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| Home Advice Tips |
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The provisional agreement for sale and purchase is a valid and legally binding contract. Upon reaching agreement on the property price and other terms and conditions, the seller and the buyer may sign the provisional agreement, which shall include the following basic elements:
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| 1. |
Date of the agreement
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| 2. |
Names, Identity Card numbers, correspondence addresses and telephone numbers of the seller and the buyer.
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| 3. |
The detailed address of the subject property and whether it will be handed over with vacant possession. A list of the furniture, electrical appliances and fixtures (if any) included in the sale should be set out as well.
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Agreed price of the property.
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Payment schedule of the provisional deposit, formal deposit and the remaining balance.
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Completion date.
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The apportionment of the legal fees between the parties.
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The amount of brokerage commission, which party shall pay and when.
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The compensation for one party upon breach of contract by the other party. |
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It is your solicitor, not a paralegal or legal clerk, who should explain to you the terms and conditions of the formal sale and purchase agreement.
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If furniture, electrical appliances and fixtures are included in the sale, they should be specified in detail in the agreement and shall be inspected carefully upon handover.
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Upon signing the formal agreement, the formal deposit, together with the stamp duty, is payable to the solicitor, who will redirect the latter to the Inland Revenue Department.
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Upon signing the formal agreement, the title still remains with the seller, who is liable for the rates and government rent, as well as water and electricity bills until the handover. Nevertheless, the risk of any damage to the property will be borne by the buyer. Hence, buyers of second-hand properties should take out home insurance policies for their properties as soon as possible.
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Within one week after the formal agreement is signed, you should check with your solicitor if the stamp duty has been paid in order to protect your own interests.
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On the completion date, you should inspect the property to see that it is to your satisfaction before paying the remaining balance of the property price. If any condition is found to be inconsistent with the agreement, such as any variations in the furniture or electrical appliances from what is specified therein, a detailed record shall be made for the solicitor to follow up.
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If you are fully satisfied after the inspection, the Deed of Assignment should be signed and the remaining balance of the consideration (normally equivalent to 90% of the property price) should be paid on the completion date. If a mortgage is to be drawn, payment of the remaining balance to the seller will be handled by the solicitor authorised by the bank.
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The transaction will be completed by the seller handing over the keys to the solicitor or property agent for delivery to the buyer.
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Solicitor:
You should seek professional legal advice before signing the provisional and formal agreements. Generally speaking, the seller and the buyer should engage different solicitors to fully protect their respective interests and avoid any conflict of interest. However, under certain circumstances, such as the sale and purchase of a presale property or the first sale of a completed property, the developer may require the buyer to engage the same solicitor. As such, before buying a property, you should check with the developer to see if you can engage your own solicitor.
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Deposits:
According to market practice, the buyer is required to pay a provisional deposit, normally equivalent to 3%-5% of the property price, upon signing the provisional agreement. The sum of the provisional and formal deposits are normally equal to 10% of the property price, and the formal deposit is normally payable when the formal agreement is signed. |
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