Mrs Wong owned a three-room flat and had all along lived there with her son, her daughter-in-law and her young grandson. Two years before, as she felt she was getting old, she executed a Deed of Gift transferring the ownership of the flat to her son, Mr Wong, but continued to live there herself.
Recently, seeing their son approaching school age, Mr and Mrs Wong began to busy themselves choosing a school for the boy. After much discussion, the couple decided to look for a flat in the vicinity of the chosen school for the whole family, including Grandma. Mrs Wong agreed to it, so she and Mr Wong instructed an estate agent to list the old flat for sale. A purchaser was found and Mr Wong quickly signed a provisional agreement for sale and purchase with him.
Unexpectedly, the purchaser informed Mr Wong soon afterwards that his solicitor, having carried out a preliminary search of the Land Register, found that the flat had been given to Mr Wong by way of gift two years before and that it could not be established that Mr Wong had good title to the flat. Thus, he asked Mr Wong to return the deposit and cancel the agreement. Only after consulting a lawyer himself did Mr Wong realize that with a Deed of Gift, there might be potential problem for estate duty. As there were still several months before the period of three years from the date of the Deed of Gift expired, he might not be able to satisfy the purchaser's solicitor's requisitions on title.
According to the Estate Duty Ordinance (Cap. 111 of the Laws of Hong Kong), any property transferred by the owner in the form of a gift within three years before the death of the owner has to be included in the calculation of estate duty. It is also provided in the Ordinance that where there is an unpaid estate duty which falls due, it will constitute a charge on the property, rendering its title defective. If it is resold by the person to whom it was given or the person to whom it is sold, there may be a problem. Usually, a solicitor will be especially cautious after finding that a property has been transferred by the way of gift and will request proof that estate duty has been fully paid if the donor has died within three years of giving the flat away. If the donor is still alive, or if there is no proof indicating that he is dead, and it is not yet three years since the flat was given away, the title of the present owner will be doubtful.
The above are just matters that a Deed of Gift may give rise to. There are others concerning title and conveyancing procedure which, when encountered, should be promptly referred to professionals for advice.
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