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FAQ

1. Why is it important for the owners’ corporation to have Third Party Risks Insurance?

In 1994, the canopy of a seafood restaurant situated at Albert House in Aberdeen collapsed. One passer-by was killed and 13 others were injured in the incident. The High Court held that the owners’ corporation, property management company, restaurant, licencee of the restaurant, owner of the unit at which the restaurant was situated and contractor that had built the canopy were liable for compensation to the victims, which amounted to more than HK$30 million. Since the owners’ corporation of Albert House did not have third party risks insurance, it was unable to pay the compensation. Eventually, the owners’ corporation had to be wound up. Pursuant to the Building Management Ordinance ( Cap. 344 of the Laws of Hong Kong), each of the individual owners was liable and had to pay a portion of the compensation for his/her share of the liability.

The message from this case is that compensation must be paid if the court rules that the victim must be compensated. If the OC does not have third party risks insurance, it has to make full compensation. If it does not have sufficient funds to pay compensation and has to be wound up, each individual owner becomes personally liable for the compensation. If individual owners are unable to pay compensation, they may be forced into bankruptcy. Procuring third party risks insurance protects the owners and any potential third party victims, thus reducing the financial risks faced by the owners should an accident occur.

For more about Owners Corporations and Third Party Risks Insurance, please visit Properties Arrangements > Maintenance and safety of real property > Third party insurance .

2. Does the owners’ corporation (OC) have the legal obligation to take out an insurance policy to cover liabilities arising from unauthorised building works?

No, it is not a mandatory requirement. But if the court finds that the OC is responsible for an accident caused by unauthorised building works, the OC and/or the owners are liable for all the civil liabilities incurred.

Generally speaking, insurance companies do not provide insurance for unauthorised building works. If there are unauthorised building works in the building, the OC should remove them for the benefit of the OC, building owners and third parties who may be affected by the unauthorised works.

For more about Owners Corporations and Third Party Risks Insurance, please visit Properties Arrangements > Maintenance and safety of real property > Third party insurance .

3. What are the Mandatory Building Inspection Scheme (MBIS) and a Mandatory Window Inspection Scheme (MWIS)?

In order to ensure that building owners take full and continuous responsibility for building maintenance and safety, the Government amended the Buildings Ordinance ( Cap. 123 of the Laws of Hong Kong) and enacted the Building (Inspection and Repair) Regulation ( Cap. 123P of the Laws of Hong Kong) to introduce a Mandatory Building Inspection Scheme (MBIS) and a Mandatory Window Inspection Scheme (MWIS). Each year, 2000 buildings are selected for both the MBIS and MWIS, to be carried out concurrently, and another 3800 buildings are selected for only the MWIS. The Buildings Department (BD) issues statutory notices to the owners of buildings targeted to carry out of the prescribed inspection and any repairs that may be required.

Under MBIS, owners of buildings at least 30 years old (except domestic buildings not exceeding three storeys) are required to carry out the prescribed inspection of the common parts, external walls and projections or signboards of the buildings once every 10 years.

Under MWIS, owners of buildings at least 10 years old (except domestic buildings not exceeding three storeys) are required to carry out the prescribed inspection of all windows of the buildings once every five years.

For more about MBIS and MWIS, please visit Properties Arrangements > Maintenance and safety of real property > Mandatory Building Inspection Scheme and Mandatory Window Inspection Scheme .

4. What can the Government do if the statutory notice under MBIS/MWIS is not complied with?

The Government may prosecute the owners/OC who do not comply with a statutory notice for mandatory building inspection or mandatory window inspection. The BD may also arrange for the required inspection and repair works to be carried out by a consultant and contractor, respectively, of its choice and then recover the cost of inspection and repair works, as well as a supervision charge, from the owners/OC, together with a surcharge not exceeding 20% of the cost.

For more about MBIS and MWIS, please visit Properties Arrangements > Maintenance and safety of real property > Mandatory Building Inspection Scheme and Mandatory Window Inspection Scheme .

5. Does the Government provide subsidy, loan or grant to assist property owners to carry out maintenance or repair works?

In order to assist property owners who may have queries about the statutory requirements for maintaining their residential building and those who may have financial difficulty in doing so, the Government launched the Integrated Building Maintenance Assistance Scheme (operated by the Urban Renewal Authority). The Scheme comprises subsidies, loans and/or grants in various forms to cater for different needs. For more details, owners can call the hotline at 3188 1188.

For a list of the major subsidies, loans and/or grants, please visit Properties Arrangements > Maintenance and safety of real property > Government subsidy, loan and/or grant .

Caveat: The matters discussed below involve complex legal arguments for which legal advice must be sought.

I. Overview

The names of the legal owner(s) of a property can be ascertained from the title deeds or title documents relating to the property, which can be found in the land records maintained by the Land Registry.

The Land Registration Ordinance , Cap. 128 , Laws of Hong Kong, provides for the registration of deeds, conveyances, judgments and other instruments affecting real or immovable property, the keeping of Land Registry records, and for other matters relating to land registration.

Legal or nominal ownership is sometimes called the “paper title”, which can easily be traced or ascertained from looking at the title documents. However, legal ownership does not necessarily reflect the beneficial ownership of a property. Beneficial ownership is the right to enjoyment or entitlement to the benefit of a property, in contrast to legal or nominal ownership. It derives from monetary contribution (in most cases) towards the purchase price of the property, by virtue of a resulting trust or constructive trust.

Where a property is purchased in the name of X but the money comes from Y, and there is nothing to show Y intended to give up his beneficial interest, then it is presumed that Y intended to keep the beneficial interest and X would be said to be holding the property in “resulting trust” for Y.

A constructive trust is one which arises by the operation of law without reference to any presumed intention of the parties. The principle is that where a person holds a property in circumstances in which in equity and good conscience it should be held or enjoyed by another, he is compelled to hold the property on trust for the other person.

For example, X buys a flat with his own money in his sole name. The flat is occupied by Y, his girlfriend, and him. Y did not contribute anything towards the purchase price of the flat, but has made a great number of improvements to the flat, as well as doing ordinary housework. Y could claim an interest in the flat by way of a constructive trust. Constructive trust does not depend on intention of the parties. It is a question of fairness. So it does not matter that X did not have the intention to give Y an interest in the property. The issue is whether Y has done “enough” to justify an equitable claim.

