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Following is a question by the Hon Starry Lee and a reply by the Secretary for Transport and Housing, Ms Eva Cheng, in the Legislative Council today (December 2):
Question:
It has been reported that in October this year, a special unit at 39 Conduit Road, a residential development project in Mid-levels West, was sold at an "astronomical price" of over $71,000 per square foot, breaking world records. Yet, there have been comments querying that since the buyer of that unit has also bought four lower floor units at the same time, it is doubtful whether the developer has transferred the property prices of the lower floor units to that of the special unit, so that the price per square foot of that unit is much higher than that of an ordinary unit, so as to mislead prospective buyers. Regarding the regulation of sales practices for properties, will the Government inform this Council:
(a) of the total number of cases in the past three years in which developers had to shoulder criminal or civil liabilities for releasing misleading information, committing misrepresentation or fraudulent acts during the sale of properties, as well as the details of the cases;
(b) which government department is currently responsible for handling complaints about developers selling properties using misleading practices, and what legislation regulates such kinds of activities; whether the authorities will investigate if the aforesaid transaction involved releasing misleading information; if they will, of the details; if not, the reasons for that; and
(c) whether the authorities will consider setting up an organisation similar to the Securities and Futures Commission to investigate and monitor developers' sales practices for properties, so as to maintain a healthy development of the residential property market and prevent small investors from bearing unnecessary risks and losses; if they will, of the details; if not, the reasons for that?
Reply:
President,
The Government is committed to maintaining healthy development of the private residential property market, safeguarding the reasonable rights of consumers, and ensuring that consumers have access to accurate and comprehensive property information, in particular information on private uncompleted first-hand residential properties.
To enhance clarity of information on flat prices and transactions of uncompleted first-hand residential properties, the guidelines of the Real Estate Developers Association of Hong Kong (REDA) require that developers should make public the first price list containing not less than 20 flats or 20% of the total number of flats on offer at the first batch of sale, whichever is the higher, at least one day prior to the commencement of sale. Moreover, developers should make public the price lists for subsequent batches of flats prior to putting them up for sale for prospective flat buyers' information.
According to the Lands Department's (LandsD) Consent Scheme (Consent Scheme), developers are required to register a duly signed Agreement for Sale and Purchase (ASP) of uncompleted first-hand residential properties, approved for pre-sale under the Consent Scheme in the Land Registry (LR) within one month after signing the Preliminary Agreement for Sale and Purchase (PASP). The public may inspect the transaction details, including the date of signing the ASP, name of the vendor and buyer, particulars of the transacted flat and the transaction amount.
In view of the recent sales tactics in relation to some uncompleted first-hand residential properties and the confusing market information on property transactions, the Transport and Housing Bureau reached an agreement with REDA on November 20, 2009 to require developers to, with effect from December 1, 2009, provide in their websites and sales offices transaction information of the ASPs of uncompleted first-hand residential properties approved for pre-sale under the Consent Scheme within five working days after signing the PASPs, so that the public will know about the actual market information as early as possible. Information required includes the particulars of the transacted flat, date of signing the ASP and the transaction amount. The Government will closely monitor the implementation of the new measure.
My reply to the three parts of question is as follows:
(a) The Police have maintained statistics on the total number of prosecution and convicted cases of fraudulent acts in relation to property transactions, but do not have further breakdown on those cases.
For uncompleted first-hand residential properties approved for pre-sale under the Consent Scheme, developers have to comply fully with the requirements of the Consent Scheme. When LandsD has spotted irregularities which are in breach of the Consent Scheme requirements, it will require the developers to take rectification measures as appropriate. Generally, developers will take rectification measures immediately. For cases involving severe breach of the Consent Scheme requirements, LandsD would issue warning letters to the developers concerned on possible withdrawal of the pre-sale consent. According to LandsD's record, two warning letters were issued under the Consent Scheme in the past three years, and the developers concerned had subsequently taken rectification measures.
(b) At present, there are various pieces of legislation regulating misrepresentation or fraudulent acts which mislead the market. They are also applicable to misrepresentation or fraudulent acts in the course of property transactions. Under the Theft Ordinance (Cap. 210), committing a fraudulent act is a criminal offence, and the offender may be liable to prosecution. Under the common law, where a misrepresentation amounts to fraud, the person who makes the misrepresentation may be sued by the victims for damages. Also, pursuant to the Misrepresentation Ordinance (Cap. 284), a person who makes a misrepresentation inducing another person to enter into a contract may be legally liable for damages.
The Police will investigate fraudulent acts of criminal nature and, when there is sufficient evidence, take prosecution actions against the persons concerned under the Theft Ordinance or other relevant ordinances. Upon receipt of complaints against developers on alleged fraudulent acts, Government departments (such as the Transport and Housing Bureau) and relevant organisations (such as the Estate Agents Authority and the Consumer Council (CC)) may refer the complaints to the Police for necessary action.
Regarding misrepresentation, CC will take follow up actions, including mediation, upon receipt of complaints from consumers and having regard to the particulars of the cases. If there are strong justifications in support of a case, and the case may have far reaching implications on consumers, CC would advise the complainant to apply to the Consumer Legal Action Fund for assistance in taking legal action.
Regarding the residential development project in Mid-levels West as mentioned in the question, the developer is required under the Consent Scheme to register the duly signed ASPs in the LR within one month from the signing of the PASPs concerned. LR's record shows that the developer has so far completed registering the ASPs of 25 units sold in LR. The transaction amount of the 25 units sold tallied with the prices as shown on the price lists made public by the developer earlier on.
On the basis of the aforementioned information, there is at present no evidence to indicate that the developer sold properties using misleading practices. However, we will continue to closely monitor developments.
(c) As I have mentioned above, the new measure of requiring developers to provide in their websites and sales offices transaction information of the ASPs concerned within five working days after the signing of the PASPs concerned will help the public obtain accurate market information as early as possible. This will greatly enhance the transparency of the transactions of uncompleted first-hand residential properties and minimise the presence of misleading information in the market.
At present, we have no intention to set up an organisation similar to the Securities and Futures Commission to investigate and regulate the sales practices of developers.
We will continue to monitor the implementation of the measure closely. When necessary, we will further enhance the measure to respond flexibly and in a timely manner to the market and public needs. That said, if the existing measures and arrangements cannot achieve the expected effect, we do not rule out the possibility of adopting more severe administrative or legislative measures to tackle the problems.
Ends/Wednesday, December 2, 2009
Issued at HKT 14:57
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