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:
- appointment of consultants on behalf of the owners, and co-ordinating and monitoring the services provided by the consultants; and
- 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:
- Joint application is made by the owners of not less than 50% of the undivided shares in each lot within the site;
- The building conditions are “poor” or “varied”;
- The site does not form a part of the area of a redevelopment project commenced by the URA;
- 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
- 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.
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.
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.
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.
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.