Most of the time we can also ascertain beneficial ownership by referring to the documents kept by the Lands Registry, e.g. an action or proceeding pending in a court or tribunal that relates to land or any interest in or charge on land and a bankruptcy petition. For example, if the property is subject to a mortgage to a bank, then the bank will have a beneficial interest in the property until the mortgage is paid off.

Sometimes it is not easy to ascertain beneficial ownership of a property, e.g. when the property is registered in the name of the husband only, but the property is in fact the matrimonial home. The wife’s beneficial interest may not be ascertained simply by looking at the title deed.

The “paper title” of a matrimonial home may be in the name of both husband and wife, or in the name of only one spouse. The husband and wife may both contribute towards the purchase price or only one party may pay for it.

If both parties contribute towards the purchase price, they are co-owners of the property. They are either “joint tenants” or “tenants in common”, as the case may be.

If the property is registered in the sole name of one spouse, but was paid for by both spouses, the party whose name does not appear on the title deeds can claim that he or she is a beneficial owner of the property. They are “co-owners” of the property despite the fact that the property is registered in the sole name of only one spouse. For more detailed discussion of this, please go to “Sale and Purchase of Property” on the CLIC website.

II. Co-Ownership

When two (or more) persons purchase property together and provide the money in equal shares, they are presumed to be joint tenants. If their contributions are unequal, they are presumed to take beneficially, as tenants in common, shares proportionate to the sums paid. For example, if H contributes one-third and W two-thirds of the purchase price, they are presumed to be equitable tenants in common as to one-third and two-thirds, respectively.

This presumption may be rebutted by evidence that the parties intended to hold as joint tenants despite their unequal contributions, or that they intended to take as tenants in common despite equal contributions.

III. Joint Tenancy

A joint tenancy must display ‘the four unities’: unities of possession, interest, title, and time.

“Unity of possession” means that no co-owner is entitled to the possession of any particular part of the property to the exclusion of the other co-owner.

“Unity of interest” means that joint tenants hold the same interest. Tenants in common, however, may hold in different shares or proportions.

“Unity of title” means that the joint tenants must derive their interest from the same document or act. They must acquire their interest under the same instrument, e.g. an assignment of land.

“Unity of time” means that the joint tenants must acquire their interest at the same time.

A joint tenant does not hold any interest in the property in his individual capacity. His only interest is that which he holds jointly with his fellow joint tenant(s). A joint tenant is said to hold the whole with other joint tenant(s) but nothing by himself. There is only one estate in property which is held jointly and, although the joint tenants between themselves may have distinct rights, to everyone else, they are regarded as a sole owner.

If any one of the four unities is missing, then the co-owners are tenants in common, not joint tenants.

When a joint tenant dies, his interest is automatically extinguished and the surviving joint tenant(s) become(s) entitled to the property. If there are two joint tenants, the surviving tenant will become the sole owner of the property. If there are more than two join tenants, the shares of the late joint tenant will be divided and pass to the surviving tenants in equal shares. This special feature of a joint tenancy is known as the “right of survivorship”. The right of survivorship is the right of a person to property by reason of his having survived another person who had an interest in it.

IV. Tenancy in Common

A tenant in common’s interest forms part of his estate on his death and passes according to his will (a disposition or declaration by which the person making it provides for the distribution or administration of his property after his death) or the laws of intestacy (a person dying without a will). The main legislation on intestacy is the Intestates’ Estate Ordinance , Cap. 73 , Laws of Hong Kong.

A tenancy in common must display unity of possession. A tenant in common is regarded as holding a distinct yet undivided share in the property independently of the other co-owner(s). Each tenant in common holds a separate interest in the property. While the interests of joint tenants are equal, the shares of tenants in common may be unequal.

V. Division of Assets following a Divorce

When a husband and wife decide to divorce, what follows is the division of matrimonial property. However, it does not necessarily follow that the division is in accordance with their respective contribution towards the purchase price of the property.

Section 7 of the Matrimonial Proceedings and Property Ordinance , Cap.192 (“MPPO”) sets out what the court must do when deciding how the matrimonial property is to be divided:

“1. It shall be the duty of the court in deciding whether to exercise its powers under section 4 , 6 or 6A in relation to a party to the marriage and, if so, in what manner, to have regard to the conduct of the parties and all the circumstances of the case including the following matters, that is to say –

  • the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;
  • the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
  • the standard of living enjoyed by the family before the breakdown of the marriage;
  • the age of each party to the marriage and the duration of the marriage;
  • any physical or mental disability of either of the parties to the marriage;
  • the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;

in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage that party will lose the chance of acquiring.”

Section 7(1) is based on section 25(1) of the Matrimonial Causes Act 1973 and section 3 of the Matrimonial and Family Proceedings Act 1984 of the United Kingdom.

Since the House of Lords’ landmark decision in White v White [2001] and the subsequent decision in Miller v Miller and McFarlane v McFarlane [2006], the task of the Court has been to make fair financial arrangements on or after divorce in the absence of agreement between the former spouses.

A non-financial contribution to the welfare of the family is regarded as an important factor. The equal status of husband and wife in a matrimonial union is also to be reflected in the division of assets. The starting point is a more or less equal division of the available assets.

The Hong Kong Court of Appeal in DD v LKW sets out the relevant principles:

‘In the majority of the cases where the parties only have limited financial resources, the focus of the inquiry on fairness is to divide the assets of the parties so as to make provision for their housing and financial needs. It may be necessary to augment the available assets by making orders for periodical payments.

Where there are assets which are available beyond satisfying the immediate housing and financial needs, equality in the division of the assets should be made unless there is a good reason to the contrary. This approach is not confined to ‘big money cases’ but to all cases where assets are available beyond what is required to satisfy the needs of the parties.

The inquiry should be conducted in two stages :

First, there should be a computation of the available assets of the parties, such as property, income (including earning capacity), and any other financial resources which the parties have or are likely to have in the foreseeable future.

Second, the assets should be distributed according to the three principles of need (generously interpreted), compensation and sharing. These principles can be gleaned from section 7(1) , and each of the matters set out in section 7(1)(a)–(g) can be assigned to one or another of the three principles.’

