Avoiding property tussles

Source : Today - 19 Feb 2009

Reduce risk of bargains turning into legal liabilities

IN THE current recession, people with ready cash are looking to pick up good bargains. However, tread with care.

Reported cases that I took on over the years showed that property investors unwittingly fell into costly legal tussles because they failed to take the necessary safeguards before putting down their money.

What seem like simple and standard procedures in a property transaction can lead to expensive, drawn out legal battles. Here are four tips for minimising your risks.

Tip 1: Do on-site approval checks
The year was 1991, just after the Gulf War. Property values had dived sharply here.
My client, who owned a Lornie Road home, was faced with a lawsuit from a buyer wanting to back out of the deal.

The buyer claimed that the seller had not disclosed substantial unauthorised additions and alterations to the property, which affected its title.

At stake was the recovery of a $250,000 deposit from the buyer.

Fortunately for my client, the Appellate Court was persuaded that a seller’s obligation to disclose in a conveyance did not extend to unauthorised structures where no order or notice had been issued by the Building Control Division, as that relate only to an issue of quality and not title.

In a sale and purchase of property containing unauthorised alterations and additions, caveat emptor ­applies.

This means it is for the buyer to protect himself by checking that the property is free of illegal additions and alterations before buying the option, or to include in the option to purchase, a clause enabling the buyer to exit the purchase before completion if there are illegal or unauthorised alterations and additions.

Tip 2: As a buyer, ensure you have exit or compensation clause

Last year, I represented a couple that had contracted to sell their Changi terrace house, which had an unauthorised second storey.

The buyers wanted the couple to restore the unauthorised structure, claiming they would suffer huge financial damages if they were to buy a property which required regularisation of unauthorised works.

They further argued that if the works could not be regularised, and had to be removed, this would reduce the built-in area.

It seemed like a case that was plainly in favour of the buyers.
As it turned out, the couple won the case on the argument that the contract was inadequate and did not provide for an exit or compensation clause for the buyers, where there were unauthorised works on the property.

Tip 3: Think carefully before signing on the dotted line

Beware of buying on a whim and then changing your mind.

A caveat cannot be filed willy-nilly and unless a party has an interest in the property, he can be liable for damages and costs for wrongful filing.

Tip 4: If you have to sue, do it before the time warranty lapses

In a case where a developer was suing an architectural firm for professional negligence, the claim failed because it was not filed within six years from the act of negligence.
An injured party must pursue a claim with diligence. Otherwise, it may fail because of the time bar.

The writer is director of Bernard & Rada Law Corporation. She has 22 years‚ experience in property and commercial litigation.

HK’s Peak residential prices at decade low

Source : Business Times - 19 Feb 2009

Property prices on The Peak, most expensive residential area on the Hong Kong Island, experienced the biggest drop since the Asian financial crisis 10 years ago, according to local media yesterday.

The prices slumped 41.4 per cent in the final three months of last year compared with the previous quarter. The fall was the biggest on record in Hong Kong’s luxury real estate market, underscoring the seriousness of the global economic slump, the South China Morning Post reported.

In the final three months of 1997, prices on The Peak fell only 16 per cent, property consultant CB Richard Ellis said, though it cautioned that a slump in sales meant one big transaction could skew its figures.

‘Prices on The Peak have increased most rapidly over the past few years and that’s why they dropped the most once the market entered a down cycle,’ said Margaret Ng, a senior director at the firm.

Ms Ng said prices on The Peak rose 27 per cent between the last quarter of 2007 and the second quarter of last year, to an average of about HK$327,373 (S$64,555) per square metre.
‘The economic outlook is still uncertain. The effect of the economic rescue packages may be seen in the second half of this year. We have to wait and see,’ she said.

Simon Lo Wing-fai, a director at property consultant Colliers International, said fewer than 10 homes priced at HK$15 million or more had been sold citywide each week since the onset of the global financial crisis. He said that 30 to 40 luxury homes were being sold every week before the start of the crisis.

Average luxury residential prices fell to about HK$118,611 per square meter in December, returning to September 2007 levels, he said, expecting that prices will drop 15 to 20 per cent this year.

Adrian Ngan Wai-hung, an executive director of research at CCB International Securities, believes property prices will drop a further 5 to 10 per cent in the short term but that they will stabilise in the second and third quarters of the year.