1. Sale and purchase of property under construction is governed by either the "Consent Scheme" or the "Non-Consent Scheme". What are the differences between these two schemes?
The Consent Scheme may be imposed by the terms of the Government Lease for the relevant land. This Scheme applies to buildings that are erected on a particular piece of land for development purposes. This Scheme allows the Director of Lands to ensure that the developer has complied with a set of requirements before he grants permission to the developer to sell the property under construction. The purchasers will be protected by this Scheme as a result. The relevant requirements cover:
- the financial standing of the developer and financing arrangements,
- the terms of the sale and purchase agreement,
- the terms of the deed of mutual covenant,
- contents of the sales brochure, and
- the way the pre-sale is to be carried out.
The developer/vendor's solicitor is responsible for ensuring that the requirements are met. The solicitor will keep the money that the purchaser has paid, and then release the money to the vendor in the manner permitted under the Scheme. Under this Scheme, the purchaser and vendor may be represented by the same solicitor but this is not essential. The purchaser should be aware that the solicitor may be involved in a conflict of interest.
You may obtain a sample of the formal sale and purchase agreement under the Consent Scheme from Appendix III to the Legal Advisory and Conveyancing Office Circular Memorandum No. 72 from the Land’s Department website. Please note the sample agreement is only for reference purposes and you should check the agreement carefully with your agent or solicitor before signing the agreement.
If the buildings are not erected on a piece of land granted by the Government for development purposes, the purchasers are protected by the ‘Non-Consent Scheme'. An example of this kind of building is one built on a piece land obtained by the developer after demolishing the old buildings that were on the land.
This Scheme is regulated by the Law Society of Hong Kong by imposing professional obligations to be complied by solicitors. Although there is no requirement, this Scheme permits the same solicitor to act for both the vendor and purchaser, and this solicitor will undertake to ensure that the purchasers are protected in a way similar to that offered by the Consent Scheme . Failure to comply with this Scheme would result in professional misconduct on the part of the solicitor and liability to the purchasers for compensation.