Certain encumbrances might be registered against a property. For example, when certain kinds of documents such as Court Orders, Charging Orders, Memorandum of outstanding management fees, etc., have been registered against the property, the sale of the property might become complicated. Due to the defective title of this kind of properties, their transactions might be cancelled by the purchaser. Therefore, in order to avoid any disputes, estate agents should be very careful when handling the transaction of properties with subsisting encumbrances, and they should inform their clients of the details of encumbrances and the related risks before the transaction.
Common causes for registering encumbrances against a property include the property owner’s failure to make repayments to a bank, financial institution, management company or other personal debts and thus being sued by creditors; breaches against the Buildings Ordinance due to the existence of unauthorised building works or not complying with any building orders; violating the deed of mutual covenant and being sued by the incorporated owners or other owners of the building etc.
Estate agent who acts for the vendor of a residential property must conduct a land search and provide a copy of the land search of the property to the purchaser immediately before an agreement for sale and purchase is entered into. If estate agents discover the above mentioned encumbrances registered against the property through a land search, they should inform clients honestly, reminding them (no matter whether they are vendors or purchasers) of the related risk in that property transaction and advise them to seek legal advice before proceeding with the transaction.