In W v H , the Court of Appeal suggested flexibility in the exercise of the court’s discretion:

‘ … I consider that there are grave difficulties in accepting that the Hong Kong courts are bound by the decisions of English courts. Naturally, decisions of the House of Lords are to be given respect. But since the resumption of sovereignty in 1997, it would appear difficult to suggest that decisions, even of the House of Lords, could be considered as binding.’

‘I consider it unnecessary to examine what was said in all the cases, but the provisions of the Ordinance mandate a flexibility in the exercise of discretion which in each case is necessary to meet the circumstances of the case. The English decisions have shown a progression towards the realisation that fairness often dictates that, on dissolution of the marriage, the family assets should, in principle, be shared between the parties unless there was good reason to depart from such a distribution. Nevertheless, each case must be decided on its own facts and its own merits. In cases of divorce, the facts and circumstances relating to the parties and the marriage can and do vary significantly. In my view it would be dangerous to attempt to decree a principle that is applicable in all cases.’

The ultimate goal is to achieve fairness in the distribution of the couple’s assets, not necessarily a strict 50/50 division.

Complications arise when the purchase price of the matrimonial property was funded (in whole or in part) by a third party. In that case, the third party may have a claim on the property for his or her contribution.

For example, if the matrimonial home was purchased at, say, HK$3 million, and the husband and the wife each contributed $1 million, with the remaining HK$1 million contributed by a brother of the husband, then the brother could have a 1/3 interest in the value of the matrimonial home at the time of the divorce, and that 1/3 would not form part of the pool of matrimonial property to be divided between the husband and wife.

VI. Other Scenarios

When property is registered in the name of one person only but the purchase price was contributed by more than one person, the other person(s) who contributed towards the purchase price could claim a beneficial interest by way of resulting trust or constructive trust.

Parties to co-habitation are not subject to the Matrimonial Proceedings and Property Ordinance . Their claims to the property are in accordance with their respective contributions to the purchase price. Sometimes non-monetary contributions are also taken into account.

The same applies when the property was purchased jointly by siblings. Their claims to the property would be in accordance with their respective contributions.

However, if a parent funded the purchase of property for his or her child, there is a presumption that the parent intended it to be a gift to the child. This is called the “Presumption of Advancement or Gift”. This presumption is rebuttable by evidence that the parent intended to keep the beneficial interest for himself or herself.

FAQ

1. If I buy a property in the name of my partner, am I entitled to any interest in the property?

If a property is purchased in your partner’s name but you have contributed towards the purchase price, and there is nothing to show that you intend to give up your interest in the property, then it is presumed that you intend to keep the interest (known as “beneficial interest”) and your partner is holding your interest in the property on trust for you. Unless this presumption is rebutted, you would be a “beneficial owner” of the flat even though you are not a registered legal owner. In the situation where the purchase price is paid solely by you, you may even be the sole beneficial owner of the property.

For more details, please visit Properties Arrangements > Purchasing property together > Overview .

2. My partner and I decided to live together. The flat was bought in his/her name. He/She paid the down payment and the monthly mortgage, and I am responsible for all household expenses and improvement works of the flat. Do I have any entitlement to the flat?

If it is shown that you and your partner had an intention (whether express, implied or presumed) as to how the flat was to be owned, then generally the intention would prevail. But if no such intention can be shown, then whether you have any interest in the flat would depend on whether the circumstances have given rise to a “constructive trust” in your favour. The principle is that if the flat is held in your partner’s name in circumstances where it is fair and just that you should have a share in the flat, your partner is compelled to hold your share on a “constructive trust” for you. The issue is whether you have done “enough” to justify an equitable claim.

If you want to know more, you may refer to Properties Arrangements > Purchasing property together > Overview .

3. My husband and I have both paid for the purchase price of our home. The flat is registered in my name only. Is my husband an owner of the flat as well? If so, how would our shares of the flat be worked out?

If you and your husband have contributed towards the purchase price of the flat, both of you are co-owners of the flat. Even though your husband is not a registered legal owner, he would be a beneficial owner of the flat.

As to how your shares of the flat are worked out, it would depend on the respective contributions of you and your husband towards the purchase price. If both of you have contributed equally towards the purchase price, both of you are presumed to own the flat equally as “joint tenants”. Joint tenants are subject to the “right of survivorship”, which stipulates that upon the death of an owner, his/her interest will automatically pass to and shared equally by the surviving owners.

On the other hand, if the contributions of you and your husband are unequal, then it is presumed that both of you own the flat as “tenants in common”, with each owning a share proportionate to the amount of your contributions. For example, if your husband has contributed one-third and you two-thirds of the purchase price, your husband and you will own respectively one-third and two-thirds of the flat as tenants in common. Tenants in common are not subject to the “right of survivorship”, and the interest of any owner who dies will pass under his/her will (or under the law of intestacy, if the owner dies without a will).

The presumptions of “joint tenants” and “tenants in common” can be rebutted by evidence that you and your husband intended to hold as joint tenants despite unequal contributions, or that both of you intended to own as tenants in common despite equal contributions.

For further explanations, please refer to Properties Arrangements > Purchasing property together > Co-ownership , Joint tenancy and Tenancy in common . For divorce scenarios, please refer to Q4.

4. If a married couple ended up in divorce, how would the court divide up their interests in the matrimonial property?

This is a complicated issue.

When a married couple undergoes a divorce, the division of their matrimonial property does not necessarily follow from their respective contributions towards the purchase price of the property. The power of the court in this regard is governed by the Matrimonial Proceedings and Property Ordinance . Generally speaking, the court would take into consideration the conduct of the parties and all the circumstances of the case, such as the financial resources, financial needs and age of each of the parties, the contribution of each party to the welfare of the family, the standard of living enjoyed by the family before the breakdown of the marriage, and the duration of the marriage. The ultimate goal is to achieve fairness in the distribution of the couple’s assets, which is not necessarily a strict 50/50 division.

If you want to know more on the division of matrimonial property upon divorce, you may go to Properties Arrangements > Purchasing property together > Division of assets following a divorce .

5. I am living with my partner in a flat which we bought together. I want to break up with him/her. I want to know if my interest in the flat is protected by legislations in Hong Kong.

