The interest of Hong Kong people in purchasing properties situated outside Hong Kong has been on the rise in recent years. At the same time, there has also been an increase in the number of companies, including licensed property agents, taking part in the sale of such properties.

However, most consumers have limited knowledge of foreign regulatory regimes and taxation systems governing the purchase or leasing of these properties by foreign buyers. In particular, purchasing an incomplete property outside Hong Kong carries greater risk and may lead to a higher chance of complaint, as purchasers not only lack the opportunity to inspect the property and the progress of its construction, they may also have limited knowledge of the background and financial standing of the developers.

The Estate Agents Authority (EAA) therefore issued a practice circular, which took effect last year, on handling the sale of incomplete properties situated outside Hong Kong, to provide guidelines for licensed property agents to follow. Such guidelines only regulate licensed property agents, as non-licensees are outside the purview of the EAA.

Here I would like to share a case in which a licensed estate agency was in breach of the guidelines.

During an inspection of printed advertisements, EAA staff discovered that an advertisement of an incomplete property development in the United Kingdom issued by a licensed company did not comply with the requirements of the practice circular. The advertisement did not state clearly the development permit or approval numbers, the name of the relevant authority which issued such documents, and whether purchasers are acquiring an interest in the land, the building to be erected, and/or a right to use and occupy the properties in the building.

The estate agency admitted its negligence and the fact that it had failed to read the practice circular carefully. It reassured us that they would comply with the relevant guidelines in the future.

The EAA Disciplinary Committee found the estate agency had failed to comply with the guidelines. It was in breach of paragraph 3.2.1 of the Code of Ethics issued by the EAA, which states: “property agents and salespersons should be fully conversant with the property agents ordinance, its subsidiary legislation, this Code of Ethics, and other guidelines issued by the EAA.”

Having considered the nature and gravity of the case and the disciplinary record of the estate agency, the committee decided to reprimand the company and imposed a fine of HK$3,000 on it.

Although the sale of properties situated outside Hong Kong is generally outside the purview of the EAA, the conduct of licensed property agents is regulated by the EAA. In fact, the guidelines in the practice circular are extensive and include requirements for licensees to obtain a due diligence report on the vendor and the related incomplete property; to obtain legal opinion issued by a lawyer practising in the place where the property is situated; and there are also requirements for the issuance of advertisements and sales information sheets, etc by the licensee.

I would like to remind the public of a few important points to note before deciding to purchase a non-local property. First, an agent that only engages in handling properties outside Hong Kong shall be exempt from the requirement of obtaining a licence from the EAA. Hence, if the agent is unlicensed, he or she is not regulated by the EAA, as opposed to licensed property agents, where the EAA can follow up on their misconduct. That said, consumers should also note that the EAA is unable and not in a position to assist them in pursuing any loss against any parties, and they will need to file a lawsuit by themselves.

Furthermore, consumers are advised to do their homework when purchasing non-local properties to better protect themselves.

For instance, since legal procedures for property transactions vary in different jurisdictions, consumers are advised to seek legal advice from a local legal practitioner so as to understand legal and operational procedures, and whether there are restrictions imposed on foreign purchasers relating to property buying, selling, leasing, or the taking out of a mortgage loan; and whether common law or local law will be exercised in case of litigation, so that their own interests are better protected.

Ruby Hon Yuen-ping is the chief executive of the EAA