LCQ 14: The sale of overseas properties in Hong Kong
Since 2015, I have received requests for assistance from quite a number of members of the public who said that they had, at the property fairs held in Hong Kong or on referrals of friends, purchased uncompleted housing units in more than 25 development projects located in countries such as the United Kingdom, the United States, Thailand, etc. through Hong Kong's licensed estate agents or unlicensed salespersons, but all the projects concerned had subsequently gone "failed". As the developers concerned had also been ordered to be wound up, they were not only unable to recover their monetary losses, but might even have to bear further financial obligations in respect of such property transactions. In this connection, will the Government inform this Council:
(1) of the respective numbers of requests for assistance or complaints, received since January 2015 by (i) the Commercial Crime Bureau of the Hong Kong Police Force, (ii) the police stations in various police districts, (iii) the Securities and Futures Commission (SFC), (iv) the Customs and Excise Department (C&ED), and (v) the Estate Agents Authority (EAA), about Hong Kong people suffering losses from the purchase of overseas properties in Hong Kong; the respective numbers of Hong Kong people, countries, development projects, licensed estate agents and unlicensed salespersons involved in such cases;
(2) whether the Police have passed on the requests for assistance or complaints they received to the Commercial Crime Bureau for centralised handling and for investigating whether the persons concerned committed, in the course of the sale of properties, the relevant offences of fraud or provision of false information, etc.; if not, whether the Police will make such an arrangement in future;
(3) whether it knows if SFC has investigated whether the requests for assistance or complaints it received involved sales arrangements inviting members of the public to participate in collective investment schemes that are subject to regulation by the Securities and Futures Ordinance (SFO) (Cap. 571) and related unlawful acts; if SFC has, of the number of such cases uncovered and the relevant law enforcement actions taken by SFC, and whether SFC has punished the persons concerned (e.g. revoking licences issued to them under Cap. 571);
(4) whether the act of selling overseas properties in Hong Kong is subject to regulation by the Trade Descriptions Ordinance (Cap. 362); if so, whether C&ED will proactively send staff to conduct inspections at overseas property fairs held in Hong Kong to see if the unfair trade practices caught by Cap. 362 are employed in the sale of properties;
(5) whether it knows if EAA has carried out any investigation to ascertain if the requests for assistance or complaints it received involved estate agent licensees' failure to observe or comply with the Code of Ethics and practice circulars issued by EAA; if such investigation has been conducted and the results show that such situation does exist, of the number of the licensees concerned and the punishments imposed on them for that;
(6) given that EAA is preparing the issue of a set of guidelines by the end of this year on the sale of non-local residential properties in Hong Kong, whether it knows if salespersons who are not estate agent licensees will be subject to regulation by the guidelines; if not, whether the authorities will consider regulating the sale of overseas properties in Hong Kong by such type of persons through other means (e.g. enacting legislation); if so, when such legislation will be enacted; if such legislation will not be enacted, of the means that will be employed to regulate the sale of overseas properties in Hong Kong by such type of persons; and
(7) whether it knows if the overseas Hong Kong Economic and Trade Offices and the Chinese Diplomatic and Consular Missions abroad have received complaints lodged by members of the public in Hong Kong concerning the development projects in the countries concerned that have gone "failed" after they have purchased in Hong Kong the properties of such projects; if they have, of the follow-up work and the outcome?
Having consulted the Security Bureau, the Financial Services and the Treasury Bureau, the Commerce and Economic Development Bureau, the Constitutional and Mainland Affairs Bureau and the Estate Agents Authority (EAA), I set out my consolidated reply to various parts of the question raised by the Hon James To as follows.
(1) From January 2015 to November 2017, the Police handled a total of three cases involving 156 complainants who alleged to have been cheated when purchasing overseas properties through property sale agents or intermediaries. The three cases involved 19 property development projects in Japan, the United Kingdom (UK) and the United States (US); and a property agent and two real estate intermediaries.
During the above-mentioned period, the Customs and Excise Department (C&ED) received 15 complaints (involving 15 complainants) that relate to purchase of overseas properties, and most complaints involved allegations of false trade description practices. The complaints involved 15 residential property development projects located in Australia, Japan, Malaysia, Thailand, UK and US; and four licensed estate agents and 11 non-licensed salespersons.
During the same period, the EAA received 32 complaints (involving 34 complainants) against licensed estate agents in handling the sale of overseas properties. The complaints involved 19 residential property development projects in Australia, Japan, UK and US; and 17 licensed estate agents and 15 non-licensed salespersons.
The Securities and Futures Commission (SFC) does not maintain the statistics described in the question.
(2) In general, the Police will, after taking into account factors such as the location, nature, complexity and severity of the cases, consider referring a case to an appropriate investigation unit for handling. For cases involving the same suspect or agency, the Police will, in light of the relevant circumstances, consider making consolidated investigation. Should the case involve cross-boundary elements, the Police will exchange intelligence with and seek assistance from relevant overseas law enforcement agencies.