Parties to co-habitation who are not married are not subject to the Matrimonial Proceedings and Property Ordinance. Their claims to any property bought by them are generally in accordance with their respective contributions to the purchase price of the property. Sometimes non-monetary contributions are also taken into account.

For more details, please refer to Q1 and Q2 above, and Properties Arrangements > Purchasing property together > Other scenarios .

I. Who undertakes redevelopment projects?

In a large-scale property redevelopment, the following entities are usually the only parties that acquire land for redevelopment:

  • the Urban Renewal Authority (URA), or
  • property developers.

If the URA or property developers want to redevelop an area, they first consider acquiring the land by private agreement with the existing owners. If they cannot acquire the entire interest in the land, they may acquire the rest through land resumption or compulsory sale.

The URA undertakes land resumption under the Urban Renewal Authority Ordinance ( Cap. 563 of the Laws of Hong Kong) and the Lands Resumption Ordinance ( Cap. 124 of the Laws of Hong Kong).

Property developers can apply for a compulsory sale order for all interest in the land under the Land (Compulsory Sale for Redevelopment) Ordinance ( Cap. 545 of the Laws of Hong Kong) for the purpose of redevelopment.

II. Urban Renewal Authority

The URA was established under the Urban Renewal Authority Ordinance ( Cap. 563 of the Laws of Hong Kong) in May 2001 to replace the Land Development Corporation as the statutory body to undertake, encourage, promote and facilitate the regeneration of the older urban areas of Hong Kong.

III. URA-implemented redevelopment projects

Under the Urban Renewal Authority Ordinance ( Cap. 563 of the Laws of Hong Kong), the URA may implement a project by way of a development project or a development scheme.

Development project

If, in accordance with the Town Planning Ordinance ( Cap. 131 of the Laws of Hong Kong), amendment of the land use indicated in the Outline Zoning Plan (OZP) is not required, the URA can implement the project as a “development project”. 

Development scheme

If the project area is sizable and an amendment to the land use zoning indicated in the OZP is required, the URA can implement the project by means of a “development scheme”.

Since the OZP has to be amended, the URA has to submit a draft plan to the Town Planning Board. After a hearing, the URA considers their presentations and comments received in respect of the draft plan, and submits a draft plan or amended draft plan to the Chief Executive in Council for approval.

A. Publication of development projects and development schemes

Upon the implementation of a URA initiated or “demand-led” project, the URA must publish in each issue of the Gazette within two months, and once a week during the publication period in a Chinese language and an English language local newspaper, a notice of the commencement date of the implementation of the project, together with a summary of the project information (a description of the general nature and effects of the project), and the times and places where information on the project will be exhibited and available for public inspection.

B. Objections and appeals

Development project

The commencement date of the development project is published in the Gazette, and information on the development project is made available for public inspection for a period of two months (the publication period).

Within the publication period, any person who considers that he will be affected by the development project may send to the URA a written statement of his objections to the project.

The URA then submits the project, the URA’s deliberation on the objection, the objections which have not been withdrawn, and an assessment to the Secretary for Development for consideration no later than three months after the expiration of the publication period.

The Secretary for Development then considers the development project and any objections which have not been withdrawn, and can decide to: (1) authorize the URA to proceed with the development project without any amendment; (2) make an amendment to the development project to meet an objection; or (3) decline to authorize the development project.

If the Secretary for Development authorizes the URA to proceed with a development project, he orders the URA to publish in the Gazette a notice of authorisation of the project, together with a summary of the description of the general nature and effects of the project, and a plan delineating the boundaries of the project.

If the Secretary for Development makes an amendment to a development project to meet an objection, he orders the URA to publish in the Gazette notice of the amendment to the development project. If the amendment appears to the Secretary for Development to affect any land other than that of the objector, the Secretary for Development serves notice in writing of the amendment on the owner of the other land, or gives notice by advertisement or other means he deems desirable and practicable to inform the owner of the other land of the amendment.

If the owner of the other land wishes to object to the amendment made by the Secretary for Development, he must send to the Secretary for Development a written statement of that objection within-

  1. 14 days in the case of an owner of the land included in the original development project; or
  2. two months in the case of an owner of the land affected by an amendment made by the Secretary for Development which was not included in the original development project.

If the Secretary for Development declines to authorise a development project, he orders the URA to publish in the Gazette a notice of withdrawal of the project, and he gives written notice of that decision to the owner of the land, or gives notice by advertisement or other means the URA deems desirable and practicable to inform the owner of the land of the decision.

An aggrieved objector to the decision of the Secretary for Development can appeal to an independent Appeal Board. The Appeal Board Panel may confirm, reverse or change the appealed decision of the Secretary for Development.

Development schemes

Objections will be considered under the Town Planning Ordinance (TPO). Objections can be made to the Town Planning Board (TPB) when the TPB publishes in the Gazette notice of the URA development scheme. The TPB will then consider the related objections.

For details, please refer to Town Planning Board Guidelines No. 29B .

C. Acquisition price

The URA will offer an owner-occupier of domestic property the market value (valued on a vacant-possession basis) of his property plus an ex-gratia allowance, namely Home Purchase Allowance (“HPA”), for the purchase of the property.

The HPA is the difference between the market value of the property being acquired and the value of a notional replacement flat, which is a seven-year-old flat of similar size and in a similar locality to the property being acquired, and located on a middle floor with average orientation.

An owner who leaves his property vacant will be offered the market value (valued on vacant possession basis) of his property plus a Supplementary Allowance (“SA”) instead of the HPA. The SA is a percentage of the HPA.

If an owner does not reside in his property as his sole residence, the occupancy status of his property will be treated as being vacant.

D. Freezing survey

The occupation status of the property at the date of the freezing survey is used by the URA to determine whether the owner is entitled to a HPA or SA, so the URA conducts a freezing survey on the date on which a project commences.

Any change in the occupation status of the property after the freezing survey does not affect the amount of allowance payable to the owner. Hence, even if the owner evicts the tenants from the property between the time of the freezing survey and the time of the completion of property acquisition by the URA and becomes an owner-occupier, he will not receive a higher allowance.

