THE UNIVERSITY OF HONG KONG

DEPARMENT OF PROFESSIONAL LEGAL EDUCATION

CONVEYANCING

LECTURE NO 1

OVERVIEW OF A CONVEYANCING TRANSACTION

THE PURPOSE OF THIS LECTURE is:

(a) to take you through a conveyancing transaction from the preliminary agreement to completion so that, by way of an overview, you will understand how the different elements in the transaction interconnect and;

(b) by way of illustration, to explain the transactions involved when a multi-storey building is constructed on a site and the flats are sold off to successive purchasers and, in particular, to identify the contents of the Schedule to the successive assignments

PART I

THE STAGES OF A `SIMPLE' CONVEYANCING TRANSACTION

A `simple' conveyancing transaction: the stages listed below assume that the property owned by the vendor is not presently subject to a mortgage. If the property is subject to a pre-existing mortgage, then additional steps have to be taken to have the mortgage discharged so that the vendor may assign the property free from the mortgage.

(1) Preliminary Agreement (signed in estate agent's office)....preliminary deposit paid.............is the agreement binding?........If so problems may arise for both vendor and purchaser.

1

(2) Parties retain solicitors...joint or separate representation (see rule 5C Solicitors Practice Rules) .....

(3) Solicitor for Vendor should acquire title deeds (originals or certified copies) and carry out search in Land Registry.......he should then check title carefully. If defects found he must make subsequent provision for these defects in the Sale and Purchase Agreement.....must not hide them........(4) Solicitor for Vendor should check to see whether any consent to sell is needed: eg under the Consent Scheme for presale of flats in multi-storey buildings......if such needed, it should be obtained.......

(5) Title deeds sent to purchaser against undertaking by solicitor to return on demand..............

(6) Purchaser must arrange finance.......

(7) Draft sale and purchase agreement prepared by vendor and sent to purchaser together with any remaining title deeds.............. negotiation of formal Sale and Purchase Agreement.....what fixtures and fittings are included?........completion date?......

(8) Solicitor for Purchaser checks title by perusing title deeds..............

Common defects to look for:(i) missing title deeds(ii) improper execution of title deeds; by companies; under power of attorney(iii) discrepancies in signatures on title deeds(iv) encumbrances on the title; eg mortgages, charging orders; rights of way, restrictive covenants; (v) potential liability for estate duty on gifted property; (vi) notices of resumption, demolition, re-entry, closure etc

(9) Solicitor for Purchaser checks user provisions in Government Lease/Conditions, DMC, Outline Zoning Plan, Occupation Permit

(10) Solicitor for Purchaser makes inquiries from vendor and other authorities such as Highways Department to ensure no encumbrances or potential development that will interfere with Purchaser's enjoyment of property.......

(11) Purchaser or his solicitor visits to ensure that no occupant has any interest in property by way of resulting

2

trust.....

(12) Purchaser or his solicitor (perhaps with surveyor) visits to ensure that there are no illegal structures affecting the property;

(13) Execution of Sale and Purchase Agreement.......procedure.....two copies;...drafted by vendor... amended in red by purchaser...if amendments approved by vendor, agreement executed by purchaser and sent together with deposit to vendor....executed by vendor.......copy sent to purchaser.......

(14) Stamping and registration of sale and purchase agreement.........

(15) Assignment drafted by solicitor for Purchaser and approved by solicitor for Vendor......executed in escrow by Purchaser........

(16) Method of completion agreed upon - usually by way of undertaking..........both parties must approve draft completion undertakings.....

(17) Completion statement sent by Vendor's solicitors to Purchaser's solicitors.........

(18) Mortgage finalised with bank........mortgage executed......cheque for loan sum sent to purchaser's solicitors..........

(19) On completion date purchase price, less preliminary deposit and main deposit, sent by cheque (usually by messenger) to Vendor's solicitor against Vendor's solicitor's undertaking to send executed assignment together with title deeds within 21 days........

(20) Purchaser occupies flat unless arrangement made for earlier occupation......

(21) Assignment and mortgage registered............

(22) Solicitor for parties send their accounts for payment.

***************************************************************

For a more detailed account, see Conveyancing Checklists:

3

Checklist I Vendor: Conveyancing Stages

Checklist II Purchaser: Conveyancing Stages

***************************************************************

4

PART II

SALE OF FLATS IN A MULTI-STOREY DEVELOPMENT

The purpose of this part of the lecture is to consider the procedure by which land is developed by way of the construction of a multi-storey building and flats in the building are sold to successive purchasers. We shall pay particular attention to the property description in the assignment, which will be located in the Schedules to the successive assignments. The suggested format and contents of the assignments can be found in Form 1 of the Third Schedule to the Conveyancing and Property Ordinance. The Schedule in blank provides:

1. The Property -

(a) Description and address

(b) Lot number, sections, undivided shares

(c) Exceptions and reservations

(d) Easements and appurtenant rights

[(e) Covenants may be added]

[Note: only pre-existing interests, rights and burdens must be included in the Schedule; for example, newly created easements and covenants must be inserted in the body of the assignment which creates them]

2. The Government lease -

(a) Date

(b) Parties

(c) Term

(d) Lot number

DIAGRAMME:

Note: For the purposes of this illustration, I am ignoring any development conditions or restrictions on alienation in the Government lease/conditions of grant

1. Grant of Government lease/conditions and sectioning of the Lot

The title will commence with either a Government lease (formerly Crown lease) or conditions of grant/sale. Let us assume that conditions of sale No 900 in respect of Inland Lot No 1234 are granted to Patten & Co on August 1st 1980. Patten & Co decide to divide the plot on the ground into three parts. This is known as sectioning and is effected by deed poll. A Section Plan is now drawn up. The Lot will now comprise Section A of Inland Lot No 1234, Section B of Inland Lot No 1234 and the Remaining Portion of Inland Lot No 1234. The division will be recorded in the Section Register in the Land Registry.

