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Searching, finding and agreeing
The process begins with the seller putting his premises on the market and the buyer searching for and inspecting the premises through agents.
Once the buyer finds a suitable premises, the seller and buyer will agree on the principal terms such as purchase price; when the formal agreement for sale and purchase will be signed; the date of completion; any special features or furniture to remain in the premises and to be included in the purchase price; and any other conditions and relevant issues which either seller or buyer wishes to include as part of the sale and purchase.
It is usual for the buyer to pay the required stamp duty. Stamp duty ranges from HK$100 to 3.75 per cent of the value of the property depending on that value. Since the general principle of caveat emptor/buyer beware applies, the buyer should by this time have carried out all necessary due diligence checks on the property including a physical survey if appropriate. |
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Provisional agreement for sale and purchase
The seller and buyer will sign a provisional agreement for sale and purchase setting out the agreed principal terms. At this point the buyer will normally pay an initial deposit, which is usually equivalent to three to five per cent of the purchase price.
If the buyer requires a mortgage loan to finance his purchase, the buyer should obtain an approval in principal from the relevant bank approving the advance of the required loan prior to the signing of the provisional agreement for sale and purchase.
If the buyer fails to sign the formal agreement for sale and purchase or to complete the purchase, the deposit paid by him will normally be forfeited by the seller. In addition, the party failing to sign the formal agreement for sale and purchase will generally have to cover the commission payable to the agent under the provisional agreement for sale and purchase. |
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Formal agreement
The seller and buyer will engage their respective solicitors to negotiate the terms of the formal agreement for sale and purchase to cover issues which are not included in the provisional agreement for sale and purchase.
It is common that the formal agreement for sale and purchase will include an "all agreement" clause which states that any agreements, representations or warranties reached or made by the parties prior to the signing of but which are not included in the formal agreement for sale and purchase shall be deemed to have been withdrawn and superseded. Therefore, it is essential that the seller and buyer keep their solicitors informed of any agreement, whether written or oral, reached by the parties. |
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Due diligence
The buyer's solicitors will conduct a due diligence investigation so as to ensure that the seller can give good title to the premises which is unaffected by any rights in favour of third parties to the detriment of the premises and to check if there are any obligations attached to the premises which are not disclosed in the title deeds (e.g. unpaid payment of management fees, government rates, government rent and other outgoings). |
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Title transfer
Upon the buyer's solicitors being satisfied that the seller has good title to the premises and (if applicable) the receipt of instructions from the mortgagee bank to prepare the mortgage documents, the buyer's solicitors will draft and arrange for the execution of the deed of assignment (title transfer) and the mortgage deed at its office usually a few days prior to the date of completion. Normally, the buyer will also pay the seller a sum for the management fees deposit, public utilities deposit and other transferable deposits. The buyer can recover similar deposits from a subsequent purchaser. |
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Take possession
Unless the premises is sold subject to an existing tenancy, the buyer should carry out one further inspection of the premises on the day preceding or on the actual date of completion to verify that the seller is actually ready to deliver vacant possession of the premises to the buyer on completion.
Once the completion cheque is received by the seller on the date of completion, the seller will release the keys to the premises to the buyer through either the seller's solicitors or the agent.
The buyer's solicitors will usually attend to the post completion procedures (i.e. stamping and registration of the deed of assignment and the mortgage deed). After the post completion procedures have been wrapped up, the buyer's solicitors will return the title deeds to the buyer or to the relevant mortgagee bank for safekeeping. |
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