Completion and handover: the final stage

Completion is the legal moment when you pay the balance of the purchase price and receive the signed assignment (the deed of ownership) together with vacant possession of the flat. It is the point at which ownership transfers from the seller to you. The process is governed entirely by the terms of the sale and purchase agreement you signed, and the key exchange happens at the offices of the seller’s solicitor, usually on a date fixed in that agreement. The property portal or agent does not control this stage; your solicitor handles it. Where things go wrong is almost always because one party has failed to meet a condition set out in that agreement, most commonly the condition that the flat be handed over in the condition agreed and with vacant possession.

The mechanics of completion

On the completion date, your solicitor delivers the balance of the purchase price (by manager’s cheque or electronic transfer) to the seller’s solicitor. In return, the seller’s solicitor hands over:

• The assignment — the legal document that transfers title to you, signed by the seller as a deed and stamped by the Inland Revenue Department.
• The keys — all keys, remote controls, access cards and any security device for the flat and common areas.
• Vacant possession — this means the flat is empty of all people, furniture and belongings that are not included in the sale, and no tenancy or licence to occupy exists. More on this below.
• Meter readings — final readings for electricity, gas and water, so that you can transfer accounts into your name from the completion date.
• A receipt for outstanding management fees and rates — the seller should have paid all management fees and government rates up to the completion date. The sale and purchase agreement usually provides for an apportionment: the seller pays for the period up to completion, you pay from completion onward. Your solicitor will check this on the completion statement.

Your solicitor then registers the assignment at the Land Registry. This gives the world notice that you are the owner. The process is complete only when that registration is accepted, though in practice you can take possession as soon as the keys are handed over.

Vacant possession — the most common source of dispute

Vacant possession is a legal term with a specific meaning: the property is physically empty of occupants and of any chattels (movable goods) that are not included in the sale. It also means there is no subsisting tenancy, licence or right of occupation held by anyone other than the seller. If the seller fails to deliver vacant possession, you may be entitled to delay completion, claim damages, or in extreme cases treat the contract as repudiated.

Two situations cause problems:

• Property sold with a sitting tenant. If the flat is occupied under a tenancy that the seller agreed would continue, the agreement must say so explicitly. If it does not, you are entitled to vacant possession. A tenancy that the seller forgot to disclose is a defect in title. You should insist the seller terminate the tenancy lawfully before completion. Do not rely on a verbal undertaking.
• Property sold with furniture. If furniture is included, the agreement should list it in a schedule. Anything not listed should be removed. If large items (sofa, bed, wardrobe) are left and are not included, the seller has failed to give vacant possession. You can refuse to complete until they are gone, or agree to have them removed at the seller’s cost.

Your solicitor should conduct a final inspection immediately before completion or, if possible, on the morning of completion. Check every room, every cupboard, every fitted appliance. If you find anything that should not be there, tell your solicitor immediately. Do not accept delivery of the keys until the issue is resolved, because once you accept the keys you may be deemed to have accepted the condition of the property.

The final inspection — what to check

You are entitled to the property in the condition it was in at the time you made the offer, subject to fair wear and tear. What counts as a defect the seller must remedy, versus fair wear and tear, is a common source of disagreement. The general principle is:

• Defect the seller must remedy: A broken window, a leaking pipe, a non-functioning air conditioner that was listed as part of the sale, a stained or torn carpet that was clean when you viewed it, a crack in a wall that was not present. Anything that affects the use or value of the property and that a reasonable buyer would not accept.
• Fair wear and tear: Scuffed paintwork, faded curtains, minor scratches on flooring, light wear on kitchen worktops. These are expected from normal living and are not defects.

The sale and purchase agreement often contains a clause that the seller will hand over the property in the “same condition as at the date of the agreement”. That means the seller must not remove fixtures or fittings that were present when you viewed, and must not cause damage after that date. If you find damage that was not there when you last viewed, you have a claim.

Practical checklist for the final inspection:

• Test all electrics — lights, sockets, switches, extractor fans.
• Turn on all taps and check for leaks under sinks and in the toilet.
• Flush toilets and check that the cistern refills.
• Open and close all windows and doors, including sliding doors and balcony doors.
• Check locks and keys for every door and window.
• Check that air-conditioning units operate (both cooling and fan) and that the remote control works.
• Check the water heater works and that there is hot water.
• Inspect the ceiling for water stains (indicating a leak from above).
• Count keys, fobs and access cards against the inventory in the agreement.
• Take meter readings for electricity, gas and water and photograph them.
• If the sale includes furniture, tick off each item against the schedule.

Outstanding management fees and rates apportionment

The sale and purchase agreement will specify how management fees and government rates are apportioned between you and the seller on completion. Typically, the seller pays all management fees and rates up to and including the completion date. Your solicitor will deduct from the balance of the purchase price an amount equal to the seller’s share of these charges for the period from the last paid date up to completion, and pay it to the management office and the Rating and Valuation Department on the seller’s behalf. You then become responsible for these charges from the completion date onward.

Make sure your solicitor confirms that the seller has paid all outstanding management fees. If there are arrears, the management office may have a lien (a right to hold your flat as security) for those arrears, and you could be chased for them even though you were not the owner at the time. Your solicitor should insist on a clearance letter from the management office confirming no arrears, and should not release the balance of the purchase price until that letter is produced.

Your recourse if the property is not as agreed

If you discover a defect on the final inspection that the seller should remedy, you have several options, depending on how serious it is and what the sale and purchase agreement says:

• Refuse to complete. This is the strongest step. You must have a clear contractual right to do so — for example, if the seller fails to deliver vacant possession or the property is materially different from the condition agreed. Your solicitor will advise whether you are entitled to refuse. If you refuse without a valid contractual ground, you may be in breach yourself and could forfeit your deposit.
• Insist on a retention. Your solicitor can hold back a sum of money from the purchase price (a “retention”) as security for the seller to fix the defect within an agreed period. This is common for non-serious defects. The amount should be enough to cover the cost of repair. The retention is released to the seller once the work is done.
• Agree a price reduction. You can negotiate a discount on the purchase price in lieu of the seller fixing the defect. This is rare in Hong Kong because the seller is rarely willing to do so after the contract is signed, but it can happen if the defect is minor.
• Claim damages after completion. If you have already completed and then discover a defect that the seller deliberately concealed, you may be able to sue for damages for misrepresentation. This is difficult and expensive. Your solicitor should press for a retention or a refusal to complete before the keys change hands, because after completion your bargaining power is much weaker.

The most important rule: do not accept the keys until your solicitor confirms that all conditions of the sale and purchase agreement are satisfied. Once you accept the keys, you are deemed to have accepted the property in the condition it was in, and your ability to complain is sharply limited.

What to do next

After completion, you should:

• Transfer the utility accounts (electricity, gas, water) into your name immediately. Contact CLP Power or HK Electric (depending on your district), Towngas and the Water Supplies Department. Your meter readings from the inspection are essential for accurate billing.
• Change the locks. Even though the seller should have returned all keys, you have no guarantee that copies were not made. A locksmith can rekey the locks or replace the cylinders.
• Notify the management office of your ownership and provide a copy of the assignment or the Land Registry receipt. Register your contact details for management fee bills and emergency notices.
• Check the property insurance. Your mortgage lender will require the property to be insured from completion. If you arranged insurance to start on that date, confirm the policy is active. If you did not, arrange it immediately.
• Keep all completion documents — the signed assignment, the completion statement from your solicitor, the keys receipt and the meter readings — in a safe place. You will need them for any future sale.