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16 May 2013
The purchase and sale of units in buildings under construction is common practice in Macau's real estate market. However, the legal regime for real estate transactions in Macau does not cover buildings under construction. In order to enhance the transparency of transactions, streamline the performance of the market and safeguard the legitimate interests of the parties concerned, legislation has been proposed that would regulate:
The government has presented a bill which has already been amended by the Legislative Assembly and will be voted on on May 31 2013. The bill will regulate promissory contracts for the sale or encumbrance of buildings under construction. It defines 'buildings under construction' as any future property that is in the planning stage or under construction, as well as completed works for which no valid licence for use has been issued or, in the case of buildings constructed in a horizontal property regime, the future real estate, covering building units for which the relevant title deed has not yet been finally registered.
The bill provides that the early sale of buildings under construction is subject to prior authorisation of the Land, Public Works and Transport Bureau of Macau (DSSOPT), under penalty of nullity and administrative sanctions. This authorisation is subject to prior verification of the works licence for the entire building under construction, completion of the foundation works of the building and their provisional registration under horizontal property.
On the other hand, all legal transactions on the promissory transfer of buildings under construction must take the form of a promissory sale agreement or assignment of the contractual position agreement. These must also be reviewed by a lawyer and the signatures of the contracting parties must be recognised by a notary. Any legal transaction that contravenes such requirements will be considered null. The bill also provides that the promissory contract must contain all elements described in its annex, under penalty of revocation by the promissory buyer within one year of the date of notarisation of the parties' signatures. Both lawyers and notaries have a decisive role to play in assessing compliance with the law - the former by confirming that the draft contract accords with the law (expressly stating whether it includes all mandatory information), and the latter by refusing the notarial certificate if the law has been infringed.
In order to ensure the publication and transparency of transactions involving buildings under construction, the bill also creates a registration regime for legal facts pertaining to the promissory transfer or encumbrance of buildings under construction, which is to be concluded within 30 days of issue of the notarial certificate. Should there be any need to cancel a registration, aside from the cases foreseen in the Land Registry Code, the developer may bring action before the first instance court through a special procedure under the proposed law, in cases of failure to pay any of the instalments of the price due. The original version of the bill provided for the nullity of legal transactions involving the promissory transfer or encumbrance of buildings under construction while registration of the acquisition in favour of the promissory buyer or transferee, or registration of the security interest to the creditor, was in effect. However, these consequences were abandoned following the amendment of the bill by the legislature.
The bill also introduces a new regime on real estate agents, given their importance in the functioning of the market. Real estate agents can only conclude mediation contracts with the developer after prior authorisation has been issued by the DSSOPT. They must also keep the mediation contract available for clients and archive a copy of the contract with the DSSOPT. The original bill established rigorous requirements regarding the information to be provided in the mediation contract, but this section was removed following the amendment of the bill.
Finally, the DSSOPT will be responsible for supervising compliance with the law, in cooperation with all public and private entities requested for this purpose, as well as the parties involved in the procedure - that is, banks and other financial institutions, lawyers, solicitors and real estate agents - which must refrain from acts or practices that violate the bill.
The bill must still be approved by the Legislative Assembly before being enacted. Although it has been diluted and truncated in some respects, it still shows some promise in its intent towards enhancing transparency in such an important sector in the Macau economy. However, the real litmus test for this statute will be its interplay with existing legislation, namely the provisions regulating real estate mediation, since it does not seem to impose the necessary obligations on one of the key players in the purchase and sale of units in buildings under construction.
For further information on this topic please contact Pedro Cortés or José Filipe Salreta at Rato Ling Vong Lei & Cortés Advogados by telephone (+853 2856 2322), fax (+853 2858 0991) or email (email@example.com or firstname.lastname@example.org).
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