The Consumer Council makes a strong call for the new legislation to cover sale of first-hand residential properties in redevelopment projects.
In the wake of the controversy over the sale of the recently completed residential development in the Mid-levels, the Council sees an urgent need to strengthen the existing regulatory regime for better protection of homebuyers' interest.
To plug the loopholes of purchasers falling prey to unscrupulous sales tactics in respect of residential flats not subject to the Consent Scheme and built by developers not being REDA members - hence not subject to REDA's guidelines - the Council has called for extension of the scope of first-hand residential properties in the legislation under contemplation to cover all first-hand flats, irrespective of the types of land leases (old lease or new grant) or the development status (uncompleted or completed).
The Council's Working Group on Consumer Issues Relating to Residential Property was concerned about the lack of safeguards available to homebuyers of residential properties in redevelopment projects.
For Non-Consent Scheme developments, provision by the developers of formal sales brochures with prescribed key information, such as the name of the developer, location plan, floor plan of the development and area schedule of the units, is not a prerequisite for sale of uncompleted units.
Instead, promotional materials and booklets which are unregulated in style and contents can be freely distributed to prospective buyers who might mistake the materials as sales brochures. From a practical point of view, it is not likely for an ordinary homebuyer to tell whether the developments fall under the Consent Scheme or to realise what safeguards (if any) are available for developments of different status.
To rectify the shortcomings, the Council has put forward a series of recommendations, both for the long term and interim measures, to enhance the protection of consumers.
Apart from extending the scope of properties to be covered by the new legislation, establishment of monitoring and enforcement mechanisms need to be strengthened to ensure compliance within the real estate industry.
Since long term measures take time to implement, the Council considers that in the mean time all stakeholders involved in a property transaction (i.e. developers, estate agents, solicitors and consumers) should step up their efforts to reduce the inadequacies in the sale of residential properties in redevelopments.
As interim measures, the Council urges developers of Non-Consent Scheme properties to adopt the Consent Scheme requirements voluntarily, to enhance the transparency and clarity of property information for better protection of homebuyers.
The requirements are to provide comprehensive and detailed property information in sales brochures and to make available sales brochures and price lists to prospective buyers before commencement of sales of uncompleted flats. That is to ensure prospective buyers will have key and up-to-date property information to make an informed purchase decision.
The Council also urges the Estate Agent Authority to remind estate agents of their obligations under the present regulatory regime to provide accurate property information to prospective buyers, irrespective of whether they are acting as agent of the developer and/or the purchaser.
To ensure that consumers will be aware of the potential pitfalls in buying Non-Consent Scheme residential properties, the Council calls upon the Law Society of Hong Kong to advise its members to post a warning notice on the front page of the Sale and Purchase Agreement for Non-Consent Scheme developments to alert homebuyers.
The Council also reminds homebuyers to be alert about the difference in safeguards between the Consent Scheme and Non-Consent Scheme, to study carefully the crucial information in the sales brochures and agreements before committing themselves, and to take heed of the risks of unauthorized building works.
Another area of concern is the handling of latent defects in the newly completed properties. The Council proposes that it be explored if the 6-month defect liability period should be lengthened to provide better protection to purchasers as some structural defects in its property may not surface within the short period of time.