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VIII. Sale and purchase of property under construction

The term "property under construction" in this section covers both i) uncompleted buildings/development, or ii) buildings which have been erected but the developer has not yet obtained the occupation permit or a certificate of compliance from the Government. Sale and purchase of this kind of property is regulated by the Consent Scheme and the Non-Consent Scheme .

 

People in Hong Kong often purchase flats before the buildings in which the flats are located have been constructed. The above two schemes exist to protect purchasers in case the developer becomes bankrupt before the property is constructed.

 

In addition, the sale and purchase of a new first-hand residential property is further governed by the Residential Properties (First-hand Sales) Ordinance (Cap. 621) which came into operation in 2013.  The Ordinance sets out detailed requirements in relation to sales brochures, price lists, show flats, disclosure of transaction information, advertisements, sales arrangements, and the mandatory provisions for the Preliminary Agreement for Sale and Purchase and Agreement for Sale and Purchase for the sales of first-hand residential properties.

 

From a purchaser's perspective, the legal formalities for buying a new (first-hand) residential property are similar to that for buying a second-hand property. You need to sign a provisional sale and purchase agreement with the developer, followed by a formal sale and purchase agreement and an assignment upon the completion/ hand over day. The main difference is that the provisional agreement of a first-hand residential property does not bind the purchaser to buy the flat and sign the formal agreement.  The developer/vendor's remedies if the purchaser does not sign the formal agreement after signing the provisional agreement for a first-hand residential agreement is only to claim the forfeiture of the 5% deposit paid on the signing of the provisional agreement.  

 

For a first-hand residential property under the Consent Scheme, the standard form of the formal agreement for sale and purchase prescribed by the Lands Department provides that the property can only be transferred to the original buyer. Hence the property cannot be sub-sold by way of confirmor sale and the property cannot be resold before the assignment of the property by the developer to the purchaser. 

 

Depending on the circumstances (i.e. whether it is a Consent scheme or Non-Consent Scheme), the formal agreement may contain an estimated material date which generally means the estimated date on which new development is completed in compliance with the approved building plans or the conditions of the land grant of the new development are complied with. There may be provision in the agreement requiring the developer/vendor to apply for an occupation document/a certificate of compliance/consent to assign within 14 days after the estimated material date and the developer/vendor is to notify the purchaser in writing that the vendor is in a position to assign the property within a certain period after the issue of the occupation document/a certificate of compliance/consent. Normally, the completion date/handover of the new flat is within 14 days of the above notification from the developer/vendor to the purchaser.

 

Before you buy or invest in a property under construction, you may find it useful to study carefully the Outline Zoning Plan ("OZP") of the area in the vicinity. OZP is a statutory plan published by the Town Planning Board under the Town Planning Ordinance (Cap.131 of the Laws of Hong Kong). Once you have located the OZP of the area on which the property situates, you will be able to see the existing and/or proposed land-uses and major road systems in its surrounding areas. You can access the websites of the Planning Department or the Town Planning Board for further information. If you have any difficulties in reading the OZP, please consult an architect or other relevant professionals.

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