Fair Trade Commission Disposal Directions (Policy Statements)  on Selling Presale House

Passed by the 571st Commissioners' Meeting on 17 October 2002
Promulgated by Order Kung Yi Tzu No. 0910010858 on 6 November 2002
Title Amendment by the 688th Commissioners' Meeting on 13 January 2005
Promulgated by Order Kung Fa Tzu No. 0940001278 on 24 February 2005
Promulgated Amendments Item 3 by Order Kung Fa Tzu No. 0940006955 on 26 August 2005
Amended by the 842nd Commissioners' Meeting on 27 December 2007
Promulgated by Order Kung Yi Tzu No. 0970000186 on 10 January 2008

1.  Background Explanation
Owing to current trade characteristics of presale house system, consumer may obtain very limited information on the presale house at the time of signing the purchase contract. The consumer depends completely on advertisement or the purchase contract to familiarize with the environment, appearance, lay-out, facilities, building materials and other dispositions etc and rely on these information to decide whether to proceed with the purchase. Due to the fact that the presale houeses are of "higher value" and "less mobile" comparing to other consumer products, difference in actual delivery and expectation often cause disputes between consumer and building developers.   As derived trade disputes would also impact on the rights of the parties thus if, within reasonable scope, real estate trade may be induced to become more transparent, then such disputes may be minimized. As the Fair Trade Act was enacted for the main purpose of maintaining trading order, protecting consumers' interests, ensuring fair competition, and promoting economic stability and prosperity, and also to ensure that the real estate brokers clearly understand the relevant standards of the Fair Trade Act, the Fair Trade Commission hereby sets this Policy Statements as to notify all related business operators and set reference for future case dealings.

2.  Definition:

1. Building Developer: A building developer refers to enterprise or person manages the development, rental and sale of invested residence, multi-storey building and other buildings.
2. Presale House: A presale house in this Policy Statements means a building with construction license and is not yet finished being constructed and shall become the trading object as soon as its construction is done.

3.  Possible Infringement of Deceitful or Obviously Unfair Act under the Fair Trade Act by the Building Developer during the Process of Selling the Presale Houses:

