Public Consultation on the Proposed Legislation to Regulate the Sale of First-hand Residential Properties

The Real Estate Developers Association of Hong Kong (“REDA”) is pleased to note that the objective of the proposed legislation is “to enhance the transparency and fairness of the sales arrangements of first-hand residential properties” and that “it also aims to strike a balance between enhancing consumer protection on the one hand, and allowing developers to continue to take business decisions in the light of market situation on the other.” (para. 6 of Consultation Paper)

However, REDA notes that there are a number of proposals in the White Bill that are apparently at odds with its stated objective.

Completed vs uncompleted properties

REDA has long held the position that reasonable measures to regulate the sale of first-hand residential flats are a positive move, but that legislation should only apply to uncompleted properties and not completed ones.

The reason is simple: there is no difference in substance between first-hand and second-hand completed flats and no logical distinction can be drawn between the two as, in both cases, the flats can be physically inspected by a purchaser which in itself provides adequate protection.


While REDA supports the principle of adopting saleable area as the basis for quoting unit prices of flats, it should be recognized that quoting GFA in the sale of flats has been the long-standing market practice, and confusion in the market will be created if this practice is to change abruptly. This confusion will further intensify as the primary and secondary markets start to use a different basis for calculating prices, potentially in the same development.

REDA does not understand how the interest of purchasers can be jeopardized by additional information such as GFA. Quite the contrary, the inclusion of GFA along with saleable area will give purchasers a better idea of the nature and extent of the common areas of the development which may impact their use and enjoyment of the property and the amount of management fees they will bear.

The concern of the Transport and Housing Bureau (“THB”) appears to be the lack of a commonly adopted definition of GFA (para. 16 of Consultation Paper). To this end, REDA proposes that a standard definition of GFA be agreed upon and adopted by the entire industry.

Penalties and definitions

REDA believes a clear definition is needed as to what constitutes “misleading information and misrepresentation”. As a general principle, criminal penalty should only be imposed where there is an element of dishonesty or recklessness, and it is inappropriate to criminalize non-compliance with administrative requirements, such as the failure to provide building plans in the sales office for public inspection. The threat of criminal prosecution may be exploited by litigious purchasers who are seeking to rescind their agreements, particularly during a downturn in the property market.

Further, the Securities and Futures Ordinance (SFO) on which the proposed legislation is based, is not an appropriate model as the SFO is designed to regulate the highly complex securities papers which bear little resemblance to residential properties that are both tangible and physical.

Inability to reduce price

It is not uncommon for developers to offer special discounts from time to time to help close a deal. Under the proposed legislation, any price revision (including reduction) will require the issuance of a new price list which means that the sale cannot take place until 3 days later. This is not practical and cannot be working in the interest of purchasers.

REDA proposes that the flexibility to reduce price should be retained.

Exemption of the Housing Authority

REDA sees no valid reason for exempting the Housing Authority from the legislation. For the sake of fairness and openness, all developers (Housing Authority included) should be subject to the same rule.

REDA is ready and willing to work with the THB with the view of bringing the proposed legislation in line with its stated objective.