For candidates preparing for the Estate Agents Authority (EAA) licensing exams, mastering the financial mechanics of a property transaction is non-negotiable. While solicitors handle the formal legal conveyancing in Hong Kong, estate agents are the first point of contact for buyers and sellers. You will be expected to accurately estimate closing costs, explain the timeline of payments, and guide clients through the financial realities of their transaction. This guide provides a comprehensive settlement statement walkthrough tailored specifically for the Hong Kong property market.

Whether you are a seasoned trainee or just starting, this walkthrough is an essential companion to the Complete Hong Kong Salesperson Exam Exam Guide.

What is a Settlement Statement in Hong Kong?

In Hong Kong conveyancing, the "settlement statement" is more commonly referred to as the Completion Statement and the Apportionment Account. Prepared by the solicitors representing the vendor (seller) and the purchaser (buyer), these documents outline the exact financial obligations required to successfully complete the transaction on the agreed-upon Completion Date.

While an estate agent does not draft these legal documents—doing so would violate the real estate ethics and standards regarding the unauthorized practice of law—an agent must understand every line item to prevent client disputes and ensure a smooth handover.

Key Components of a Hong Kong Completion Statement

A standard Hong Kong settlement statement consolidates several financial streams. Exam candidates must be able to identify and explain each of the following components:

1. The Purchase Price and Deposits

The core of the statement is the consideration (purchase price) stated in the Formal Agreement for Sale and Purchase (FASP). The statement will credit the buyer for deposits already paid:

  • Initial Deposit: Typically 3% to 5% of the purchase price, paid upon signing the Provisional Agreement for Sale and Purchase (PASP).
  • Further Deposit: Paid upon signing the FASP (usually 14 days after the PASP), bringing the total deposit to 10%.
  • Balance of Purchase Price: The remaining 90%, typically funded by the buyer's mortgage bank and their own cash balance, due on completion.

2. Apportionments (Outgoings)

Property outgoings must be split fairly between the vendor and the purchaser based on the exact day of completion. In Hong Kong, the vendor is responsible for all expenses up to and including the day before completion, while the purchaser takes over on the completion day itself. Common apportionments include:

  • Management Fees: Usually paid monthly in advance.
  • Rates: Government rates are charged quarterly in advance.
  • Government Rent: Also charged quarterly in advance.

For a deep dive into the exact mathematical formulas used by solicitors, review our guide on proration calculations step-by-step.

3. Stamp Duty

Stamp duty is a major closing cost in Hong Kong. Following the landmark removal of the Special Stamp Duty (SSD), Buyer's Stamp Duty (BSD), and New Residential Stamp Duty (NRSD) in April 2026, the landscape has simplified. However, the Ad Valorem Stamp Duty (AVD) still applies. The solicitor will include the stamp duty payable to the Inland Revenue Department (IRD) in the buyer's settlement funds.

4. Agency Commission and Legal Fees

While agency commission is fully negotiable—a critical point heavily regulated by anti-trust laws in real estate—the market norm in Hong Kong is 1% from the vendor and 1% from the purchaser. Solicitors will also include their own conveyancing fees, land search fees, and registration fees for the Land Registry.

Visualizing the Buyer's Cash Outlay

To help clients prepare for completion, agents must estimate the cash required excluding the mortgage loan. Below is a realistic breakdown for a first-time buyer purchasing an HKD 8,000,000 property with a 30% total downpayment (10% already paid as deposits, 20% due at settlement).

Typical Buyer Cash Outlay at Settlement (HKD 8M Property)

Step-by-Step Walkthrough Scenario

Let’s walk through a practical scenario that mirrors the calculation questions frequently found on the Hong Kong Salesperson Exam.

The Scenario:
Mr. Chan is buying a flat in Taikoo Shing from Ms. Lee for HK$10,000,000.
Completion Date: 16th November.
Mr. Chan paid a 5% initial deposit (HK$500,000) and a 5% further deposit (HK$500,000).
Ms. Lee has already prepaid the November management fee of HK$1,500 and the Q4 (Oct-Dec) Rates and Government Rent of HK$4,600.

Step 1: Calculate the Balance of Purchase Price

Purchase Price: HK$10,000,000
Less Total Deposits: - HK$1,000,000
Balance Due to Vendor: HK$9,000,000

Step 2: Calculate the Apportionments

Note: November has 30 days. Q4 (Oct-Dec) has 92 days. The buyer is responsible from Nov 16 onward.

  • Management Fee (Nov): Buyer is responsible for 15 days (Nov 16 to Nov 30).
    Calculation: (HK$1,500 / 30 days) × 15 days = HK$750 due to vendor.
  • Rates & Gov Rent (Q4): Buyer is responsible from Nov 16 to Dec 31 (15 days in Nov + 31 days in Dec = 46 days).
    Calculation: (HK$4,600 / 92 days) × 46 days = HK$2,300 due to vendor.

Total Apportionment Due to Vendor: HK$3,050

Step 3: Final Settlement Sum to Vendor

Balance of Purchase Price (HK$9,000,000) + Apportionments (HK$3,050) = HK$9,003,050.

Exam Tip: The buyer's solicitor will draw down the mortgage loan from the bank and collect the remaining cash from the buyer to produce cashiers' orders totaling exactly HK$9,003,050, which are then delivered to the vendor's solicitor on completion day.

Regulatory Framework and Agent Responsibilities

Under the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation, licensees must exercise due care and skill. Providing a wildly inaccurate estimate of closing costs or failing to remind a buyer of stamp duty obligations can lead to disciplinary action by the EAA.

Furthermore, agents must ensure that any promises regarding the waiver of commission or cash rebates are properly documented in writing, as these directly impact the final settlement calculations and can lead to severe contractual disputes if left as verbal agreements.

Frequently Asked Questions (FAQs)

1. Who is legally responsible for preparing the settlement statement in Hong Kong?

The vendor's solicitor typically prepares the Completion Statement and Apportionment Account, which is then sent to the purchaser's solicitor for approval. Estate agents do not draft these documents.

2. How is the agency commission handled during settlement?

Agency commission is usually paid on or immediately after the completion date. Sometimes, solicitors will hold the commission from the settlement funds and issue a cheque directly to the real estate agency, though clients can also pay the agency directly depending on the terms of the Estate Agency Agreement (Form 3 or Form 4).

3. Do I need to calculate Special Stamp Duty (SSD) or Buyer's Stamp Duty (BSD) for current exams?

As of the 2024-2025 Hong Kong Budget, the government abolished SSD, BSD, and NRSD. For exams taken in 2026 and beyond, you only need to calculate standard Ad Valorem Stamp Duty (AVD) unless historical context is specifically requested in the question.

4. What happens if the completion day falls on a public holiday or a Black Rainstorm warning?

Under standard Hong Kong conveyancing practice, if the completion day is a general holiday or if a Black Rainstorm Warning / Typhoon Signal No. 8 is hoisted, completion is automatically postponed to the next working day. The apportionments will be recalculated accordingly.

5. Are management fee deposits and utility deposits included in the settlement statement?

Yes. The vendor usually transfers the management fee deposit, public water, and electricity deposits to the purchaser, and the purchaser reimburses the vendor for these exact amounts on the Apportionment Account. Alternatively, utility accounts are simply closed by the vendor and newly opened by the purchaser.