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Purchasing Property in Hong Kong


Jun 17, 2015

In a recent Hong Kong court decision, the Courts were asked to determine if a charging order could sever a joint tenancy between two persons sharing landed property in Hong Kong.  

Joint tenancy is a form of ownership by two or more persons of the same property which gives them equal shares in ownership of the property. Joint tenancy also creates a “right of survivorship”, which means that if any one of the joint tenants of a property dies, the survivor gets the title to the entire property.

In Ho Wai Kwan v Chan Hon Kuen [2015] 1 HKLRD 901, Cheng Kwok Sum (“Cheng”) and Wong Lai Ha (“Wong”) were the joint tenants of a Property. In March 1994, the Standard Chartered Bank (“Bank”) obtained a charging order in respect of the Property against Cheng (“Charging Order”). In March 1995, the orders were discharged. Cheng subsequently passed away on 17 April 1998.

Wong then sold the Property to two individuals, who then on-sold it to the Plaintiffs in this case. The Plaintiffs then sought to sell the Property to the Defendants. A summons was then taken out to seek an order from the Court as to whether the Plaintiffs had shown good title to the Property.

The question before the Courts whether the Charging Order operated to sever the joint tenancy between Cheng and Wong so that Wong was not entitled to the right of survivorship and instead became a 50% tenant in common. This would mean that the other 50% interest (as tenant in common) would remain with the estate of Cheng, so that Wong had did not have good title to give and, therefore, neither did the Plaintiffs.

The Court held that Wong did have good title for the following reasons:-

(i) A charging order does not confer any proprietary right or title in the land. It only gives the charge certain rights over the property as security for a loan.

(ii) The Charging Order was discharged before Cheng’s death, meaning that when Cheng passed away, there was no encumbrance on his joint tenancy interest. That meant that Cheng’s interest, by way of her right to survivorship, was transferred to Wong. She was therefore in a position to pass such beneficial interest to subsequent purchasers. The Plaintiffs showed good title to the Property in accordance with the Agreement.

(iii) An act of severance must have a final or irrevocable character in precluding the joint tenant from claiming by survivorship any interest in a joint tenancy. A charging order in itself did not satisfy this test.

Parties to the sale and purchase of property in Hong Kong must be wary of the title to the property held by the vendor(s) and must be careful when dealing with any encumbrances over the property (whether existing or discharged).

Although the Court ultimately decided that there was no defect in the title relevant to this issue, this case is another example of the many complications that can arise in dealing with requisitions on title on Hong Kong real estate.

 


For more information on Real Estate matters, please contact:-

Andrew Lee | andrew@robertsonshk.com | +852 2861 8362
Lesley McLean | lamclean@robertsonshk.com | +852 2861 8404

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