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. 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. 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.

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.

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. 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)

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. 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.

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;

• • a minority owner involved in an application or prospective application to the Lands Tribunal for compulsory sale for redevelopment under the Land (Compulsory Sale for Redevelopment) Ordinance ( Cap. 545 of the Laws of Hong Kong);

• • 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:-

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).