1. Standards on deceitful or obviously unfair acts that are sufficient to influence trading order: Article 24 reads "In addition to what is provided for in this Act, no enterprise shall otherwise have any deceptive or obviously unfair act that is able to affect trading order."  The said unfair competing conduct generally stipulates any conduct that has the nature of unfair competition and where no other articles in the Fair Trade Act is applicable, then may investigate whether Article 24 of the Fair Trade Act is applicable. Article 24 of the Fair Trade Act is established upon "market competition order", and restricts over "deceptive conduct" or "obviously unfair act" that is "sufficient to influence trade order".  Hence emphasis upon whether in an individual dealing, a party used "deception" or "concealed important facts", or other erroneous methods etc to induce the trade counterpart from entering into the trade, or to cause competitor to lose a trade opportunity due to "deceptive conduct"; or any "obviously unfair act" that inappropriately suppresses trade counterpart, hinders the trade counterpart’s freedom in deciding whether to trade or and the trading terms.
2. Type of deceitful or obviously unfair act sufficient to influence trading order:
   1. inappropriately restrict purchaser from reviewing contract
   Due to the fact that in a presale house, most of the sales contracts are drafted by the building developer and the subject presale houses have not yet taken forms, hence the building developer stands on a more advantageous position with regards to information content of the contract.  If a building developer takes deposit bond prior to revealing the content of the contract and the purchaser then objects to the content of the contract but the building developer insists on either to proceed on the original contract content or to confiscate the deposit bond, then such confiscation of deposit bond indisputably place the purchaser at a disadvantageous position and such conduct is an obviously unfair act.  In addition, the purchase contract content involves professional language and require actual check and understanding, hence if the building operator does not allow the purchaser a reasonable contract review opportunity, the purchaser’s bargaining and trade position would not be lifted close to or leveled closed with that of building developer.  Hence in a presale house, in the instances where the building developer requires deposit bond prior to providing the purchaser with the sales contract or prior to confiscate deposit bond or execute the contract, the building developer must permit the purchaser at least 5 days of contract review.  Failure to provide the purchaser with adequate contract review opportunity would be suspected to have infringed Article 24 of the Fair Trade Act.
   2. Conceal important bargain information
   Where the building developer fails to notify the purchaser important information on any restrictive land usage due to any legally mandatory land readjustment, the building developer would be suspected to have infringed Article 24 of the Fair Trade Act.
   3. Failure the clearly state the year or the date of land transfer in the purchase contract.
   In accordance with normal real estate sales contract, if land transfer time is not clearly stated and the purchaser is to bear the stipulated value-added tax would obviously place the purchaser in a disadvantageous position in estimating its capital gain tax burden, causing erroneous understanding and impact on its rights.  Hence where the building developer fails to clearly state the year or date of the land transfer may be deemed to have infringed Article 24 of the Fair Trade Act.
   4. Failure to clearly state the common area items and share calculations
   Due to the fact that shares on common area of presale house affect the calculation of the area of the subject real estate and is an important trade information in the purchaser decision making of whether to enter into the trade; further, since the presale house title is not yet registered, the purchaser is unable to obtain relevant information from the Land Office and should the building developer fails to disclose complete information in the contract, may be considered to be deceiving the trade counterpart.  Hence the building developer should in the sales contract list all items in the individual share of the common area, area of the common area or results of shared percentage calculation, individual household’s full title holding chart should show the result of the common area calculation for the entire community; at least list out the percentage of individual household’s each item entitlements over the whole common area and voluntarily provide such information for public viewing, distribution, or for free take-and-read etc. Also, in accordance with Article 53 of the Statute for Management of Apartment Buildings, where related facility usage and management of a community forming by numerous individual independent used architectural buildings or apartment buildings, cannot be separated or divided is considered to be common area.  This provision is not applicable in situations where at the time of signing the sales contract, the real estate ahs completed title registration and has certificate of landownership for understand the status on the common area.  If the building developer fails to disclose information in accordance with this provision, may be considered to have infringed Article 24 of the Fair Trade Act.
   5. Lending bank designated by building developer
   Should the purchaser intend to select its own lending bank, the purchaser should indicate such intention to the building developer at the time of signing the contract.  Settlement loan might be hindered due to the need to attain to the individual requirements in self-arranged loan and whether refusal by the building developer in providing certificate of real estate ownership in such instance constitute an infringement of Article 24 of the Fair Trade Act would depend on the individual facts.  Factors taking into account will include: whether the loan interest from the purchaser’s selected bank is comparatively lower (for example, labor home loan or public servant home loan), whether the building developer would share the difference in loan interest, whether the purchaser will assist in guaranteeing building developer’s debt, and cooperation between the two banks, etc.
   6. Designs of the unsold portion of presale house is unilaterally altered to increase household sales.
   If, after the building developer’s unilateral alteration the advertised designs, the building developer fails to notify the purchaser or indicate consent for contract termination, price reduction, or other resolution alternatives, deprive the purchaser of choices, such act would be deemed to have infringed Article 24 of the Fair Trade Act.
   7. Building developer demands purchaser to return the contract
   According to the Part of Obligation of Civil Code provisions, seller has rights over the sale property and shall be responsible to guarantee the property is free from defects.  Whilst sales contract being the main basis for claims, it follows that if the purchaser returns the contract, the purchaser would encounter difficulties in exercise its right to claim and may need to bear unforeseeable dangerous risks; not only would such situation obviously unfair but also seriously damage consumer's rights and trade order.  Hence if the building developer demands the return of the contract from the purchaser, such act would be deemed to infringe Article 24 of the Fair Trade Act.  

4.  Penalty and legal responsibility of infringing the Fair Trade Act and related regulations

1. The Fair Trade Commission may, in accordance with Article 41 of the Fair Trade Act, order any enterprise that violates any of the provisions of the same Act to cease therefrom, rectify its conduct or take necessary corrective action within the time prescribed in the order; in addition, it may assess upon such enterprise an administrative penalty of not less than fifty thousand nor more than twenty-five million New Taiwan Dollars. Shall such enterprise fails to cease therefrom, rectify the conduct or take any necessary corrective action after the lapse of the prescribed period, the Fair Trade Commission may continue to order such enterprise to cease therefrom, rectify the conduct or take any necessary corrective action within the time prescribed in the order, and each time may successively assess thereupon an administrative penalty of not less than one hundred thousand nor more than fifty million New Taiwan Dollars until its ceasing therefrom, rectifying its conduct or taking the necessary corrective action.
2. If any enterprise infringes the regulations of the Fair Trade Act, the enterprise, in additional to any criminal or administrative responsibilities, shall also be responsible for civil loss and damage in accordance with Chapter 5 provisions of the same Act.

