By Poyi (Natalie) Leung
Sale of uncompleted property in Macau will be subject to specified legal norms in the near future, an attempt by the Government to prevent non-standard transactions in the market as well as to increase protection for both housing developers and buyers.
The public consultation for the legal system to regulate unfinished property transactions has now begun and will run until April 25.
At present, the sale of uncompleted apartments in the SAR is overseen only by the “reservation contract” system in the Civil Code.
Director of the Legal Affairs Bureau (DSAJ), Cheong Weng Chon, said in a press conference yesterday that the draft law is expected to be delivered to the Legislative Assembly for deliberation in the fourth quarter of this year.
According to the proposal released yesterday jointly by DSAJ and the Land, Public Works and Transport Bureau (DSSOPT), developers can apply for approval from DSSOPT to sell uncompleted property only after the temporary hierarchical registration with the Property Registry is completed, the construction license is acquired from DSSOPT and the foundation works are completed.
Developers who launch a pre-sale without a DSSOPT approval will constitute an administrative violation and receive a fine as well as other additional penalties.
With regard to the sale and resale contracts, it is proposed that they must have to be authenticated and signed by a public or private notary before effects can take place.
In order to prevent non-standard transactions such as internal sale and also to increase the speculation cost, contracts that are not signed in line with the law will result in an administrative fine for the developer.
Lawyers or real estate agents who witness the signing of these contracts will also be fined and subject to disciplinary responsibilities.
The Government has proposed that each sale or resale contract must include a set of provisions, which will clearly state the details of public facilities (such as clubhouses, if any), unit layouts, construction and usable areas, payment schemes, delivery date of the property as well as responsibilities and penalties if the contract is breached.
A draft of the contract will need to be approved by the DSSOPT to ensure that all these mandatory provisions are included.
Contracts without all or part of these provisions will be deemed invalid.
Cheong Weng Chon said a sample contract will be provided to developers for reference after the law comes into effect.
In addition, with an aim to increase transparency of the sale and avoid developers from selling the same apartment to more than one buyer, property registration of unfinished property transactions will become mandatory under the proposed law.
The DSAJ director disclosed that the number of uncompleted apartments already registered were respectively 52 (in 2006), 190 (in 2007), 35 (in 2008), 128 (in 2009) and 142 (in 2010).
He also said neither DSSOPT nor DSAJ had been reported cases of “one property being sold to multiple buyers” in recent years, but stressed that a legal system to regulate the sale is still necessary to prevent the problem from emerging in the future.
Furthermore, before the property is completed, if a buyer fails to settle the installments for a certain outstanding period according to the payment scheme already agreed upon on the contract, the developer will be able to resell the property to another buyer.
However, the original buyer must have to be notified about the resale and the new contract will also need to put a note explaining the situation to the new buyer.
Cheong said after the law comes into effect, existing sale contracts will remain valid but if the unfinished property is to be resold, the resale contract needs to be signed by a notary and be registered.
Copies of contracts established before the law is in effect will also be required to be sent to the Property Registry for registrations.
Nevertheless, Cheong reiterated that although the law enables higher protection for the two sides, risks cannot be completely avoided for buyers as they are purchasing a “future product”.