2. Assignment of a section

Patten & Co decide to sell Section A of Inland Lot No 1234 to Chan Co. The property will be assigned to Chan Co by reference to the Section Plan and the Schedule to the assignment will specify the reservations, easements, appurtenant rights, covenants etc contained in the conditions of sale No 900. Let us assume that the assignment will be registered by memorial No 11111.

3. Subdivision of the Section

Chan Co now decides to build a multi-storey building on the Lot and he must therefore subdivide the plot accordingly. Let us assume that the multi-storey building, called Flora Villa, which now has the address of 156, Lockhart Road, Wanchai, comprises 9 flats. The lot may be notionally subdivided into, let us say, 900 equal undivided shares and 100 shares will be allocated to each flat. This subdivision is recorded on a Subdivision Plan. The proper description of each flat is therefore `100 equal undivided 900th shares of and in Section A of Inland Lot No 1234.'

A Deed of Mutual Covenant for the building is then drafted showing the division of the building and allocating the appropriate number of shares to each flat.

4. Sale of first flat (Flat F) to Mr Scott

The first flat to be sold is flat F to Mr Scott. Mr Scott, as the purchaser of the first flat in the development to be sold, and Chan Co execute the Deed of Mutual Covenant and the deed of Mutual Covenant is registered as, let us say, memorial number 22222. Scott and Chan Co also execute an assignment of the flat to Scott, whereby Scott is assigned 100 undivided 900th shares in section A of Inland Lot No 1234, together with the exclusive possession of flat F and the use in common with the other co-owners of the common parts of the building. The Schedule to the assignment will refer to the property as identified on the Subdivision Plan and marked...[pink]. In the assignment from Chan Co to Scott, Chan Co will reserve for itself all rights in relation to the other flats and the assignment will also require Scott to pay an apportioned sum in respect of the Government rent for the lot. The assignment will be registered as memorial 33333. Mr Scott will become a tenant in common with the other co-owners of the building.

The Schedule to the assignment No 33333 will be drafted as follows:

1. The Property

(a) Description and addressFlat No F, Flora Villa, 156, Lockhart Road, Wanchai,

more particularly delineated and coloured [pink] on the plan attached to this assignment.

(b) Lot Number, sections, undivided shares100 equal undivided 900th shares of and in Section A of

Inland Lot No 1234.

(c) Exceptions and reservationsThe exceptions and reservations in conditions of sale No

900 and in assignment memorial No 11111.

(d) Easements and appurtenant rightsThe easements and appurtenant rights in conditions of

sale No 900 and in Assignment memorial No 11111. [The right to exclusive possession of Flat F will be set

out in the body of the assignment since it is a newly created right.]

(e) CovenantsThe covenants in the conditions of sale No 900 and in

assignment memorial No 11111. [No reference in the Schedule is made to the DMC,

since it is binding upon the parties by virtue of their both having executed it.]

2. Conditions of Sale (once all conditions have been complied with, this will be referred to as `Government lease having been deemed issued under section 14 of the Conveyancing and Property Ordinance')

(a) Conditions of Sale No 900

(b) Date: August 1st 1980

(c) Parties: The Governor of Hong Kong and Patten Co Ltd

(d) Term: 75 years from August 1st 1980, with a right of renewal for a further term of 75 years.

(e) Lot No: Inland Lot No 1234

5. Sale of Flat B, Flora Villa

Let us now assume that Chan Co sells flat B in Flora Villa to Mr Ho. The assignment will be of 100 equal undivided 900th shares of and in Section A of Inland Lot No 1234 together with the right of exclusive possession of Flat B and the use of the common parts. The assignment will be expressly made `together with the benefits and subject to the burdens and obligations set out in the Deed of Mutual Covenant memorial No 22222'. The assignment will be registered as memorial No 44444.

The Schedule will be the same as above, save that heading (e) Covenants will refer to the covenants in the DMC memorial No 22222.

6. Sale of Flat F by Mr Scott to Mr Wong

Let us now assume that Mr Scott decides to sell Flat F to Mr Wong. The assignment will be registered as memorial No 55555. The Schedule to the Assignment will be drafted as follows:

1. The Property

(a) Description and addressFlat No F, Flora Villa, 156 Lockhart Road, Wanchai, more

particularly delineated and marked [pink] on the plan attached to assignment memorial No 33333.

(b) Lot number etc

100 equal undivided 900th shares of and in Section A of Inland Lot No 1234.

(c) Exceptions and ReservationsThe exceptions and reservations in the conditions of

sale No 900, assignment memorial No 11111 and assignment memorial No 33333.

(d) Easements and appurtenant rightsEasements and appurtenant rights in the conditions of

sale memorial No 900, assignment memorial No 11111 and assignment memorial No 33333.

(e) CovenantsCovenants in the conditions of sale No 900, assignment

memorial No 11111 and assignment memorial No 33333 (and DMC memorial no 22222).

The assigment is made together with the benefits and subject to the burdens of the covenants set out in the Deed of Mutual Covenant memorial No 22222.

2. Conditions of sale

etc as above

Michael WilkinsonJune 2001