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By virtue of Article 7 of the Basic Law, the land within the Hong Kong SAR is now owned by the People’s Republic of China (PRC) and managed by the SAR Government. A piece of "private land" in Hong Kong is, in reality, just a piece of land granted by the government in the form of a "government lease", which confers the right of possession of the land to the land possessor or the landlord for a term of years. On expiration of the term, the government has the power to resume possession of the land, though the possessor can usually renew the term by paying an additional premium.
Today in Hong Kong, most immovable properties (including residential flats, offices and factories) are in the form of flats, located within multi-storey buildings. The owner of a flat has, together with owners of other flats within the same building, a "joint ownership" (or a "tenancy in common") over the piece of land on which the flats were built. He also has a right of exclusive use of his flat.
In other words, when we talk about the "sale" of land or property we are actually referring to the process whereby a land possessor conveys his rights and obligations in the government lease to the purchaser.
A typical "sale" of property in Hong Kong can be divided into three separate processes: (1) negotiation, (2) contract, (3) completion, i.e. signing the deed of assignment. If the two parties of the sale agreed, they could skip the process of contract and sign the deed of assignment right away after negotiation.
In Hong Kong, the Land Registrar is merely responsible for registering deeds and written documents about land, but not responsible for verifying the covenants and the validity of these documents. Therefore, the purchaser in a conveyance must, before concluding a contract, prudently inspect all deeds and written documents concerning the property, in order to obtain a good title. As the process of verification can be very complicated indeed, it is common for the two parties of a conveyance to separately instruct their solicitors to verify the title, as well as to draft the Contract of Sale and the Deed of Assignment, on their behalf.
A lease is basically a contract setting out the rights and responsibilities between a "landlord" (or "leasor") and a "tenant" (or "leasee") over a piece of land or property. A lease confers the tenant an exclusive right of possession over the land or the property during a fixed period of time. Normally, the tenant is required to pay rent.
An agreement must satisfy the following conditions before it can be regarded as a valid lease:
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The two parties must have had an intention to create a lease;
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The agreement must be one that purports to grant the tenant an exclusive right of possession over the land or the property;
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The term (i.e. duration) of the lease has to be certain;
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The landlord creating the lease must have retained the right of reversion;
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The formalities required by law must have been complied with.
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Although as a general rule the landlord and the tenant can freely agree on an appropriate rent, security of tenure and the extent of any increase in rent are matters regulated by legislation.
Further, if the tenant violated certain conditions of the lease, the landlord would have a statutory right to forfeit the lease. And at the end of the term of a periodic tenancy, unless one of the parties has served a "notice to quit" on another, the tenancy would automatically continue with the same terms. Of course, both the landlord and the tenant can "determine" (i.e. discontinue) the lease at the end of any period by serving an appropriate "notice to quit", with or without the consent of the other party.
The nature of a mortgage is a "charge" which confers a security to one who lends money to another. It is common to create a mortgage on land or on an immovable property.
Since 1984, legal mortgage can only be created by way of a charge and by deed. On the other hand, equitable mortgage merely requires an enforceable agreement between the two parties to create a mortgage. The most common form of equitable mortgage in Hong Kong is a mortgage over uncompleted property. Interests can be calculated in a number of ways – as a general rule the applicable method of calculation can be freely determined by negotiation between individual banks and individual mortgagors. However, the laws of Hong Kong have laid down certain limitations on the maximum rate of interests payable.
After the debt owed by the mortgagor (i.e. the borrower) to the mortgagee (i.e. the lender, usually but not necessarily a bank) has been paid off, the mortgagee’s solicitors would add a receipt clause into the deed of mortgage. The mortgagee would then sign the clause and the mortgage is discharged. But in the event of default of payment, with sufficient notice, the mortgagee can usually exercise its power of sale (of the mortgaged property), or appoint a receiver, to recover the debts.
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