REALWorld Law

Sale and purchase

Form of contract

Are there formal requirements regarding the content and structure of a sale and purchase contract relating to real estate (SPA)?

Hong Kong, SAR

Hong Kong, SAR

Yes. The contract must be in writing and signed by each party. It must contain all the terms of the sale, including details of the land to be sold and the price, as well as the date when the transfer will take place and the documents to be entered into on that date. The contract must be signed by both the purchaser and the vendor. The contract is then exchanged, with the lawyers sending the documents signed by their clients to each other.

What is a typical contract or SPA in this jurisdiction like?

A typical contract sets out the date when the transfer will take place and the documents to be entered into on that date. It must contain all the important terms of the sale, including the:

  • Details of the parties
  • Property
  • Price
  • Payment of initial deposit (normally 3-5% of the purchase price)
  • Payment of a main or further deposit (usually up to 10% including the initial deposit)
  • Payment of the balance of the purchase price (90% if a 10% deposit has been paid)
  • Completion date
  • Date for signing the formal sale and purchase agreement
  • Relevant legal costs and stamp duty
  • Liability of the purchaser in the event it fails to perform the agreement, and
  • Payment of estate agent's commission.

The contract must be signed by both the purchaser and the vendor. The contract is then exchanged, with the lawyers sending the documents signed by their clients to each other. The contract may also contain provisions regarding how the property will be managed between exchange and completion, and how any income will be allocated between the purchaser and the vendor, particularly where completion will be some time in the future or if the sale concerns an investment property (such as a sale subject to tenancy).

Contracts invariably contain provisions relating to insurance and what would happen if the property is damaged before completion.

In real estate transactions, payment of 3% to 5% of the purchase price as an initial deposit upon signing of a provisional agreement and 10% of the purchase price as a further deposit inclusive of the payment of the initial deposit upon signing of the agreement for sale and purchase is usual.