V. Demand-led Redevelopment Project (Pilot Scheme)

The Urban Renewal Strategy, which was promulgated on 24th February 2011, providesthat the URA may respond to a joint approach frombuilding owners to initiate redevelopment of their lot(s) or building(s). The URA hastherefore introduced an owner-initiated, demand-led redevelopment scheme tofacilitate urban renewal.

A. Principles of the Pilot Scheme

Just as with URA-initiated redevelopment projects, demand-led redevelopment projects are implemented under the Urban Renewal Authority Ordinance ( Cap.563 of the Laws of Hong Kong) (the “URAO”).

The Pilot Scheme covers only development projects which may be implemented under Section 26 of the URAO , so amendments to the Outline Zoning Plan are not required.

The prevailing principles adopted by the URA in the acquisition of properties will be applicable to the demand-led redevelopment projects implemented subsequent to the Pilot Scheme.

The prevailing principles adopted by the URA for the provision of re-housing and ex-gratia payments will be applicable to any demand-led redevelopment projects implemented subsequent to the Pilot Scheme.

B. Application requirements

The application must meet the following criteria:

    1. It should be a joint application by the owners of not less than 67% of the undivided shares in each lot within the Site.
    2. Residential building conditions within the site should be “poor” or “varied”.
    3. The site should generally be larger than 400 square meters. If a smaller site is proposed, there must be special needs to support the URA to consider it.
    4. The site does not comprise buildings/structures of historical, architectural or cultural significance unless they can be integrated into the future development.
    5. The site is situated within redevelopment zones and not situated within any of the proposed preservation areas identified by the District Urban Renewal Forum, if there are any in the district in which the site is located.

C. Selection

The URA will consider allapplications which fulfill the selection criteria. All applications will be assessed with reference to the following factors:

Residential building conditions

For example:

    1. A high proportion of the residential buildings in poor condition, indicated by building decay and dilapidation, such as concrete spalling, cracking, bulging, leakage or seepage;
    2. A high proportions of the residential buildings with confirmed signs of sub-divided units;or
    3. Residential buildings with permanently obstructed means of escape from the ground floor to the roof.

Planning gains

For example:

    1. The redevelopment allows for set-back/road widening, etc. (ifthe Government’s intentions are known) or has the potential for this;
    2. The redevelopment allows for pavement widening/corner set-back /realignment of a public passageway;
    3. The redevelopment allows for better vista and air-ventilation;
    4. The redevelopment allows for the provision of at-grade open space, or space for social enterprise or GIC use;
    5. Buildings/structures within the proposed project are of historical, architectural or cultural significance, and are deemed to be able to add value to the future development by providing a viable”theme”;
    6. The redevelopment allows for designs to mitigate current noise impact;
    7. Existing use includes obnoxious trades, or unauthorized or illegal activities, the removal of which by way of redevelopment would have a positive impact on local living environment;or
    8. Poor living conditions: e.g. a high degree of sharing (if discernible).

Planning impact

For example:

    1. Redevelopment of the proposed site would compromise the potential of implementing a more comprehensive project for the benefit of the community;
    2. Existing use (with a distinct local character) would be removed by redevelopment; or
    3. Over-concentration of projects in that district in the same year.

Other planning factors

For example:

    1. A clear indication of local aspirations;
    2. Ownership structure;
    3. Re-housing resources in the district; or
    4. Abnormal spate of tenant evictions.

If there is/are suitable demand-led redevelopment project(s) that satisfy all the application requirements, the URA may exercise its absolute discretion, while considering whether the URA has sufficient resources to undertake any such demand-led redevelopment projects within a reasonable period.

Demand-led redevelopment projects selected by the URA have to be approved by the Financial Secretary for implementation.

The URA conducts a freezing survey for the building(s) within the site of an approved project for commencement. This indicates that the relevant application has been approved and that the relevant project has commenced.

D. Implementation

Implementation of the approved projects is subject to the fulfillment of the following two conditions precedent:

    1. Acceptance of URA’s conditional offers and the signing of Sale and Purchase Agreements by the owners of not less than 80% of the undivided shares of the lots in the site under application within a period of not more than 90 days of the issue of the URA’s conditional offers; and
    2. Within one year of the issue of the URA’s conditional offers, the granting of authorization by the Secretary for Development for the URA to implement a development project under Section 24 of the URAO for the site under application, with no appeals received upon the expiry of the appeal period, or the dismissal of all appeal(s), if any.

If the above conditions precedent have been fulfilled, the URA notifies the owners in writing to complete the relevant Sale and Purchase Agreement within one month after the date of fulfillment of all conditions.

If any of the two conditions precedent above cannot be met, the URA will not proceed any further with the approved project and will cancel any Sale and Purchase Agreements already signed with any owners.

VI. Facilitating Services (Pilot Scheme)

The Urban Renewal Strategy, which was promulgated in February 2011, states that the URA may provide assistance to owners as a consultant to help them assemble titles for commencing owner-initiated redevelopment.

The URA has set up its wholly-owned subsidiary, Urban Redevelopment Facilitating Services Co. Ltd. (“URFS”), to implement the relevant pilot scheme (Facilitating Services (Pilot Scheme)).

A. Services provided under Facilitating Services (Pilot Scheme)

The URFS provides Facilitating Services to eligible owners. No acquisition, compensation, re-housing or resumption action on the part of URA/URFS is involved.

At the current stage, the URFS mainly helps owners assemble titles for the joint sale of their property interests. The services include:

    1. appointment of consultants on behalf of the owners, and co-ordinating and monitoring the services provided by the consultants; and
    2. persuading yet-to-commit owners to join the Facilitating Services (Pilot Scheme)for the joint sale of their property interests under the Scheme.

B. Application requirements

All applications received by URFS are screened to see if each application meets the following criteria:

    1. Joint application is made by the owners of not less than 50% of the undivided shares in each lot within the site;
    2. The building conditions are “poor” or “varied”;
    3. The site does not form a part of the area of a redevelopment project commenced by the URA;
    4. The buildings of the site are not for industrial use or those where 50% or more of the floor area is under existing commercial use; and
    5. The site is situated within redevelopment zones or at least not situated within a proposed preservation area identified by the District Urban Renewal Forum, if there is one in the district in which the site is located.

C. Application procedures

Application and project selection

Owners interested in joining the Facilitating Services(Pilot Scheme) must jointly submit an application form, together with the relevant information, to the URFS.

