Consultation Paper on the Sales Description of Uncompleted Residential Properities Bill ("the Bill")

SALES DESCRIPTIONS OF UNCOMPLETED RESIDENTIAL PROPERTIES BILL ("THE BILL")

Introduction

1. Generally, the proposals contained in the Bill are to be welcomed. Implementation of the Law Reform Commission’s report which was issued in April 1995 is long overdue.

2. The following aspects of the Bill, however, require further consideration and possibly revisions.

Date of Sale Completion

3. Whilst the term "date of sale completion" is defined in s.2(1), this term does not actually appear in the other parts of the Bill.

Developer

4. The word "developer" is defined in s.2(1) as meaning "the person who -

5. This is a cumbersome definition. It appears that (a), (b) and (c) in the definition are cumulative requirements all of which must be satisfied before a person constitute a developer. But it may be that the person who is properly regarded as being the developer will not qualify under all three requirements. For instance, the owner of the site may be a certain subsidiary company in a large group whilst the person whose commissions the contractor to build the development may be a different subsidiary in the same group. We would have thought it would be better to make these requirements separate so that anyone who fits any of the three requirements would fall within the scope of "developer".

6. If this suggestion is accepted, s.6 would also have to be re-worked. This section refers to a "contract between the developer of a development and a purchaser of an uncompleted residential property in the development for the sale of that uncompleted residential property". The word "developer" is used as defined. If the 3 parts of the definition of "developer" are to be separate requirements, then in a case where the individual or company selling a development is not the owner of the development or did not commission the construction of the same, the "contract" mentioned in s.6 would only exist between the individual or company selling the development (but not the other individuals or companies also within the definition of "developer") and the purchaser.

7. Alternatively, since the Bill is for the protection of purchasers, it would appear that its object could be achieved simply by making a person who sells an uncompleted residential property in a public sale responsible for compliance with the measures contained within the Bill.

8. The word ‘an’ seems to have been omitted before the word ‘offer’ in subsection (c) of the definition. Alternatively, the word "offer" should be replaced with the word "offers".

Punishment and Penalties

9. The word "similar" before the word "officer" in s.15(1) seems to be unnecessary. What matters is that an officer of a corporate developer who contributed to the corporate developer’s commission of an offence under ss.5(4) or 11(4) should not himself escape criminal sanction. Whether his office is similar to those of a director, manager or secretary is beside the point and may encourage immaterial arguments.

10. The fines which are provided for by various sub-sections in the Bill are appropriately large. We note that imprisonment is available in the case of obstruction of an authorized officer in the exercise of his powers, which may appear harsh, but that in the case of this and other offences a defence of due diligence is provided for.

Civil Remedies

11. The Law Reform Commission proposed that a breach of the legislation should constitute a statutory tort. For reasons which are unexplained in the Consultation Paper, this recommendation has not been followed.

12. The main deficiency here is that the contents of the brochure mandated by Part I of Schedule I give rise to no civil remedy if there are not complied with. Section 6 of the Bill, which deals with the effect of information in the sales brochure, does not mention the information set out in Part I of Schedule I. It says that the information set out in Part II of Schedule I shall be representation of fact, thus giving rise to an action in misrepresentation if that information is false. It also says that the information provided pursuant to Part III of Schedule I (which concerns fittings and finishes) shall be implied as terms of the sale and purchase agreement, that is opening the way to an action for breach of contract if that information is false. There is nothing specifically about the information provided under Part I of Schedule I. There nearest that s.6 comes the dealing with that is that ss.(4) provides that that section shall not prejudice any right of, or remedy available to, a purchaser of any uncompleted residential property arising otherwise under that section. The trouble with this is that nowhere else in the Bill is there anything about the statutory tort.

13. It is proposed that the information set out in the sale brochure as a result of Part II of Schedule I will be representations of fact with the result that a disappointed purchaser would have an action in misrepresentation, not in tort imposed by the statute. The purchaser will be presumed to have been induced by the misrepresentation to have entered into the contract.

14. Misrepresentation will work in respect of most of the matters set out in Part II of Schedule I, that is to say, information relating to land use, open areas, utilities and installations, conditions of the government leases, slope maintenance and financial arrangements. This is because these things will have been arranged and will be in place at the time that the flats are marketed. The same cannot necessarily be said of the deed of mutual covenant, however, which is also the subject of Part II.

15. It seems to us this manner of providing a civil remedy is decidedly inferior to that recommended by the Law Reform Commission. The contents of a sales brochure pertaining to an uncompleted flat are necessarily promises concerning the flat and the development when completed. Accordingly, it would be artificial to decree that they shall be representations of fact and the Bill does not do so. It would be more natural to provide that failure to comply with the promises in the brochure shall be breaches of an implied term in the agreement for sale and purchase, giving rise to an action in breach of contract. But the Bill does not do this either, expect in respect of fittings and finishes, the subject-matter of Part III of Schedule I.

16. Unless the administration is able to give a cogent technical reason as to why misrepresentation is a better cause of action than breach of statutory tort, we think that the Law Reform Commission proposal should be followed.

17. Finally and incidentally, the Consultation Paper in its explanations of the main proposals at paragraph 18 on page 6 states that the information to be provided shall be representations of fact and that this will facilitate purchasers to pursue contractual remedies for inaccurate information. But misrepresentation is not a contractual matter, rather a pre-contractual one, and actually misrepresentation is an action in tort.

Dated 11th August 2000