Managing Property Title Risks for a Smooth Completion

Q1｜Which category poses the highest risk? Why?

Lis Pendens (Lis Pendens)

• A registered lis pendens must be canceled by a court order and properly registered to be considered an acceptable completion status; before cancellation, most banks will not lend, and the settlement risk is extremely high.

Q2｜What is the difference between Lis Pendens and Caution (Warning Registration / Similar Interest Alert)?

• Lis Pendens: Indicates that the property is involved in ongoing litigation; it can only be removed by court order under Land Registration Ordinance (Cap.128) Sections 19–21.
• Caution (Warning Registration / Similar Interest Alert): Serves as a alert mechanism for interest claims; under the current system and the future Land Titles Ordinance (Cap.585), it is advisory in nature, and it is advisable to obtain a withdrawal / no objection document before completion.
• Regardless of the type of alert / warning registration, it is safest to obtain a written document of withdrawal or proper handling before completion.

Q3｜Impact and Handling of Building Authority / Government Statutory Orders (Dangerous Building Orders, Repair / Demolition Orders, etc.) on Transactions

• The government can carry out works on behalf and recover costs + supervision fees + surcharges; related orders and compliance status are often registered with the Land Registry.
• Common practices:
  • Seller to clear the order and submit proof of compliance before completion; or
  • Use price adjustment / retention money to offset the pending portion (specify timeline and responsibilities); or
  • Buyer takes over (requires discount + clear timeline + responsibility allocation), and confirm acceptability in advance with banks / insurers.
• Alternative "adverse items": If a Lands Department breach of covenant warning letter (commonly known as "charging order") is registered, it is a contractual burden, generally requiring rectification or proper arrangement of price / responsibilities before completion.

Q4｜What is the impact of an undischarged mortgage/legal charge on completion? How to manage it through contract?

• Principle: On the completion date, a registrable clean title must be delivered; if a Mortgage/Legal Charge (commonly an all-monies charge) is still found in the search, it must be properly executed and submitted on the same day as completion with a valid discharge document (Release/Discharge/Receipt on Discharge of a Mortgage/Legal Charge).
• Contract recommendation: Include "discharged and registrable" as a condition precedent to completion + a long-stop date; if not achieved by the deadline, the buyer can terminate without liability or postpone and withhold part of the purchase price (as agreed).

Important Risk Notice｜Deposit Escrow

• Estate Agents AuthorityGuidelines clearly remind: When a property has an uncleared mortgage, the initial and additional deposits should be arranged in the provisional/formal agreement to be held in escrow by a law firm as a stakeholder; Direct payment to the seller carries high risks (e.g., the seller may fail to redeem the mortgage or go bankrupt).