The Residential Properties (First-Hand Sales) Ordinance (Cap. 621) came into full effect on 29 April 2013. It is the primary legislation governing the sale of newly built residential units in Hong Kong. Before the ordinance, the first-hand market operated with limited standardisation, and buyers often faced opaque pricing, misleading brochures, and unclear floor plans. The ordinance was enacted to level the information asymmetry between developers and purchasers. It applies to all residential properties that have never been sold and are offered for sale by a vendor (typically a developer) in Hong Kong. This article explains the key provisions, practical implications for buyers, and how to use the ordinance to your advantage.
Scope and Application of the Ordinance
The ordinance applies to any first-hand sale of a residential property in Hong Kong, including houses, apartments, and serviced apartments that are classified as residential under the Buildings Ordinance. It covers both completed units and units under construction (commonly known as “pre-sale”). The vendor must be the owner of the property or a person authorised by the owner. The ordinance does not apply to second-hand sales, sales by the Housing Authority under the Home Ownership Scheme, or sales of commercial properties.
Key definitions under Cap. 621:
- “Residential property”: any property that is designed or adapted for residential use, including a flat, house, or a part of a building used as a dwelling.
- “First-hand sale”: a sale where the property has not previously been sold (i.e., it is the first transfer of ownership from the developer to a purchaser).
- “Vendor”: the person who sells the property, usually the developer or an associated company.
- “Sale”: includes an agreement for sale and purchase, an assignment, and a preliminary agreement (such as a provisional sale and purchase agreement).
Key Requirements for Developers
The ordinance imposes strict requirements on developers at every stage of the sales process. These requirements are designed to give buyers clear, accurate, and timely information.
Sales Brochure
Developers must prepare a sales brochure for each development. The brochure must contain specific information, including:
- A location plan showing the development’s position within a 250-metre radius, including roads, public transport stops, and nearby buildings.
- Floor plans of each unit with dimensions (length and width) in millimetres, and the gross floor area and saleable area clearly stated.
- A list of all finishes, materials, and fittings provided in the unit (e.g., floor tiles, kitchen cabinets, sanitary ware).
- Details of the management company, management fees, and any special levies.
- Information about the building’s structural components, such as load-bearing walls, columns, and beams.
- Any “glass curtain wall” or “bay window” areas, which are included in the saleable area calculation.
The brochure must be made available free of charge to any person who requests it, at least seven days before the first day of sale. You can download the brochure from the developer’s website or obtain a printed copy at the show flat. For more details on interpreting these documents, see Reading a Sales Brochure.
Price List
The ordinance requires the vendor to publish a price list for all units offered for sale. The price list must include:
- The unit number, floor, and block.
- The saleable area of the unit (in square metres and square feet).
- The total selling price (in Hong Kong dollars) before any discounts.
- A clear statement of any discounts, rebates, or concessions offered (e.g., early bird discount, cash rebate, stamp duty subsidy).
- The net price after all discounts (if applicable).
- The price per square foot/meter of saleable area (both before and after discounts).
The price list must be published on the developer’s website and made available at the show flat at least three days before the first day of sale. This “three-day cooling-off” period allows buyers to study prices without pressure. To understand how to compare prices across units, read Deciphering Price Lists.
Show Flats
If a developer constructs a show flat, the ordinance imposes strict rules:
- The show flat must accurately represent the unit’s dimensions, layout, and finishes. Any deviations (e.g., removal of a non-load-bearing wall) must be clearly indicated.
- For show flats that are not built to actual size, the developer must display a notice stating the dimensions of the actual unit.
- The developer cannot use furniture or decorations that misrepresent the size of the room (e.g., using scaled-down furniture to make a room appear larger).
- Visitors must be allowed to take measurements and photographs (subject to reasonable restrictions).
Sales Arrangements
The ordinance regulates the sales process to prevent unfair practices:
- The vendor must announce the number of units for sale in each phase and the method of sale (e.g., public ballot, tender, first-come-first-served).
- For sales by ballot, the vendor must conduct a fair and transparent draw. The results must be posted on the website.
- The vendor cannot reserve units for selected buyers or offer undisclosed preferential treatment.
- Any “price adjustments” (e.g., increasing prices for later phases) must be clearly communicated.
Buyer Protections and Rights
The ordinance provides several important protections for purchasers.
Right to Cancel (Cooling-Off Period)
For first-hand sales, the purchaser has a statutory right to cancel the provisional agreement within three working days after signing. This is known as the “cooling-off period”. If you cancel, you forfeit 5% of the purchase price (the deposit). This right cannot be waived. The developer must give you a written notice informing you of this right at the time of signing.
Mandatory Pre-Sale Information
Before signing any agreement, the vendor must provide you with:
- A copy of the sales brochure (or a link to download it).
- A copy of the price list.
- A copy of the draft sale and purchase agreement (which must include all material terms).
- A “Register of Transactions” showing the prices at which previous units in the development were sold (if any).
If the vendor fails to provide these documents, you may have the right to rescind the agreement and get your deposit back.
Misrepresentation and False Statements
The ordinance makes it a criminal offence for a vendor to make a false or misleading statement in any sales material, including brochures, advertisements, price lists, or oral statements. If you suffer loss because of a misrepresentation, you can sue for damages. The enforcement agency is the Estate Agents Authority (EAA) and the Police. In practice, most disputes are resolved through civil litigation.
Register of Transactions
The vendor must maintain a register of all transactions for the development, updated daily. The register includes:
- The date of the agreement.
- The unit number and floor.
- The agreed price.
- The name of the purchaser (if they consent).
This register is available for public inspection at the developer’s office and on its website. It helps you see the actual transaction prices, which may differ from the listed price due to discounts.
