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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.


From a purchaser's perspective, the legal formalities for buying a new (first-hand) 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 is a non-binding contract (except for the vendor's right to claim the forfeiture of a certain percentage of the purchase price if the purchaser does not sign the formal agreement afterwards).


In August 2010, the Hong Kong Government put a ban on confirmor transactions on uncompleted properties. Confirmors are investors who buy a property and resell it before the completion of the Formal Sale and Purchase Agreement.


Further, all purchasers who pull out before the Formal Sale and Purchase Agreement would be subject to forfeiture of 10% of the value of the property in question.


Under the formal sale and purchase agreement, there may be a clause specifying the date of completion of the construction work for the relevant building. Also, there is usually a clause which says the completion of the sale (i.e. the hand over day of the property) is to take place within, say 14 days, of the date of notification to the purchaser that the developer is in a position validly to assign the property 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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