"Mr. Chan, congratulations! You've finally found your ideal unit!" the real estate agent said excitedly. But just as Mr. Chan was about to sign the provisional agreement, the building inspector discovered a 'glass house' on the rooftop and an 'iron cage' outside the kitchen window. The lawyer's remark, 'These are all illegal structures, the bank may not approve the mortgage,' instantly shattered Mr. Chan's dream of buying a home.
According to the 2023 data from the Buildings Department, there are over 400,000 unaddressed unauthorized building cases across Hong Kong. For first-time homebuyers, unauthorized structures not only affect mortgage approval but may also lead to demolition orders, fines, and even impact property resale. In today's article, I will use my 15 years of real estate experience to teach you how to identify unauthorized structures before buying a property, helping you avoid falling into the 'unauthorized building trap'.
What is an Illegal Building? A Comprehensive Breakdown of the Core Concept
Legal Definition of Illegal Structures
According to the Buildings Ordinance, any construction work carried out without the approval of the Buildings Department is considered 'unauthorized building works', commonly known as 'illegal structures'. Simply put, if the owner alters or adds to the property structure without submitting plans and obtaining approval, it constitutes an unauthorized building.
:::tip Expert Tips Not all 'additions' are illegal constructions! If the owner had submitted plans to the Buildings Department at the time and obtained approval, even rooftop additions or external wall alterations are considered legal buildings. The key is whether there is 'approval'. :::
Overview of Common Types of Illegal Constructions
In the Hong Kong property market, the following are the most common types of illegal structures:
External Unauthorized Structures:
- Adding glass or metal sheds on the rooftop
- Building pergolas or storage rooms on terraces
- Illegally installing air conditioner brackets or clothes racks on exterior walls
- Installing iron cages or grilles outside windows
Internal Illegal Constructions:
- Breaking through load-bearing walls to change room layouts
- Illegal expansion of kitchen and bathroom
- Adding a loft (commonly called 'attic')
- Ceiling modifications without approval
Unauthorized Constructions in Public Spaces:
- Adding shoe cabinets and storage cabinets in corridors
- Installing covers over light wells
- Enclosing and modifying back staircases
:::warning High Risk Warning Rooftop illegal structures are a key target for the Buildings Department! In the 2023 demolition orders, over 60% involved illegal rooftop additions. If the property you are interested in has rooftop usage rights, be sure to check carefully. :::
The Three Major Impacts of Illegal Structures on Property Ownership
1. Difficulty in Mortgage Approval When banks review mortgage applications, they will require a property inspection report. Once illegal constructions are discovered, banks may:
- Require the owner to remove them before approving the mortgage
- Lower the mortgage ratio (for example, from 60% to 50%)
- Directly refuse to approve the mortgage
2. Legal Liability Risks According to the Buildings Ordinance, owners of unauthorized building works may face:
- Demolition orders issued by the Buildings Department
- A maximum fine of HK$200,000 and imprisonment for 1 year
- An additional daily fine of HK$20,000 for non-compliance with the demolition order
3. Difficulties in Resale Even if you successfully "get on board," when selling later:
- The buyer's lawyer will require you to remove any illegal structures
- The property valuation may be lowered
- The transaction period may be extended due to demolition works
:::highlight Insider Tip Some sellers may include a 'sold as is' clause in the pre-agreement, meaning 'even illegal structures will be sold as is.' As a buyer, you must not easily accept this clause, otherwise, you will bear all responsibilities in the future! :::
Case Studies: Three Real-Life Stories of Illegal Building Pitfalls
Case 1: The Mortgage Nightmare of a Rooftop Glass House
Background: Ms. Cheung is interested in a bargain property with a rooftop terrace. The usable area is 500 sq ft, and the terrace area is 300 sq ft, with a price of $6 million. There is a glass house on the terrace, which the seller claims 'can be used as an extra room.'