The URFS decides whether to select the application for preliminary processing. In deciding whether to select a particular application for preliminary processing, the URFS considers whether the application requirements are satisfied, assesses the available manpower and financial resources of the URFS at the time, and considers any other factors it deems relevant, including, but not limited to, the ownership structure of the buildings, etc.

For applications selected by the URFS for preliminary processing, the URFS, at its own cost, engages a valuer, selected by the owner-applicants who signed the application form from a list prepared by URFS, to assess the financial viability of the joint sale of property interests.

Facilitation Agreement(s)

If the report from the URFS’s valuers indicates that the joint sale of property interests is financially viable, the application after preliminary processing is then treated as an approved project under the Facilitating Services (Pilot Scheme) for formal implementation (the “Approved Project”).

The URFS then signs Facilitation Agreements with each applicant and all subsequent owners who join the Approved Project. The Facilitation Agreement details the rights and obligations of both the URFS and the applicants under the Approved Project, key milestones of the Approved Project, contributions to work expenses to be made by each applicant, withdrawal/termination events, etc.

The URFS, on behalf of the participating owners, engages consultants for the Approved Project (including, but not limited to, solicitors, valuers and auction consultants), coordinates and monitors their work, and tries to persuade yet-to-commit owners to join the Approved Project.

Joint Sale Agreement

When the percentage of undivided shares of participating owners reaches 90%(or between 80%and 90%,subject to the absolute discretion of the URFS), the URFS arranges for the participating owners to sign a binding Joint Sale Agreement.

The percentage of undivided shares of participating owners who eventually sign the Joint Sale Agreement must reach 90% (or between 80% and 90%,subject to the absolute discretion of the URFS).

The Joint Sale Agreement binds all the participating owners who sign the Joint Sale Agreement to sell their property interests by auction, subject to a reserve price, and to share the sales proceeds among themselves in accordance with an agreed sharing ratio schedule.

The reserve price and the sharing ratio schedule are determined by a valuer and have to be accepted by all the participating owners who sign the Joint Sale Agreement.

Auction

The property interests covered by the Joint Sale Agreement are sold by auction to the purchaser offering the highest bid which meets or exceeds the reserve price.

If no one offers a bid or the reserve price is not met in the auction, the joint sale is deemed “unsuccessful” and the Joint Sale Agreement is terminated at once.

If the property is successfully sold by auction, the sale proceeds, less the contribution to the URFS, are distributed to the participating owners who signed the Joint Sale Agreement in accordance with the agreed sharing ratio schedule.

D. Key milestones

Within one year from the date of signing of the first Facilitation Agreement, the percentage of undivided shares of the Participating Owners must reach 60%

Within two years from the date of signing of the first Facilitation Agreement, the percentage of undivided shares of participating owners must reach 90% (or between 80% and 90%, subject to absolute discretion of the URFS). Subject to the URFS’s absolute discretion and with the unanimous consent of all participating owners, these owners will be allowed one opportunity to put up the assembled interests for joint sale even if the percentage of undivided shares of participating owners has not reached 80%.

In accordance with the Facilitation Agreement, within three months from the date of the percentage of undivided shares of participating owners reaching 90% (or between 80% and 90%, subject to absolute discretion of the URFS), the participating owners must sign a Joint Sale Agreement with the auction company and with the URFS (if deemed necessary by the URFS), and the related auction must be conducted within that three-month period.

E. Fees

In the process of reaching a joint sale, the URFS will, on behalf of the participating owners, engage related consultants (including, but not limited to, solicitors, valuers and auction consultants) to provide relevant services to the Participating Owners. The participating owners must pay all the related work expenses. The work expenses attributable to each participating owner are calculated according to the undivided shares that he owns in a lot.

After signing the Facilitation Agreements, the participating owners must make an advance contribution to the work expenses used to pay the consultancy fees. The URFS undertakes to contribute to the work expenses in proportion to the undivided shares of the yet-to-commit owners. Owners participating in the Approved Project at a later stage have to reimburse the work expenses to the URFS in proportion to the undivided shares they own in a lot.

Upon the successful joint sale of the property interests, a contribution of 1% of the sale proceeds derived from the joint sale will be charged by the URFS. At the same time, the participating owners’ earlier contributions will be refunded by the URFS.

If an Approved Project fails after the signing of the Facilitation Agreement(s) for whatever reason(s), the participating owners and the URFS can recover their share of balance of their contribution to the work expenses that have not been expended, if any, in proportion to their contribution to the work expenses.

Any participating owners who decide to withdraw from the Facilitating Services (Pilot Scheme) on their own accord at any time prior to the signing of the JSA are be eligible for a refund of any expended or pre-paid contributions to the work expenses.

F. Withdrawal/termination

If the key milestones are not met, all the signed Facilitation Agreements are terminated and the Approved Project is aborted.

After signing the Facilitation Agreement, a Participating Owner is entitled to withdraw from the Facilitation Agreement at any time prior to his/her entering into the Joint Sale Agreement. Neither expended nor pre-paid work expenses are refunded.

VII. Land resumption

Once the development project or development scheme is launched, the URA has to repossess the land for redevelopment.

The URA first considers acquiring properties in redevelopment areas through private negotiation. If the URA fails to acquire land by private agreement for whatever reasons, such as title problems, probate cases or untraceable owners, the URA will make a request to the Government for resumption of the land pursuant to the Lands Resumption Ordinance ( Cap. 124 of the Laws of Hong Kong).

A. Application for land resumption

Under the Urban Renewal Authority Ordinance ( Cap. 563 of the Laws of Hong Kong), the URA may apply to the Secretary for Development requesting that he recommend to the Chief Executive in Council the resumption of land required for urban renewal.

If the Chief Executive in Council decides that the resumption is required for a public purpose, the Chief Executive may order the resumption.

B. Notice of approval of land resumption

If the Chief Executive approves the URA’s resumption application, a Government Notice must be published in the Gazette. Copies of the Government Notice must also be affixed in the redevelopment area and sent to the registered owners of the property, where possible.

C. Reversion of ownership to the Government

Under normal circumstances, the ownership of the properties will revert to the Government three months after the notice is published.

If there is an urgency to acquire the properties, a shorter period may be given.

