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Hong Kong proposes law on new-home sales

Alex Frew McMillan Reuters 11/30/2011 03:49
Hong Kong proposes law on new-home sales - Real Estate - Business - Property - Hong Kong

Hong Kong has proposed a new law that will slap fines and jail terms on developers that mislead buyers of new homes.

The government on Tuesday kicked off a two-month consultation period on the new law, which it hopes to introduce to the Legislative Council in the first quarter of next year.

"There are consumer protections on other areas, and there should be similar protections on selling properties," Eva Cheng, the secretary for transport and housing, said as she called for improved transparency, as she unveiled the proposed law. "It has to be done, and there is never a better time."

Cheng said the current slump in property prices in Hong Kong does not affect the government's motivation to put new rules in place. A steering committee has been working on the rule changes over the past year. The new law would govern all first-hand projects, whether completed or sold off-plan.

The maximum penalty for misleading the public would be a fine of HK$5 million and seven years in prison. Minor breaches would be punished by a fine of around HK$100,000.

Under the proposed rules, developers would have to make a sales brochure on each property available at least seven days before sales begin. The brochure would list the property's address and the neighborhood it is in. The brochure would also have to provide the saleable area of the property, and would not be allowed to contain artist's impressions of the development.

Residential property in Hong Kong has traditionally been priced and promoted based on gross floor area, not the net area. But consumers have complained about misleading practices from developers, who often include an apportionment of public areas such as lift lobbies, electricity plants and clubhouses in the gross floor area of a flat.

Cheng admitted current legislation on new-home sales is insufficient.

"We agree the current measures are not sufficient," Cheng said, adding that the new rules are a top priority for her bureau in the coming year. "The public is rightly concerned about the sale of first-hand properties," she said.