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.

Legal tenants are entitled to the open market value, if any, of their interest in the domestic properties (for example, the value of an unexpired lease term subject to an existing rent below the prevailing open market rent).

Legal domestic occupiers (including owner-occupiers and tenants) are entitled to claim the losses and expenses reasonably incurred by them in moving from the resumed flat to a replacement flat due to the land resumption. Ex-gratia removal allowance will normally be offered to them in lieu of statutory compensation.

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.

For more details, please refer to the guidelines from the Lands Department.

As at 2022, Hong Kong had about 9,600 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

In general, a person or company owning the following percentage of undivided shares in a lot may apply to the Lands Tribunal for compulsory sale of the lot for redevelopment –

Designated areas are:

1. Cheung Sha Wan (including Sham Shui Po);
2. Ma Tau Kok (including Kowloon City and To Kwa Wan);
3. Mong Kok;
4. Sai Ying Pun and Sheung Wan;
5. Tsuen Wan;
6. Wan Chai; and
7. Yau Ma Tei.

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. 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. 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)

If the building erected on a lot is aged 50 or above and all minority owners do not object to redevelopment, the Lands Tribunal is not required to review whether the lot warrants redevelopment.

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

1. 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. Support Service Centre for Minority Owners under Compulsory Sale (SMOCS)

The “Support Service Centre for Minority Owners under Compulsory Sale” (SMOCS) was set up by the “Urban Renewal Authority” (URA).

But its operation is independent of the URA. It is only accountable to the “Dedicated Office of Support Services for Minority Owners under Compulsory Sale” (SOSS) of the “Development Bureau” (DEVB).

SMOCS will arrange free information sessions on mediation for the minority owners affected by compulsory sale applications. The information seesions are provided by the Integrated Mediation Office of the Hong Kong Judiciary. The content is about how mediation facilitates minority owners and the applicant of the compulsory sale applications to resolve their disputes. Please be reminded that the information session is neither a mediation session nor a counselling service.

Furthermore, SMOCS will provide assistance in arranging mediation meetings, including provision of the referral list of mediators. Regardless of whether there is a settlement after the mediation meeting is completed, each property affected by a compulsory sale application will be granted a maximum amount of $4,500. Please note that the amount of subsidy is determinded on a per property basis.

If the affected minority owners are receiving “Comprehensive Social Security Assistance” (CSSA), “Old Age Allowance” (OAA) / “Old Age Living Allowance” (OALA) or “Disability Allowance” (DA), a maximum of $9,000 fee subsidy will be provided upon completion of the mediation meeting.

The affected minority owners need to submit a completed application form in the prescribed format with the required supporting documents to the SMOCS.

At the mediation stage, SMOCS will freely commission property valuation firms and produce indepent valuation reports on subject property and lot. If the minority owners concerned want to receive a copy of the valuation report, they are only required to pay a concessionary fee of $4,500 per property.

Minority owners who are recipients of CSSA, OAA / OALA or DA can obtain the reports free of charge.

For more information, please visit the website of the SMOCS.

If you have any enquiries and feedback, please contact SMOCS:

• Service Hours: Monday to Friday, 9:00am to 1:00pm & 2:00pm to 6:00pm
  (Closed on Saturdays, Sundays and Public Holidays)
• Address: Unit D, 6/F, 777-783 Yu Chau West Street, Kowloon [About 10-minute walk from exit B1 of Lai Chi Kok MTR station]
  (Please make an appointment before visiting the SMOCS.)
• Hotline: (852) 2156 8050
• Fax: (852) 2156 8055
• E-mail: inquiry@smocs.hk

D. Guide to Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545)

A “Guide to Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545)” is published in December 2024 by the “Dedicated Office of Support Services for Minority Owners under Compulsory Sale” of the “Urban Renewal Authority”.

The Guide introduces the compulsory sale regime after the effective of the amendments to the Cap.545. Please click here to download. (Chinese version only. The current version was finalised in December 2024.)