Circular No. 01-10 (CR) May 2001
Negative Equity (2)

Since the issuance of Circular No. 99-01 (CR), the Authority continued to receive many complaints regarding negative equity.

Practitioners are reminded to handle with extreme care properties that may become negative equity or where the vendor's ability to discharge the mortgage is in doubt. In the circumstances, practitioners should suggest that the prospective purchaser negotiate with the vendor for the stakeholding of the deposits at a solicitors' firm. Practitioners should also explain to the prospective purchaser the risks of not stakeholding in the event of the vendor being unable to complete the transaction.

Practitioners should also keep a written record of their having made suggestion of stakeholding and explained the risks to the prospective purchaser. If the prospective purchaser chooses not to stakehold the deposits, agents should obtain a written acknowledgment that such suggestion and explanation have been provided.

The Authority shall continue to monitor the situation and may issue further guidance when needed. 


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