| Monograph : Encumbrances |
Contents |
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| (2)
Conveyancing Practice |
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1. |
Usual encumbrances to be
discharged on completion |
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Encumbrances usually expected to be discharged on completion
of the sale and purchase and examples of instruments that
discharge such encumbrances include: - |
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| a. |
Discharge/release of a subsisting
legal charge/mortgage; |
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| b. |
Partial release to discharge the
property from the legal charge/mortgage which remains
subsisting over other undischarged securities; |
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| c. |
Discharge/release of charging orders
or memorandum of charge of outstanding management
fees. |
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2. |
To discharge encumbrances/cure title
problems |
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| a. |
A vendor may take some time to ascertain
the amount and mode of discharge or removal of some
less common encumbrances (those other than a legal
charge/mortgage) and an estate agent should remind
the parties to consider the amount of time required
to arrange for the discharge of such encumbrances
so as to agree on an appropriate time for completion.
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| b. |
Where it is not clear whether the
encumbrance will be discharged or removed by the
vendor before completion, an estate agent should
advise the prospective purchaser to consult his
solicitors before entering into a provisional agreement
for sale and purchase and, in particular, whether
the deposit should be paid to a stakeholder pending
completion. |
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| c. |
Sometimes removal of the matter
giving rise to the encumbrance does not cure all
problems. For example, after the removal of illegal
structures affecting a property, it remains to be
decided whether the vendor can still convey substantially
the same property agreed to be sold. This is a matter
to be decided on the facts of each case. |
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| d. |
Some encumbrances only involve financial
liability (for example a charge to secure payment
of outstanding management fees). In these cases,
the vendor may be required to give an undertaking
for their discharge on or before completion. To
secure performance of the vendor's undertaking,
an appropriate from the deposit may sometimes need
to be stakeheld pending discharge of the encumbrances. |
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3. |
Estate agents' duties with respect
to encumbrances |
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| a. |
It should be noted that estate agents
are required under the Estate Agents Ordinance to
provide information on subsisting encumbrances such
as mortgages and court orders to their clients.
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| b. |
In addition, estate agents should
advise their vendor clients to disclose information
relating to the property and the building concerned,
such as structural alterations to the property or
any notice/order issued by the incorporated owners/manager
or competent authority requiring any works to be
done to the property or common areas of the building
and the costs involved (if known) etc, in the Property
Information Form prescribed by EAA. |
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| c. |
It is prudent for an estate agent
to remind his vendor client that if a vendor fails
to disclose any encumbrance known to him to exist,
he may not be able to give good title or to sell
the property in accordance with the agreement for
sale and purchase of the property and the purchaser
may rescind the sale and purchase agreement. |
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