchaser’s solicitors have to make enquiries with the management company or the incorporated owners of the building as to whether there is any outstanding management or other fees payable by the owner of the property. The vendor’s solicitors will usually prepare an apportionment account
ILN Real Estate Group – Buying and Selling Real Estate Series
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