Essential Considerations for Tong Lau Owners: Don't Let Your Property Dream Fall Apart!

If you own a tong lau, you must read this article for important considerations when it comes to obtaining a mortgage. Tong lau, a unique form of residential building in Hong Kong, is attractive to many buyers due to its high usable space and relatively low price. However, applying for a mortgage for a tong lau can be more complicated than for other properties. Buyers must understand the different rules and conditions to avoid pitfalls.

Firstly, buyers need to understand whether the tong lau is involved in unauthorized building works. When the Buildings Department discovers unauthorized building works in a tong lau, they will issue a demolition order requiring the owner to remove the unauthorized structure and affix a Building Authority Notice on the property. If the unauthorized works are minor, the bank may still approve the mortgage. However, if the works are severe and affect the building structure, the bank may not approve the mortgage or may reduce the loan-to-value ratio. If buyers see the words "BUILDING AUTHORITY UNDER S. 24(1) OF THE BUILDINGS ORDINANCE" or "BUILDING AUTHORITY UNDER 26 OF THE BUILDINGS ORDINANCE" in the search records, they must wait for the seller to remove the unauthorized structure, cancel the notice, and obtain a letter of satisfaction before signing the provisional agreement and proceeding with the mortgage application.

Secondly, buyers should understand the bank's building inspection procedures. When the bank approves a mortgage for a tong lau, they will usually conduct a building inspection. Buyers should communicate with the seller to understand whether the tong lau has any unauthorized structures or other violations. Buyers can request the inspection to take place before signing the provisional sale and purchase agreement to avoid any problems that may affect the mortgage approval. If there have been alterations to the unit but do not involve structural changes and require minimal reinstatement cost, the bank will calculate the cost of reinstatement and approve the mortgage. However, if the reinstatement cost is high, the bank may reduce the loan-to-value ratio.

Lastly, buyers need to understand their own buying needs and consider the long-term development of the tong lau. Tong laus generally have an older age profile, making it less favorable for refinancing in the future, and they may require many years of climbing stairs. While the high usable space and low price per square foot of a tong lau may be attractive, applying for a mortgage for a tong lau can be more complicated than for other properties. Buyers must thoroughly understand the application procedures for different mortgages to avoid falling into a trap.

In summary, obtaining a mortgage for a tong lau requires special considerations. Buyers must understand whether the property has unauthorized building works, the bank's building inspection procedures, and their own buying needs to avoid any pitfalls. Buyers can also seek advice from professionals such as real estate agents or loan consultants to obtain more useful information and recommendations.