Problem: After signing the provisional agreement, the bank's property inspection found that the glass house was an illegal structure and required it to be demolished before approving the mortgage. The demolition estimate was $150,000, and since the seller refused to bear the cost, Ms. Cheung was forced to rescind the agreement, losing a $300,000 deposit.
Lessons:
- Must inspect the building before signing a provisional agreement
- 90% of rooftop additions are unauthorized structures
- The provisional agreement should include a clause like 'the contract can be rescinded if unauthorized structures are found'
Case 2: The 'Invisible Iron Cage' Outside the Kitchen Window
Background: Mr. Lee bought an old flat, and outside the kitchen window there is an iron cage used for drying clothes. The real estate agent said, 'The whole building has them, no problem.'
Problem: Three months after taking possession of the property, the Building Department inspection found that the iron cage was an unauthorized structure and issued a demolition order to Mr. Li. Mr. Li needs to pay $8,000 for the demolition himself and is concerned about the impact on future resale.
Lessons:
- 'The whole building has it' does not equal legal
- Additions to the exterior walls also fall under unauthorized building works
- Before taking possession, you should request records from the Buildings Department
:::success Success case Before buying the property, Mrs. Chan proactively requested the seller to provide a 'Buildings Department Compliance Certificate' and the maintenance records for the past five years. As a result, she discovered that the unit had previously received a demolition order, but the seller had completed the demolition. Mrs. Chan was therefore able to successfully negotiate a $200,000 reduction in price and completed the transaction with peace of mind. :::
Case 3: The Valuation Pitfall of Attic 'Loft'
Background: Mr. Wong purchased a unit with a loft, with a usable area of 400 sq ft and a loft of about 150 sq ft. He thought that 'the mortgage is cheaper than renting,' paying a monthly installment of $12,000, which is less than the rent.
Question: When the bank performed the valuation, because the loft is an illegal structure, only 400 square feet was counted for the valuation. The unit, originally valued at $5 million, was ultimately only valued at $4.2 million, and Mr. Wong had to pay an additional $800,000 difference in the down payment.
Lesson:
- Loft additions are generally considered illegal constructions
- Bank valuations do not account for illegal construction areas
- A 'preliminary valuation' should be done before buying a property
Must Do Before Buying a Property: Five Steps to Identify Illegal Structures
Step 1: Check the records of the Buildings Department
Before signing a temporary contract, you can check the records through the following channels:
Online Search of Records:
- Log in to the Buildings Department 'Building Information Centre'
- Enter the property address
- Check the 'Record of Unauthorized Building Works'
In-person Search:
- Go to the Buildings Department Customer Service Centre
- Request a "Copy of Building Records"
- Fee is about $50-$150
:::tip Expert tips Even if the Buildings Department records indicate 'no unauthorized building works,' it does not mean the property is 100% free of illegal structures. Some illegal structures may not have been reported or discovered. Therefore, on-site property inspection is still essential. :::
Step 2: Hire a Professional Home Inspector
The building inspector will use professional instruments to check for:
- Signs of structural alterations
- Abnormal wall thickness
- Additions to ceilings and floors
- Unauthorized installations on external walls
Building Inspection Fees: $3,000 - $8,000 (depending on unit size)
Inspection Report Content:
- Detailed photo records
- Indication of illegal structures
- Risk assessment and recommendations
Step 3: Compare the Principle Diagrams
You can apply to the Lands Department for 'approved building plans' to compare with the actual site conditions:
Comparison Focus:
- Whether the spacing matches the plan
- Whether the positions of windows and doors have been altered
- Whether there are any additions to the rooftop or platform
Application Method:
- Online Application: Lands Department website
- Fee: $200-$500
- Processing Time: Approximately 7-10 working days
Step 4: Observe Details on Site
Even if you are not a professional, you can still pay attention to the following 'signs of illegal construction':
Exterior Inspection:
- Check if the rooftop has glass houses or tin sheds
- Check if the exterior walls have protrusions or iron cages
- Check if the window sizes are abnormal
Internal Inspection:
- Check for inconsistent old and new paint marks on the walls
- Verify if the ceiling height is uneven
- Check if the kitchen and bathroom locations are reasonable
Public Spaces:
- Whether there are private additions in the corridor
- Whether the atrium has been enclosed
:::warning High-risk signal If the seller or real estate agent is vague about the property's history, or is eager to close the deal and unwilling to provide documents, these are all warning signs. It is better to miss a 'bargain property' than to risk buying an illegal property. :::
Step 5: Law Firm Due Diligence
Hire an experienced real estate lawyer to conduct 'due diligence':
The lawyer will check:
- Land Registry records
- Compliance certificates from the Buildings Department
- Terms of the building deed
- Past maintenance records
Attorney Fees: $5,000 - $15,000
Important Terms:
- Require the seller to declare 'no illegal structures'
- Include a clause 'contract can be rescinded if illegal structures are found'
- Clearly specify who is responsible for demolition
Three Handling Options After Discovering Illegal Structures
Option 1: Require the seller to demolish
Applicable Situation: The illegally constructed building is relatively small, and the demolition costs are reasonable.
