Sale and Purchase of Property
(Real Estate)
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3. What are the usual terms that would be contained in the provisional sale and purchase agreement?

The provisional agreement is often provided by an estate agent and must, at least, include the following:

  1. The address of the flat;
  2. The price of the flat;
  3. The personal details of the vendor and the purchaser (If a party to the agreement is a limited company, the full name and the business registration number of the company must be stated);
  4. The amount of the initial deposit (*usually 1% to 3% of the total purchase price is paid by the purchaser when he/she signs the provisional agreement);
  5. The amount of the further deposit (*usually 10% of the total purchase price, inclusive of the initial deposit, to be paid by the purchaser when he/she signs the formal agreement);
  6. When to sign the formal agreement to be prepared by the vendor's solicitor;
  7. The completion day (i.e. the day when the vendor hands over the property to the purchaser) ;
  8. The balance of the purchase price to be paid by the purchaser on the completion day;
  9. Who is paying which kind of legal expenses (e.g. the costs of the solicitors of the vendor, purchaser and any mortgagee, and the stamp duty);
  10. What the purchaser should be responsible for if he/she doesn't adhere to the provisional agreement;
  11. What the vendor must pay if he/she doesn't want to sell the flat after signing the provisional agreement;
  12. How much commission should the purchaser and/or the vendor pay the estate agent.

Also as pointed out in a Court of Appeal case (See To Keung & Another v Sunny Way Limited), there would be an "escape clause" in most of the provisional sale and purchase agreements. An "escape clause" is a clause allowing a party who wishes to withdraw from the transaction (i.e. to cancel the deal) within a short period of time after signing the provisional agreement to "buy his way out". In the case of a vendor who wants to withdraw, he agrees to return the initial deposit to the purchaser, doubled by a sum of equal amount which he must pay the purchaser (to pay the "double deposit" ). In the case of a purchaser who wants to back out, he forgoes the initial deposit. Where either party seeks to rely on the escape clause, that party must do so in strict compliance within the time allowed by the provisional agreement.

The judgment of the above case also revealed that if the provisional agreement contains such clause as "upon signing the formal sale and purchase agreement, a further deposit of $X shall be paid", then the purchaser may not be obliged to pay the further deposit if the subsequent formal agreement is not signed. To avoid any disputes on when to pay the further deposit, the parties may specify the exact date for the payment of further deposit in the provisional agreement.

However, all these terms are subject to the actual construction of the agreement that is made between the parties in each individual case.

To get a sample of a provisional sale and purchase agreement, please visit the Law Society of Hong Kong's webpage. Please note this sample agreement is only for reference purposes and you should check any actual agreement carefully with your agent or solicitor before signing it .

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