Upon the date of reversion, all legal rights and interests of the owners no longer exist. Henceforth, the former owners are not entitled to collect rents or fees of any kind from their tenants or the occupants.

D. Compensation

Persons affected by land resumption will, subject to eligibility, be offered statutory compensation and an ex-gratia allowance.

Eligible persons include the former owner or persons having an interest in the land, such as the tenant.

Statutory compensation

Legal owners are entitled to the open market value of the resumed properties, assessed on a vacant possession basis or tenancy basis, as appropriate, on the date of reversion.

Ex-gratia allowance

Owner-occupiers may also receive an ex-gratia allowance, namely the Home Purchase Allowance (HPA).

The amount of HPA payable to individual owners is the difference between the value of a notional replacement flat (based on a seven-year-old flat of a size similar to the resumed flat and in the same locality) and the open market value of the resumed flat.

1. When does the Government make an offer of compensation or invite claims for compensation?

The Government will make an offer of compensation in respect of the resumption to the former owner and to any person having an estate or interest in the land immediately before reversion or invite claims for compensation from them within 28 days of the date of reversion.

When there are legal issues, such as title issues or right-of-way issues, pertaining to the resumed land, the Government invites the related parties to make claims for compensation.

Those who are invited to submit their claims for compensation must submit their claims in a form specified by the Director of Lands, setting out the amount of compensation claimed. They must also provide to the Director of Lands any accounts, documents or particulars the Director of Lands may reasonably require in support of such claims. It is common practice for the claimant to submit his claim to the Director of Lands in writing.

2. What should a person do if he is affected by land resumption but offered no compensation?

Any person who considers that he has a compensatable interest in the resumed land, and who has been neither offered compensation nor invited to claim compensation may, within one year from the date of reversion, submit a claim in writing to the Director of Lands stating the nature of his estate or interest in the land and the amount of compensation which he claims for the resumption of that estate or interest.

This situation usually occurs when it was thought that the Government and the owner or person entitled to compensation would reach an agreement and the land would be purchased rather than resumed.

E. Lands Tribunal referral and appeal mechanisms in respect of payment of the HPA

Statutory compensation

In the event that an agreement as to the amount of statutory compensation (if any) cannot be reached between the claimant and the Government, either party may submit a claim to the Lands Tribunal for a determination of the amount of the compensation. The figure awarded is then binding on both the claimant and the Government. Any previous offer from the HPA will be withdrawn upon referral of the case to the Lands Tribunal.

Ex-gratia allowance

An owner who considers himself aggrieved by the decision of the Director of Lands in respect of the payment of the HPA(on contentious issues regarding the eligibility for the HPA, the calculation of floor area for payment of the HPA, or other related matters)can, within 60 days of the decision, submit an appeal in writing to the Appeals Committee.

The Appeals Committee, after a hearing and investigation, then makes a determination on the decision of the Director of Lands, if necessary.

If the Director of Lands does not accept the determination, the case then goes to the Secretary for Development who reviews the case and makes a final decision on it.

Appeals on the unit rate (i.e. dollars per square metre) of the notional replacement flats are considered by the Director of Lands. Legal owners are required to submit an appeal in writing within two months from the date of an offer of compensation.

VIII. Compulsory Sale

As at June 2011, Hong Kong had about 4,000 buildings aged 50 years or older. These buildings have reached their designed working life and usually lack proper repair and maintenance.

In order to encourage the redevelopment of dilapidated buildings, the Land (Compulsory Sale for Redevelopment) Ordinance ( Cap. 545 of the Laws of Hong Kong) was brought into force on 7th June 1999.

The Ordinance enables people who hold a specified majority of the undivided shares in a lot to make an application to the Lands Tribunal for an order to sell it for redevelopment.

The Ordinance provides a solution to the problem of property acquisition for redevelopment due to defective titles, untraceable owners, owners who died intestate or owners demanding unreasonably high prices.

A. Eligibility of applicants

When a developer sells individual units to individual owners, the owners jointly own the lot on which the building is situated with the developer and the other individual owners. Regarding the joint ownership of the lot, the individual owner is assigned a certain share of it. Under this arrangement, each owner owns a certain undivided share of the lot.

Generally speaking, a person or persons who own, without mortgage, not less than 90% of the undivided shares in a lot (i.e. the majority owner) may make an application to the Lands Tribunal for an order to sell all the undivided shares in the lot for the purpose of redevelopment.

On 1 April 2010, the Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice ( Cap. 545A of the Laws of Hong Kong) lowered the compulsory sale application threshold from 90% to 80% for the following three classes of lots:-

  • a lot with each of the units on the lot representing more than 10% of all the undivided shares in the lot;
  • a lot with all the buildings aged 50 years or older; or
  • a lot that is not located in an industrial zone and each of the buildings on the lot is an industrial building at least 30 years old.

B. Procedures for compulsory sale

The procedures for compulsory sale are set out in the Land (Compulsory Sale for Redevelopment) Ordinance ( Cap. 545 of the Laws of Hong Kong).

Stage 1 – Application

When making the application for compulsory sale, the majority owner must file a valuation report, prepared not earlier than three months before the application date, setting out the assessed market value of each property on the lot (1) on a vacant possession basis; (2) ignoring the possibility of a compulsory sale order; and (3) ignoring the redevelopment potential of the property or the lot.

The majority owner who has made the application must:

    1. serve a copy of the application on each minority owner;
    2. register a copy of the application under the Land Registration Ordinance ( Cap. 128 of the Laws of Hong Kong) against the lot;
    3. affix a notice in both Chinese and English upon a conspicuous part of the building on the lot (or upon a conspicuous part of the lot if there is no building on the lot); and
    4. publish a notice in not less than one Chinese language newspaper and one English language newspaper circulating generally in Hong Kong.

Stage 2 – Determination of application

Upon receipt of an application, the Lands Tribunal decides whether or not a compulsory sale order should be made.

First , if any minority owner disputes the value of any property as assessed in the valuation report, the Lands Tribunal must hear and determine the dispute.

If a minority owner cannot be found, the majority owner is required to show that the value of the minority owner’s property, as assessed in the valuation report, is not less than fair and reasonable (including when compared with the value of the majority owner’s property).

If necessary, the Lands Tribunal may adjust the valuation in the light of the evidence.

