Improvements regarding off-plan properties law reviewed

Protections for off-plan property purchases will be refined through legal means, Secretary for Administration and Justice André Cheong told parliament yesterday.

During his policy question session yesterday, the senior official was asked by lawmaker Ip Sio Kai about laws concerning the industry and related to real estate property transactions. Ip works as the deputy head of Bank of China, Macau Branch.

The lawmaker mentioned that under current laws, mortgages approved for off-plan properties are not well protected. He pointed out that during his multi-decade career, he has not seen laws that prioritize bank loan recovery.

Although a law has been established to facilitate preliminary registration for off-plan properties, he added, banks will only become prioritized creditors after both the construction of the properties and the property registration.

“The period in between sale of off-plan properties and official registration of real estate properties can be lengthy,” the lawmaker said, emphasizing that banks are not well-protected during this period.

In response, Cheong admitted that the off-plan property law – promulgated in 2013 – has only done half the job. The rest, he said, concerns transaction prices and modes, which should see improved governance by law.

“The process was slowed down because we wanted to take the Trust Law as a reference to handle [off-plan property transaction prices],” Cheong recalled. “However, after the promulgation of the Trust Law, industry practitioners said that they needed more time to study the effect of the law. As a result, we will continue studying the feasibility of any related laws.”

The official pledged that when the government reviews the off-plan property law, provisions concerning the aforementioned areas will be proposed for approval by parliament.

Another question that Ip raised was related to judicial efficiency and legal provisions related to financial industry practices. He pointed out that many foreign-funded banks tend not to provide certain products or services “due to a misunderstanding of local laws,” although similar products and services are provided by Chinese-funded banks.

On the other hand, the lawmaker added that there were occasions in which these foreign-
funded banks complain to the Macao Association of Banks about lengthy judicial procedures concerning bankruptcy and debt recovery.

Cheong admitted that such procedures are lengthy because the interests and legal procedures involved are complex. In this regard, he added, an overhaul of existing laws and regulations is required to speed up the process.

Regarding Ip’s question on sub-mortgages, Cheong said that all mortgages in Macau are officially registered, and banks have priority when disputes arise. In addition, he does not see changes in laws as necessary when it comes to banks being notified about a property transaction. In his opinion, property transactions are usually conducted through realtors, lawyers and the public notary. These institutional procedures are effective in lowering the odds of unregistered transactions.

In his question, Ip pointed out that when a mortgaged property owner seeks a sub-mortgage, no notification needs to be made to the primary creditor, who will thus not become aware of the sub-mortgage.

On the other hand, creditor banks are not notified immediately when a mortgaged property is put up for sale. In his opinion, this poses the possibility of multiple sales of a single property at the same time, which has happened before.

Cheong has also pledged that laws related to financial activities will have ongoing improvements made to provide a stable business environment for investors and entrepreneurs from within and outside Macau.

He also highlighted that the government has promulgated two laws – the Trust Law and the reviewed Legal System governing the Financial System – during the past legislative term as a means to improve the city’s business environment.

On urban renewal, Cheong said that legislation is only the first step. Both the government and the market need to investigate the most suitable way to approach each renewal project.