If you’re thinking of buying property in Hong Kong, here are a few things to keep in mind during your search and procurement of your ideal property.
In Hong Kong, the law governing real estate is called the Conveyancing and Property Ordinance (CPO). It’s based on the UK system of transactions and is similarly assisted by Common Law, which is case law that has been built up over the years. Be aware that, between residential and non-residential property, there is no major legal distinction aside from stamp duty purposes.
All land in Hong Kong belongs to the Government, and leases can be arranged for periods up to 999 years. These days, leases will usually include restrictions, obligations and other conditions such as environmental control.
The Land Registry carries records of all title deeds, and can be searched by the public for a small fee. Failure to register a title deed may mean delays to any registered transaction and/or denial of requests for mortgages by banks, so make sure that you register your title deed upon purchase.
The only restriction to land ownership is if there is a legal disability. Foreign nationals and entities can own land, although if said entity wants to conduct business operations in Hong Kong, it will have to register itself as a company at the Companies Registry. In multi-owned buildings, like apartments, each owner has a share in the land. The Deed of Mutual Covenant governs the relationship between all owners in that building by stating the conditions for rights of way, rights to services, meetings of owners, management of the building and restrictions.
Use of property is usually restricted the Government lease, planning control, and the Occupation Permit issued by the Building Authority, with the addition of the Deed of Mutual Covenant for multi-owned buildings. Any changes may require consent from up to four authorities, depending on the change to be enacted.
Stamp duty can range between 0.75% and 3.75% of the purchase price and is usually paid by the purchaser. With non-residential properties, the stamp duty is payable upon the Assignment. With residential properties, the stamp duty is payable upon execution of the Sale and Purchase Agreement, although legal provisions have been made to allow deferment of payment until the completion of the purchase or re-sale, with the maximum deferral period being three years.
Rates to be paid to the Government are levied on a quarterly basis and usually falls under the responsibility of the by the owner or occupier of the property. The rateable value of a property is based on how much rent could be achieved by that property over a period of one year. The actual rates payable, on a proportion of the rateable value defined by the Government, currently stands at 5%.
Property tax is paid by the owners. Corporations can choose to pay profits tax instead of property tax.
In Hong Kong, leases are mainly covered by the Landlord and Tenant (Consolidation) Ordinance, and are usually short-term in nature, with two years for residential properties, and three to nine years for non-residential properties.
Estate agents will usually charge a commission of about 1%, although this is negotiable. Be aware that many estate agents prefer that you enter into preliminary agreements that will become legally binding once you sign and pay a non-refundable deposit. Make sure you seek legal advice before signing the offer letter.
Solicitors are usually used for most of the conveyancing transaction, so it is important to find a good solicitor to help you handle your purchase. Usually, the same solicitor will not be allowed to represent both vendor and purchaser in the same transaction. Refer to the Solicitors’ Costs Rules for laws governing their fees and charges. The three main fees are charges for the Sale and Purchase Agreement, the assignment and the mortgage. It is normal and possible for the solicitor and client to agree on a fee other than the one stated in the Costs Rule. |