1. Provisional Sale and Purchase Agreement and Formal Sale and Purchase Agreement
The first step in buying a property is usually signing the "Provisional Agreement for Sale and Purchase." This document is legally binding, and the buyer must pay a provisional deposit upon signing, typically 3% to 5% of the property price.
If either party backs out, they may be liable for breach of contract or forfeiture of the deposit. Therefore, before signing, ensure:
- Clear understanding of payment arrangements and handover date;
- The contract terms have been reviewed by a lawyer;
- Awareness of whether the property has mortgages, leases, or legal disputes.
After signing the provisional agreement, both parties usually sign the formal sale and purchase contract within 14 days to finalize the terms.
II. Property Search and Legal Due Diligence
Lawyers play a crucial role in property transactions, conducting a "Property Search" (Land Search) for buyers to ensure:
- The registered owner of the property is indeed the owner;
- There are no unreleased mortgages or ongoing lawsuits;
- There are no deed restrictions or issues with government land rent.
If the search results show abnormalities, the lawyer will advise the buyer to postpone the transaction or require the owner to resolve the relevant encumbrances before completing the sale.
3. Stamp Duty and Other Legal Fees
Property transactions in Hong Kong require payment of various types of stamp duty, including:
- Ad Valorem Stamp Duty (AVD): Calculated based on the property price ratio;
- Buyer's Stamp Duty (BSD): Non-Hong Kong permanent residents must pay an additional 15%;
- Special Stamp Duty (SSD): Payable for short-term resale.
Lawyers will assist buyers in calculating the stamp duty amount based on individual circumstances and handling the declaration process to avoid future tax recovery or penalties.
IV. Property Purchase and Financial Risks: The Importance of Stable Income
Even after completing all legal procedures, the ability to make stable repayments remains one of the most critical conditions for property purchase. Many buyers often overlook the potential impact of "health issues or accidents" on their income—once they fall ill or temporarily lose their ability to work, the monthly mortgage pressure can become a heavy burden.
When conducting financial planning, in addition to considering insurance and emergency funds, it is also essential to understand your statutory sick leave entitlements and the salary amount you can receive to ensure that household expenses can be maintained in the event of unexpected circumstances.
📊 You can use this free tool to calculate the actual amount you can receive during sick leave: 👉Paid Sick Leave Calculator
5. The Role of Lawyers in Property Transactions
Every property transaction involves complex documents and legal details. The lawyer's work includes:
- Drafting and reviewing sale and purchase contracts;
- Handling stamp duty, land registration, and property handover procedures on behalf of the buyer;
- Verifying property rights and ensuring the transaction is legally completed.
A professional lawyer can effectively reduce legal risks and strive for the best solution for the buyer in case of disputes.
Conclusion
Buying a property is not just a financial decision, but also a significant commitment involving multiple legal procedures. Understanding the relevant laws, properly planning finances, and securing income are essential to making the path to homeownership stable and safe, truly becoming the starting point for a settled and prosperous life.