For the cases mentioned in part (1) above, the case involving the property development project in Japan has been assigned to the criminal investigation unit of the relevant police district for handling, while the remaining two cases involving the property development projects in UK and US have been assigned to the Commercial Crime Bureau for handling.
(3) The SFC has in place a set of established procedures for processing requests for assistance and complaints, including those involving sales arrangements of collective investment schemes (CIS); and will carefully assess cases that it has received. To determine whether an investment constitutes a CIS, it is necessary to consider the facts and circumstances of each case carefully. Whilst the SFC does not comment on its investigations in public, it will publish an announcement if enforcement action is taken and/or penalties are imposed (if any) following its investigations.
(4) According to the section 2 of the Trade Descriptions Ordinance (Cap. 362) (the Ordinance), immovable property is itself not a goods and therefore the Ordinance does not apply to it. However, a service supplied in relation to immovable property may be a product which may be regulated under the Ordinance. As far as service is concerned, the Ordinance does not apply to commercial practices engaged by an exempt person acting in the capacity of a professional listed in Schedule 3 to the Ordinance, including licensed estate agents/salespersons defined by section 2(1) of the Estate Agents Ordinance (Cap. 511). The Ordinance, which covers services provided by traders in general, prohibits unfair trade practices such as "false trade descriptions" (including a false trade description made by whatever means and in whatever form, e.g. paper, verbal and advertisement), and "misleading omissions" (including omitting or hiding material information, or providing material information in a manner that is unclear, unintelligible, ambiguous or untimely). Referring to the 15 complaints received by C&ED as mentioned in part (1) above, C&ED has completed investigation of 11 cases with no offence under the Ordinance detected, and referred the remaining four cases to relevant regulatory bodies for follow-up. C&ED have all along been proactively handling complaints concerning alleged incompliance with the Ordinance, reviewing the complaints received and taking appropriate follow-up actions. C&ED also conducts patrols when necessary and promotes compliance among traders.
(5) & (6) In pursuant to the Estate Agents (Exemption and Licensing) Order (Cap. 511B), a person shall be exempted from the requirement for obtaining an estate agent's licence if he handles exclusively properties outside Hong Kong; and states in all his documents (including pamphlets and brochures, etc.) and advertisement that he is not licensed to deal with any property situated in Hong Kong. However, if the concerned company or individual performs estate agency work for properties both within Hong Kong and outside Hong Kong, one should have obtained licence issued by the EAA and should be regulated by the EAA.
If a licensed estate agent/salesperson is suspected of breaching the Code of Ethics (the Code) and practice circulars issued by the EAA in the course of the sale of properties, regardless of whether the properties concerned are Hong Kong properties or not, the EAA will investigate the matter. Regarding the complaints received by the EAA as mentioned in part (1) above, 17 licensed estate agents were involved and some of the cases are still under investigation. As of now, there is no case that is found to be incompliance with the Code and practice circulars.
The EAA is in the course of preparing a set of guidelines for issue later this year to remind estate agent licensees of the matters they need to comply with and pay attention to in handling the sale of uncompleted properties situated outside Hong Kong. If the licensees breach the guidelines, they may be subject to disciplinary action.
Regulation of sale of non-local properties in Hong Kong involves complicated issues and requires careful deliberation. Indeed, there may be substantial difference between the sale of properties situated outside Hong Kong and those located in Hong Kong from both the perspectives of market operation and conduct regulation. Besides, as sale of non-local properties involves laws and regulations and tax regimes of different jurisdictions, as well as various stakeholders (e.g. non-local developers, intermediaries and agents), the issues concerned are rather complicated and extensive. In addition, with the advancement of information technology, vendors of non-local properties can now carry out sale and promotional activities easily through the Internet, thereby increasing difficulties in law enforcement.
In light of the above, the Government considers that enhancing public education, with a view to reminding investors and the public alike the risks involved and the issues that they need to pay attention to in purchasing non-local properties (especially uncompleted properties), should be a more effective way. The Government will pay close attention to the situation and take appropriate measures as and when necessary.
(7) Since 2015, among the 12 overseas Economic and Trade Offices (ETOs) of the Hong Kong Special Administrative Region (HKSAR) Government, only the London ETO received a total of two enquiries about the purchase of uncompleted properties in the UK by Hong Kong people. The ETO provided to the enquirers relevant information of the organisations which may be of assistance. It does not have information about the follow-up.
The HKSAR Government does not possess information on cases which may be received by Chinese Embassies or Consulates in foreign countries on Hong Kong residents after purchasing properties in those foreign countries encountering problems arising from those properties.
Ends/Wednesday, December 13, 2017
Issued at HKT 16:15
Issued at HKT 16:15