If you have trouble reading this email please click here
Newsletter - May 2006
 
Purchaser Loses Everything In Fraudulent Property Transaction
 
In 1997, a purchaser bought a village house in Yuen Long, Hong Kong. The vendor produced certificates of exemption and a no-objection letter purportedly issued by the District Lands Office.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 
In 2000, the purchaser discovered that all the District Lands Office approvals documents produced by the vendor were forged. In the absence of these approvals, the construction of the house was unauthorized and in breach of the Buildings Ordinance. The District Land Office is considering whether to take "appropriate steps and law enforcement action".
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 
The purchaser sued the vendor for rescission on the grounds of fraudulent misrepresentation and damages from the law firm for negligence.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 
Recently, the court decided that the sale and purchase should be rescinded because of the fraud and ordered the vendor to pay the purchaser damages equivalent to the purchase price plus expenses. However, the vendor did not appear in court and it is impossible to locate him. The rescission is conditional upon payment of damages but, in essence, the purchaser is left with an "empty" judgment as he cannot sell or mortgage the property, or recover his loss.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 
The court decided that the solicitors were not negligent given there was nothing about the forged documents which ought to have prompted them to investigate further.
 
Title Insurance
 
Comprehensive title insurance protects owners by providing an indemnity for loss suffered resulting from loss of ownership by way of fraud. Had the purchaser insured his title upon purchase, his loss would have been fully compensated by the title insurer. About 35% of all claims paid out by First American relate to fraud on property title.
 

 
For more information on our comprehensive title insurance product, please visit our website www.firstam.com.hk or contact us.