Negotiation Strategy:
- Provide the property inspection report as evidence
- Request the seller to bear the demolition costs
- Extend the closing period to complete the demolition
Notes:
- Demolition takes approximately 1-3 months
- Must ensure passing the Building Department inspection after demolition
- Keep the demolition certification documents
Option 2: Negotiate to Reduce Demolition Costs
Applicable Situation: The seller is unwilling to demolish, but you still want to buy the property
Bargaining Range:
- Small illegal structures (e.g., iron cage): deduct $5,000 - $20,000
- Medium illegal structures (e.g., loft): deduct $50,000 - $150,000
- Large illegal structures (e.g., rooftop house): deduct $100,000 - $500,000
Risk Assessment:
- Demolition costs may exceed the budget
- Mortgage approval may still be hindered
- Difficulties in future resale
:::highlight Insider Tip If you choose the negotiation option, it is recommended to reserve 1.5 times the 'demolition budget'. This is because during the actual demolition, additional problems may be discovered, leading to budget overruns. :::
Option Three: Abandon the Transaction
Applicable Situation: The illegal structure is severe, and the risk is too high
When to Give Up:
- Involves structural changes (such as removing load-bearing walls)
- Demolition costs exceed 5% of the property value
- The bank explicitly states that a mortgage will not be approved
- The Buildings Department has issued a demolition order
Deposit Forfeiture Loss:
- Preliminary Agreement Deposit: 5% of the property price
- Formal Agreement Deposit: 10% of the property price
How to Reduce Losses:
- Include a 'building inspection clause' in the contract at the last minute
- Notify a lawyer immediately upon discovering illegal construction
- Keep all evidence documents
Summary: Do thorough research before buying a property to avoid illegal construction pitfalls
Identifying illegal structures is not complicated; the key is to 'do your homework before buying a property.' Remember the following five key points:
- Check Records First: Before signing a provisional agreement, you must review the records of the Buildings Department.
- Professional Building Inspection: Hire a building inspector to conduct a comprehensive check.
- Compare Plans: Apply for approved building plans for comparison.
- Legal Safeguard: Include protective clauses in the sale and purchase agreement.
- Rational Assessment: Calmly analyze the risks after discovering unauthorized building works.
In Hong Kong's property market, illegal structures are a common issue, but as long as you master the correct identification methods, you can greatly reduce the risk of being 'tricked.' Remember, buying a property is a major life decision; it is better to spend more time and money on due diligence than to buy a problematic property out of greed for a lower price.
For first-time homebuyers, illegal structures not only affect mortgages but can also become obstacles when reselling in the future. Rather than remedying the situation afterward, it is better to prevent it in advance. Hopefully, this article can help you avoid the traps of illegal structures on your home-buying journey and successfully get on the property ladder!
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