Practical Steps for Buyers
Here is a step-by-step approach to using the ordinance to your benefit when buying a new property.
- Check the sales brochure: Download the brochure at least seven days before the sale date. Compare the floor plans with the actual show flat. Verify the dimensions using a laser measure (allowed in show flats). Look for any “minor works” or “deviations” that might affect the layout.
- Study the price list: The price list is published three days before sale. Calculate the price per square foot of saleable area for each unit you are interested in. Compare with similar units in the same development and with nearby second-hand properties. Beware of “basket discounts” that are conditional on using the developer’s mortgage or solicitor. For a deeper analysis, see New Developments vs Secondhand.
- Understand the saleable area: The ordinance requires the saleable area to be stated. Saleable area includes the internal area of the unit plus the area of balconies, utility platforms, and air-conditioning ledges (if any). It excludes common areas such as staircases, lifts, and clubhouse facilities. Compare the saleable area with the gross floor area; a large discrepancy may indicate a lot of common area. Read more in Gross vs Saleable Area.
- Review the draft agreement: The vendor must provide a draft sale and purchase agreement before you sign. Have your solicitor review it. Pay attention to the completion date, late completion penalties, and any clauses that allow the developer to substitute materials or change the layout. For a full overview of the buying process, see Step-by-Step Buying Process.
- Check the Register of Transactions: This is a powerful tool to see the actual prices paid by other buyers. If the developer claims that prices are rising, the register will confirm or refute that. You can also see if the developer is offering undisclosed discounts to certain buyers.
- Prepare your finances: First-hand purchases typically require a 5% initial deposit (on signing the provisional agreement), followed by a further 5% within 5-7 days. The balance is paid on completion (usually 90-180 days later for completed units, or upon occupation for pre-sold units). You must also budget for stamp duty, legal fees, and management fee deposits. For a breakdown of all costs, see Transaction Costs Overview. If you need a mortgage, get a pre-approval before you make an offer. Read Pre-Approval and Documentation.
- Use a solicitor: While the ordinance provides many protections, you still need legal advice. Your solicitor will check the title deeds, verify that the vendor has complied with the ordinance, and ensure that the agreement is fair. See Role of Solicitors.
Common Violations and How to Spot Them
Despite the ordinance, some developers still attempt to circumvent the rules. Here are common violations and red flags:
- Incomplete or misleading brochures: Missing dimensions, no location plan, or a floor plan that does not match the show flat. Always compare the brochure with the actual show flat.
- Price list not published on time: The price list must be online and at the show flat at least three days before sale. If it is not, the developer is breaking the law. You can report this to the EAA.
- “Internal” sales or reserved units: Some developers try to sell units to friends or family before the public sale. The ordinance requires all units to be offered to the public on equal terms. If you suspect preferential treatment, check the Register of Transactions for early sales.
- Misleading show flats: Furniture that is smaller than standard, mirrors to make rooms look larger, or removal of walls without clear notice. Take your own measurements and photos.
- Pressure to sign quickly: The ordinance gives you a three-day cooling-off period. If a salesperson tells you that you must sign immediately or the price will increase, they are probably lying. Walk away.
Enforcement and Penalties
The ordinance is enforced by the Estate Agents Authority (EAA), which can investigate complaints and impose disciplinary sanctions on estate agents. The Police can also prosecute criminal offences. Penalties for violations include fines up to HKD 500,000 and imprisonment for up to 12 months. In addition, the vendor may be liable to pay damages to a purchaser who suffers loss due to a breach of the ordinance.
Since 2013, the EAA has issued numerous warnings and prosecuted several cases. For example, in 2015, a developer was fined HKD 150,000 for failing to display a price list three days before sale. In 2018, an estate agent was suspended for six months for misrepresenting the size of a unit. The ordinance has significantly improved market transparency, but vigilance is still required.
Relationship with Other Laws
The Residential Properties (First-Hand Sales) Ordinance works alongside other legislation that affects property buyers:
- Stamp Duty Ordinance (Cap. 117): First-hand buyers must pay stamp duty, including ad valorem stamp duty, special stamp duty (if resold within a short period), and buyer’s stamp duty (for non-permanent residents). See Stamp Duty Categories Explained.
- Money Lenders Ordinance (Cap. 163): If you take out a mortgage from a bank or finance company, the loan must comply with this ordinance. Interest rates and repayment terms must be clearly disclosed.
- Buildings Ordinance (Cap. 123): The design and construction of the property must comply with this ordinance. The sales brochure must include a copy of the building plans approved by the Building Authority.
- Estate Agents Ordinance (Cap. 511): Estate agents involved in first-hand sales must hold a valid license and comply with the code of conduct issued by the EAA.
For a broader understanding of the market context, read How Hong Kong Property Market Works.
Frequently Asked Questions
Does the ordinance apply to commercial properties?
No. The ordinance only covers residential properties. Commercial and industrial properties are governed by separate laws.
Can I sue the developer if the brochure is wrong?
Yes. If you relied on a false statement in the brochure and suffered loss, you can claim damages. You should consult a solicitor. The burden of proof is on you to show that the statement was false and that you relied on it.
What is the “three-day cooling-off period”?
After signing a provisional agreement for a first-hand sale, you have three working days to cancel the agreement. You will lose 5% of the purchase price (the deposit). This right is absolute and cannot be waived. After three days, the agreement becomes binding.
Do I need to hire a solicitor to buy a new property?
It is strongly recommended. The ordinance does not require you to use a solicitor, but the legal documents are complex. A solicitor will protect your interests and ensure that the vendor has complied with all legal requirements.
Can I get a copy of the sales brochure before the show flat opens?
Yes. The developer must make the brochure available at least seven days before the first day of sale. You can download it from the developer’s website or request a printed copy. There is no charge.