1. What types of ownership are available in Macau?

• There are a small number of freehold interests in Macau (less than 15% of the total land available). They are typically found in the older parts of Macau. The rest is leasehold land held under a Government Lease for a period of years.
• The leasehold term, if compared with terms under common law, is usually shorter: 25 years is both the standard and the maximum term (under the Land Act) of any leasehold grantedby theGovernment.
• Once the leasehold property has been developed the terms of the Government Lease are subject to automatic and successive renewals for 10 year periods.
• A contribution equal to 10 years of rent is payable for each renewal.
• There are no restrictions on foreign ownership of either land or constructed property in Macau, either by foreign individuals or corporations.

2. What steps do I have to take to complete a purchase?

• Introduction by an estate agent;
• Negotiation of the key terms of sale e.g. price, date of completion, etc (estate agent usually acts for both seller and buyer);
• Optional non-binding offer by the seller to the buyer, against a small deposit from buyer (HK$5,000 -10,000); if parties decide not to proceed, the deposit is returned and the seller is entitled to sell to another party. There is no statutory cooling off period.
• If the parties decide to go ahead with the transaction, they will instruct a solicitor to handle the purchase (solicitor will normally act for both seller and buyer);
• The solicitor will draft a (binding) agreement for sale and purchase for the parties' execution. Upon signing, the buyer is required to pay a further deposit to be agreed (typically 10 %- 30% of the purchase price) - such deposit would be paid to the seller directly even if the property is subject to an existing mortgage (in Macau there are no statutory stakeholding arrangements to hold the purchase price);
• If the property is subject to an existing mortgage, the Seller must apply to its Bank asking for the release of mortgage - the Seller's bank will then issue a letter confirming the redemption amount;
• Solicitor will verify ownership of the property and conduct property searches to ensure that the property is free from any encumbrances;
• Solicitor will also ask the seller to produce receipts showing settlement of government rent (leasehold properties only), property tax and other utilities charges;
• Completion of the sale is usually effected by signing a formal Deed of Transfer before the Notary Public;
• Before the parties execute the Deed of Transfer, a Notary Public will verify the parties' identities and authenticity of the supporting documents involved;
• Once the parties have executed the Deed of Transfer, the Notary Public will lodge an "Execution Notice" with the Macau Property Registry, to preserve priority rights;
• The Notary Public will then certify the documents for onward submission to the Land Registry for registration. The Macau Property Registry then issues a registration notice and an updated property search evidencing registration of the sale;

3. What due diligence should I perform before committing to any such investment?

• In fact it is very simple to perform property due diligence in Macau. There are no title deeds to review for a start!

• Instead, Macau operates a Torrens title registration system. Ownership of property ("title") can be established as a matter of fact by reference to the title register. The person or corporation registered is recognized as the legal owner and members of the public who search the title register can be certain that the registered owner is the legal owner. There is no need to look behind the title register and review the historical title deeds to establish title.

• Purchasers acquiring properties for value and having their interests registered under the title registration system will be protected against unregistered claims.Under the title registration system, the act of registration confers ownership. A transfer is ineffective against third parties unless and until it has been registered.

4. To whom should I pay the purchase price?

• As mentioned, in Macau there is no practice of payments being made to Solicitors as stakeholder. Payments are made directly to the vendor by the purchaser who are both usually represented by the same solicitor.

• Furthermore there is no regulatory frame work governing pre-sale, which can take place at any given time, prior to or upon completion of construction. in the absence of such regulations, there are also no institutionalized procedures for advance payments to be made to escrow accounts as the developer is free to dispose of those proceeds immediately. It is, therefore, prudent to check the background and market reputation of the developer involved).

• The market practice is for all payments to be made by bank drafts with no personal cheques being accepted. Preferably such cheques should be issued by Macau banks or by banks with branches in Macau. Otherwise the clearance procedures take a much longer time.

5. What are the transaction costs of acquiring residential property in Macau?

• There are a number of disbursements and taxes to be paid when acquiring residential property in Macau.

• Most importantly there is Stamp Duty payable on the property transfer at the rate of 3.15% on the higher of the consideration (or declared price) and the "reference value" which is determined by reference to the Government's rateable valuation.

• There is also stamp duty to be paid on the Deed of Transfer (a document tax, at a reduced rate of 0.2%, on the "reference value").

• In addition to these costs the purchaser should also bear the Notary Fees (charged by the Notary Public but which revert to the Government) and Registration Fees (charged by the Macau Property Registry).

• Both the Notary Fees and Registration Fees are charged on a regressive basis.

• Finally there are lawyer's fees, which follow market rules and are not subject to any minimum fee schedule.

• It should be noticed that the practice in Macau is for the Buyer to bear ALL the costs involved in the conveyance procedures. The parties, however, are free to agree otherwise.

6. Do I need to review the Deed of Mutual Covenants (DMC)?

• The strata title regime is also governed by a Government approved document (also known as a Deed of Management Covenant). However, a DMC in Macau is a very standardized document which closely follows the rules of the Civil Code. It must be pre-approved by the Public Works Department before being filed with the Macau Property Registry.

• Based on the above, and unless the prospective buyer has an interest in a potential common part of the building (for example, a large roof terrace or a garden adjacent to the unit), there should be no need to check the contents of the DMC.

• Furthermore, most of the issues related to property management (such as the corporation handling the management, their duties and charges) are not contained in the DMC but are left to contractual arrangement between the management company and the owners of the units.

• The owners of a building have the statutory right to meet in a "general meeting" to ensure the efficient property management and maintenance of a building. The Owner's general meeting has the right to appoint a manager or terminate the appointment of an existing manager.

7. What types of taxation will property attract in Macau?

• There are essentially two taxes payable annually for a Property in Macau. The first is the Property Tax payable in respect of any property in Macau. The second is Government Rent, payable to the Macau Government, for any unit located in a leasehold building.

• Property tax is payable on all properties (and is akin to rates). It is assessed (after deduction of decoration fees and management fees) on net annual rental income, estimated or actually received by the owners of land and buildings. The current rate is 10% of such estimated or actual amounts of annual rental income.

• There is a standard exemption of Property Tax for the first 4 years of the property (for properties on the Macau Peninsula) counted from the date of the Occupation Permit (Section 9/1, Property Tax Ordinance). The exemption is for 6 years for properties located on Taipa and Coloane.

• Government rent is payable annually on all leasehold properties. The amount of Government rent is relatively nominal and charged by reference to the size and location of the unit. The amount ranges from anywhere between HK$800 to HK$6,000 per year.

8. Who is in charge of the management of the property?

• In Macau, typically the management of the property is vested by the Developer in a certain company. In many cases this is an affiliated company of the same property group.

• Such appointment is then supported by management agreements signed between the unit owners and the management company. It is not part of the DMC. Such management agreement will list the duties and obligations of each party, including the monthly management fee.

• The owners of units may change such a de facto appointment at any time, by a general meeting of owners. The majority required, under statute, to appoint the manager of the building and to approve the relevant rates or management fees payable is a simple majority of the unit owners (for the first meeting -
  Section 1347/4, Civil Code) or a majority of the unit owners present at subsequent general meeting (Section 134811, Civil Code).

• The quality and reputation of the management company has a significant impact on the market value of a property.
  The contents of this memorandum are intended to provide a general guide to the subject matter and should not be treated as a substitute for specific advice concerning individual situations.