[BUYING AND SELLING REAL ESTATE IN HONG KONG]
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of the consideration) to show his/her sincerity to purchase the landed property. The purchaser will usually register the PASP at the Land Registry (after stamping of the PASP). The PASP generally contains, inter alia, a standard clause which gives both the vendor and the purchaser a chance to “get out” of the contract after signing the PASP. The vendor is entitled to forfeit the deposit paid by the purchaser if the purchaser decides not to proceed further, whereas the vendor shall refund the deposit to the purchaser and compensate the purchaser with a sum equivalent to the amount of the deposit paid if the vendor decides not to sell the property to the purchaser. However, both the vendor and the purchaser can choose to enter into a “binding” agreement without the chance to get out of the contract unless the title to the property is defective. Ad Valorem Stamp Duty will be payable on the PASP only when the terms of the formal agreement for sale and purchase (the “Formal ASP”, as hereinafter defined) cannot be finalized and the Formal ASP cannot be signed within 14 days of the signing of the PASP. The Formal ASP is also required to be submitted for registration at the Land Registry. Formal Agreement for Sale and Purchase After signing the PASP, the parties have to appoint their respective solicitors as soon as possible. Solicitors for the respective parties will negotiate and agree on the terms and conditions of the Formal ASP. After execution of the Formal ASP, Ad Valorem Stamp Duty will be payable, and the Formal ASP will be presented for registration at the Land Registry. Use of Power of Attorney in the Sale and Purchase It is common for a purchaser or a vendor to execute a Power of Attorney (the “POA”) in the
sale and purchase of a landed property, especially when the purchaser or vendor is physically unable to be present in person when executing the Formal ASP and/or Assignment (as hereinafter defined). A POA is an instrument that allows a person (or corporation) to give power to an attorney to act for and on his/her/its behalf in performing certain acts or obligations, for example, for the purpose of enabling the sale or purchase of a landed property. To determine whether a POA is in order, a number of criteria has to be fulfilled:- (1) whether the POA has been properly executed; (2) whether the specified power(s) is/are clearly defined therein; and (3) whether the POA is still valid and not revoked as at the time when the relevant instruments such as the Formal ASP and/or Assignment is/are executed. Generally, the validity period for a POA is 12 months from its date of creation. If a POA is being relied upon by any party in a sale and purchase transaction, it is important for the purchaser’s solicitors or the vendor’s solicitors to produce the POA to the other side for verification. More importantly, it is always advisable to consult your own solicitors before executing the POA to ensure that the proper procedures are observed, especially where the POA will be executed abroad for use in Hong Kong. For POA executed abroad, it is always a good conveyancing practice for the execution of the POA to be witnessed by a notary public and sometimes further authenticated/legalized depending on different jurisdictions. Notwithstanding the foregoing, a POA might not be applicable or acceptable to all landed property transactions. For example, if a purchaser needs to obtain mortgage loan for financing the purchase of the property, a bank or financial institution may not accept POA when executing the mortgage deed. As such, it is advisable to obtain legal advice and/or consent from the relevant bank or financial
ILN Real Estate Group – Buying and Selling Real Estate Series
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