Points-to-note in relation to Car Parking Spaces, Industrial Buildings, and Retail Premises
1. Car Parking Spaces1,2
Before buying or selling a car parking space, you should ascertain whether there are any restrictions on its use.
If the Deed of Mutual Covenant for the building stipulates that the parking spaces are for the exclusive use of residents of the private housing estate and their visitors, then letting the space to a non-resident of the estate would constitute a breach of the Deed of Mutual Covenant.
Licensed estate agents should make written enquiries to the building’s management company or the owners’ corporation (if any) and/or the vendor (or owner) to ascertain whether there are any restrictions on the use of the parking space. They should also inform the purchaser of any such restrictions before the signing of the provisional sale and purchase agreement.
2. Industrial Buildings2
The EAA reminds licensed estate agents and the public that industrial buildings are not permitted to be used for residential purposes.
Industrial premises are not designed for residential use, and other units within the building may still be engaged in industrial activities or used for storing hazardous and flammable goods. From a safety perspective, units in industrial buildings are unsuitable for residential use. The unauthorised conversion of industrial units for residential use is in breach of the Buildings Ordinance (Cap. 123) and poses serious safety risks to occupants. The Buildings Department will take stringent enforcement actions.
Any private property (including industrial buildings) that contravenes government lease conditions — such as altering its permitted use — may lead to title issues. If a breach is substantiated, the Lands Department may enforce the lease conditions by issuing a warning letter to the owner, requiring rectification of the breach within a specified period. Failure to comply may result in the warning letter being registered at the Land Registry (commonly known as “imposing an encumbrance on the title”). Depending on the circumstances of each case, the Lands Department may take further enforcement action, including repossessing the property or causing the property interest to revert to the Government Rights (Re-entry and Vesting Remedies) Ordinance (Cap. 126).
Licensed estate agents must not explicitly or implicitly suggest to prospective tenants or purchasers that the industrial units may be used for residential purposes, e.g., by saying “many people are living upstairs and downstairs”. When clients ask whether a unit may be used for residential purposes, estate agents should reiterate that the permitted use of the property is for industrial use, and must not mislead clients. They should also remind clients that living in subdivided units within industrial buildings entails extremely high safety risks.
3. Retail Premises2
Some retail premises are sold as “uncompleted” properties. However, if solely based on the area information provided in promotional materials, it is difficult for purchasers to ascertain whether the units are practical or suitable for their needs. The terms of provisional sale and purchase agreement are relatively complex and should be read carefully before signing, or reviewed with the assistance of a solicitor.
In addition, the applicable mortgage ratio for retail premises is generally lower, and valuation may fall short of the purchase price. During downturns in the retail market, occupancy rates may be very low. Purchasers must therefore carefully review their cash flow and repayment capabilities before making a purchase decision.
1 Please refer to the Practice Circular (No. 15-05(CR)).
2 Please refer to the Practice Circular (No. 17-02(CR)).
