What risks do Hongkongers face while buying uncompleted property abroad?


  • The risk Hongkongers face is high, especially when properties abroad are still under construction, or are yet to be completed
  • The EAA does not assist consumers with recovery of losses suffered from property transactions

Over the past few years, it is becoming more popular for Hong Kong people to purchase non-local properties. The risk they face is high, especially when those properties are still under construction, or are yet to be completed.

Currently, there is no relevant legislation governing the sale of non-local properties in Hong Kong. Selling properties situated outside Hong Kong is generally beyond the purview of the Estate Agents Authority (EAA). A person or company engaging in estate agency work exclusively in relation to properties situated outside Hong Kong is exempt from the requirement of obtaining a licence from the EAA.

However, if a person or company does estate agency work in relation to properties both in Hong Kong and outside, the person or the company is required to hold a licence issued by the EAA. In this regard, the conduct of this licensee, irrespective of the locations of the properties that the person or company deals with, is regulated by the EAA and the person or company must comply with the relevant regulations, or else they may be subject to disciplinary action by the EAA.

According to the practice circular issued by the EAA in 2017 (Circular No. 17-03 (CR)), licensed property agents are required to obtain a report issued by a reliable authority confirming the vendor’s source of funds or financial arrangements, and to provide key information about the development, such as the location, tenure, current ownership, subsisting encumbrances, etc.

Also, licensed property agents must obtain legal opinion to ascertain whether there are restrictions on foreign ownership before they participate in sales or promotional activity, and must provide a copy of the same to the purchaser, together with a written warning and a sales information sheet, before they enter into any agreement with the purchaser.

In addition, licensed property agents must also verify the accuracy of information contained in advertisements and obtain vendors’ express endorsement in writing before issuances. They must also advise purchasers to seek independent professional advice on the types and amounts of taxes and mortgage terms regarding their own case.

Notwithstanding the above guidelines, consumers should note that the functions of the EAA do not include assisting consumers with recovery of losses suffered from property transactions. Hence, consumers should beware that they need to negotiate with the developers directly and seek their own independent legal advice on pursuing any party for any losses.

Here, I would like to remind consumers to particularly pay attention to one of the most commonly seen categories of complaints about purchasing non-local properties – the investment or rental return these properties could fetch. On this subject, consumers should be sceptical about any claims or promises about investment returns of properties, especially uncompleted ones. The EAA recently handled a case of similar nature.

A complainant bought a shop in an uncompleted shopping centre in mainland China and concurrently signed a “rent-back agreement” with the management company. According to the agreement, the management company would handle the leasing of the shop for the purchaser and pay them interest and rent regularly. After receiving a few rental payments, the management company stopped paying. The purchaser then went to the shopping centre site, only to find out that the management company had closed down and construction work had not even started.

The lesson from this case is that consumers should consider carefully whether the guaranteed return offered is legally protected and can really be honoured.

Once again, I would like to remind consumers of the potential risks they face when purchasing uncompleted properties situated outside Hong Kong. There is no guarantee that uncompleted properties will be completed in time, or even completed at all. Taking legal action to recover losses will be complicated, as it concerns laws of different jurisdictions.

Thus, consumers are strongly advised to do their own homework before making a purchase decision. There are various factors that need to be considered thoroughly, such as the location of the property, property details, payment terms, financing arrangements and the purpose of their investment, etc.

People may visit the EAA’s consumer education website for the booklet titled “Purchasing Non-local Properties Be SMART”, published by the authority to spread more information about purchasing property situated outside Hong Kong.

Last, but not the least, please be reminded of the extra risk involved in purchasing uncompleted properties situated outside Hong Kong. Property agents, even if they are licensed and have fulfilled the aforementioned EAA requirements, cannot guarantee that the developer will be able to complete construction on schedule, and the EAA is unable to assist consumers in pursuing their losses with vendors that fail to complete construction work. In this regard, consumers may consider purchasing second-hand or completed properties instead, or at least pay a visit to inspect the site of the uncompleted properties.

Finally, please do not forget to seek local professional advice before making purchases to protect yourself from possible hassles to come.