5.  This explanatory note on the provisions, only demonstrates commonly encountered infringing conducts to the Fair Trade Act in the sale of presale houses, should there be any unattained issues, this Commission would add or amend at any time, and individual incidences should still be conducted on its own merits.  Also, with respects to real estate advertisement cases, this Commission has set "Management Principles on Real Estate Property Advertisements by the Fair Trade Commission of Executive Yuan" and building developers should note and observe the provisions.

6.  Trade disputes that do not come into Fair Trade Act provisions or trade disputes that do not involve with business competition conduct or are pure consumer dispute cases should still be dealt with in accordance with Civil Law, Consumer Protection Law or other regulations (details see attachment).
 
Attachment: Dispute Not  Classified under Fair Trade Act

Type of Dealings	Applicable Rules
Return of Deposit	Resolution via civil action in accordance with Civil Law provisions
Delayed Construction	Resolution via civil action in accordance with Civil Law provisions or contract terms
Delayed Settlement	Resolution via civil action in accordance with Civil Law provisions or contract terms
Defective Construction Work	Resolution via civil action in accordance with Civil Law provisions or contract terms
Shrinkage in actual area	Resolution via civil action in accordance with Civil Law provisions or contract terms
Clearly state in the contract of building developer's obligation regarding to beach sand dwellings or radio-active dwellings	Resolution via civil action in accordance with Civil Law provisions or contract terms
Not in accordance with Ministry of Interior's Announcement on "What needs to be recorded or not to be recorded on the  presale house sales contract upon finalizing the deal"	Resolution via civil action in accordance with provisions of Consumer Protection Law
Construction Structure and public construction work safety issues	React to Construction and Planning Agency of the Ministry of Interior or Local Construction Management unit for resolution via civil action in accordance with provisions of Construction and Planning Law.
Insufficient or incorrect construction material and fire safety equipment	React to Construction and Planning Agency of the Ministry of Interior or Local Construction Management unit for resolution via civil action in accordance with provisions of Construction and Planning Law.
Building does not comply with provisions on building capacity percentage	React to Construction and Planning Agency of the Ministry of Interior or Local Construction Management unit for resolution via civil action in accordance with provisions of Construction and Planning Law.
Parking lot allocation	Resolution via civil action in accordance with Civil Law provisions or contract terms
Request or invoice loan bank prior to settlement	Resolution via civil action in accordance with Civil Law provisions or contract terms
Dispute over title or usage right over Basement, bomb shelter and other common area etc	React to the Ministry of Interior in accordance with Statute for Management of Apartment Buildings or provisions on Land Registration for resolution via civil action in accordance with Civil Law provisions.
Dispute over degree of dwelling leaning	React to Construction and Planning Agency of the Ministry of Interior or Local Construction Management unit for resolution via civil action in accordance with provisions of Construction and Planning Law.
Title or usage rights over lane, alley or other public street.	React to the Ministry of Interior in accordance with Statute for Management of Apartment Buildings for resolution via civil action in accordance with Civil Law provisions.
Management of Building and Community Common Area	React to the Ministry of Interior in accordance with Statute for Management of Apartment Buildings or provisions on Land Registration for resolution via civil action in accordance with Civil Law provisions.
Management Fee Charge	React to the Ministry of Interior in accordance with Statute for Management of Apartment Buildings or provisions on Land Registration for resolution via civil action in accordance with Civil Law provisions.
Market sales prior to the issue of construction permit	React to the Ministry of Interior in accordance with Statute for Management of Apartment Buildings or provisions on Land Registration for resolution via civil action in accordance with Civil Law provisions.
Double-sale	Resolution via civil action in accordance with Civil Law provisions or contract terms
Title Dispute Issue	Resolution via civil action in accordance with Civil Law provisions or contract terms
Dissolution of Building Developer	Resolution via civil action in accordance with Civil Law provisions or contract terms
"Hijacked" by the salesperson	Resolution via civil action in accordance with Civil Law provisions or contract terms
Continuing Construction of Dwelling (Building Developer's creditor rights or Debt transfer)	Resolution via civil action in accordance with Civil Law provisions or contract terms
Tax Evasion	React to the Ministry of Finance in accordance with Income Tax Act or Business Tax
Agency Fee (Water and Electricity Charges, Government Fees, Notarization Fee and Insurance Premium etc)	Resolution via civil action in accordance with Civil Law provisions or contract terms
Dispute on Land Boundary	React to the Ministry of Interior in accordance with Land Law.
Rental and Sale of National Property	React to the Ministry of Finance in accordance with National Property Act or provisions on Rental Management of National and Non-Public Real Estate Properties.