Second , the majority owner must satisfy the Lands Tribunal that:-

    1. the redevelopment of the lot is justified due to the age or state of repair of the existing development on the lot; and
    2. the majority owner has taken reasonable steps to acquire all the undivided shares in the lot (including, in the case of a minority owner whose whereabouts are known, negotiating the purchase of the share owned by the minority owner on terms that are fair and reasonable)

Upon receiving the grant of the compulsory sale order, the majority owner must:

    1. serve a copy of the order on each minority owner;
    2. register a copy of the order with the Director of Lands; and
    3. publish a notice in not less than one Chinese language newspaper and one English language newspaper circulating generally in Hong Kong.

Stage 3 – The sale

If the Lands Tribunal decides to grant a compulsory sale order, it appoints trustees to conduct the sale.

The lot must be sold by public auction unless all the parties agree in writing to other means of sale approved by the Lands Tribunal.

If the lot is sold by public auction, the lot must be sold to the highest bidder of the lot, subject to a reserve price approved by the Lands Tribunal which takes into account the redevelopment potential of the lot.

Any person, including the majority and/or minority owners, can bid for the lot.

The lot must be sold within three months from the grant of the compulsory sale order. If the lot is not sold within this period, the trustee, the majority owner or a minority owner may apply to the Lands Tribunal for a further three months’ extension for compulsory sale. If the lot still cannot be sold within this period, the compulsory sale order becomes void.

Stage 4 – Apportionment and application of sale proceeds

The proceeds of sale and associated expenses are apportioned between the majority and minority owners on a pro rata basis in accordance with the value of the respective properties of each majority owner and each minority owner of the lot, as assessed in the valuation report, subject to any adjustments that may have been made by the Lands Tribunal.

The apportioned proceeds are then distributed by the trustees to the respective owners after (1) deducting the expenses of the auction (or other means of sale) and legal costs on assignment of the lot; (2) discharging any liability due to the Government and encumbrance affecting the lot; and (3) paying off any compensation due to existing tenants (if so ordered by the Lands Tribunal).

C. Mediation for compulsory sale cases

1. Practice Direction: Mediation for Compulsory Sale Cases Under the Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545)

A Practice Direction ( LTPD: CS No. 1/2011 ) has been issued to cover all compulsory sale cases under the Land (Compulsory Sale for Redevelopment) Ordinance ( Cap. 545 of the Laws of Hong Kong).

Under the Direction, parties in a compulsory sale case should attempt mediation to reach a settlement of any dispute arising out of the application for compulsory sale before their case is heard by the Lands Tribunal.

If the applicant (i.e. the majority owner) in a compulsory sale case unreasonably fails or refuses to attempt mediation with the minority owner,

  • the majority owner may not be considered by the Lands Tribunal as having taken all the reasonable steps to acquire all undivided shares of the lot; and
  • the Lands Tribunal is entitled to take into account such failure or refusal in determining whether an order for sale should be granted.

2. Land (Compulsory Sale for Redevelopment) Ordinance Pilot Mediation Scheme

In order to assist owners involved in or contemplating an application for compulsory sale for redevelopment, the Development Bureau provides financial support to the Pilot Mediation Scheme to help the owners undertake mediation on a voluntary basis.

The Development Bureau commissioned Joint Mediation Helpline Office Limited (“JMHO”) to set up and operate the Pilot Mediation Scheme up to January 2013.

Persons interested in mediation may join the Pilot Mediation Scheme.

Under the Pilot Mediation Scheme, it is anticipated that mediation session(s), including pre-mediation session(s) of no more than three hours, will not last longer than a total of 15 hours.

To assist users, a uniform application fee and mediator fee are charged for mediation under the Pilot Mediation Scheme. The fees are shared equally by all parties.

1. Application fee

HK$500 per party

2. Mediator fee

    • Pre-mediation session (up to 3 hours)
    • Subsequent mediation session (from 1 to 12 hours)

HK$3,000 per hour

HK$3,000 per hour

3. Grant of Mediator Fee for Elderly Minority Owners

An elderly minority owner undertaking mediation on a voluntary basis under the Pilot Mediation Scheme may apply to the JMHO for a grant which covers the share of the mediator fee for up to a total of 15 hours of mediation (including the pre-mediation session(s) of no more than three hours).

Eligibility criteria

The eligibility criteria for the grant are set out as follows:-

    • holder of a valid Hong Kong Identity Card;
    • aged 60 or above;
    • owner of a residential flat in a domestic building or composite building;
    • residing in the subject property, with spouse if married; and
    • income and asset limits (or receiving Comprehensive Social Security Assistance (CSSA) or Normal Old Age Allowance (NOAA)) as below:-

Monthly Income Limit (Note 2)

Asset Limit (Note 3)

Singleton

HK$6,660

HK$372,000

Couple

HK$10,520

HK$562,000

Note 1 – The JMHO will not accept any application for grant of mediator fee from an elderly minority owner or his/her spouse who is a current owner/tenant of any form of subsidised housing or who is drawing related benefits.

Note 2 – In the calculation of income limit, the monthly contribution to the Mandatory Provident Fund, Disability Allowance, Old Age Allowance and mortgage repayment of the self-occupied property are not counted as income.

Note 3 – In the calculation of asset limit, the property in which the applicant resides and to which the grant relates is not counted.

Application procedures

An eligible elderly minority owner who wishes to apply for the mediator fee grant must submit an application to the JMHO prior to the commencement of his mediation session(s); otherwise, the application will not be considered.

Eligible elderly minority owner applicants are required to make a declaration that all supporting documents they submit to the JMHO are true by virtue of the provisions of the Oaths and Declarations Ordinance ( Cap. 11 of the Laws of Hong Kong).

IX. Intimidation tactics faced by property owners

There are sometimes news reports on intimidation tactics applied to minority property owners who refuse to sell their properties for redevelopment. The intimidation acts may include:

  • excessive telephone calls;
  • shouting outside the properties;
  • cutting off electricity and water supply;
  • using glue to block the key hole; or
  • using a chain lock to lock the door gate.

If property owners face these acts of intimidation, they should immediately report them to the police, as they may be criminal offences.

Property owners can also consult lawyers and apply for an injunction if necessary to avoid further intimidation and harassment.

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