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LCQ11: Land (Compulsory Sale for Redevelopment) Ordinance

Following is a question by the Hon Ronny Tong Ka-wah and a written reply by the Secretary for Development, Mrs Carrie Lam, in the Legislative Council today (January 5):

Question:

The Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545) (the Ordinance) came into operation in 1999.  Under the Ordinance, any person who owns not less than 90% of the undivided shares in a lot may make an application to the Lands Tribunal for an order for the compulsory sale of all of the undivided shares in the lot for the purposes of redevelopment.  The Government, by publication of the Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice in the Gazette in January last year, specified that with effect from April 1, 2010, in respect of three classes of land lot, the application threshold for compulsory sale would be lowered from 90% to 80%.  In this connection, will the Government inform this Council:

(a) since the Ordinance came into operation in 1999, whether the Lands Tribunal has rejected any application for a compulsory sale order (including applications with the thresholds of 90% and 80% respectively); if so, of the reasons for the rejection and the details;

(b) whether the authorities have assessed, from 1999 to the present, the differences between the prices at which the properties were sold compulsorily under the Ordinance and the prices of the properties built on the same land lots after redevelopment; if so, of the details; if not, how they monitor whether the Ordinance has been abused causing the minority owners not being reasonably compensated for their properties concerned; and

(c) given that some minority owners have reported that the services currently provided by the Legal Aid Department do not cover the proceedings handled by the Lands Tribunal under the Ordinance and the negotiation prior to such proceedings, rendering quite a number of minority owners (who have not the financial means) unable to appoint lawyers, engineers or other experts to assist them in negotiating better prices for their properties even though they are dissatisfied with the valuation of their properties, whether the Government will amend the relevant legislation to enable minority owners to receive legal aid so that they can negotiate the valuation of their properties with the developers on a more equal footing; if it will, of the timetable for the amendment; if not, the reasons for that?

Reply:

President,

My reply to the three-part question is as follows:

(a) Since the Land (Compulsory Sale for Redevelopment) Ordinance (the Ordinance) came into operation in 1999 and up till December 30, 2010, the Lands Tribunal (the Tribunal) has received a total of 85 applications for compulsory sale, of which 26 have been granted compulsory sale orders, 1 has been dismissed, 37 withdrawn by applicants or adjourned for various reasons and 21 are being processed.  With the exception of 4 cases, 81 out of these 85 applications are based on the 90% threshold.

The dismissed case was an application based on the 90% threshold, involving land lots at Nos. 125 and 127 Tung Choi Street, Kowloon (Lands Tribunal Case No. LDCS 1000/2006).  According to the judgment handed down by the Tribunal in March 2007, as the applicant had failed to adduce sufficient evidence to satisfy the Tribunal that redevelopment was justified due to the age or state of repair of the existing development on the lots, the Tribunal decided not to make a compulsory sale order.

(b) Under the Ordinance, an application by a majority owner to the Tribunal for compulsory sale of land shall be accompanied by a valuation report prepared not earlier than 3 months before the date on which the application is made.  The report shall set out the assessed market value of each property on the subject lot, and the assessment shall meet the relevant requirements specified in the Ordinance.  The valuation report will form the basis for pro rata apportionment of future sale proceeds to each majority owner and each minority owner in accordance with the existing use values of their respective properties as assessed in the report.

If the Tribunal decides to grant a compulsory sale order after hearing the case, it will approve a reserve price which has "taken into account the redevelopment potential of the lot", and appoint a trustee to sell the lot by public auction (unless all owners of the lot have agreed to seek the Tribunal's approval under the Ordinance for selling the lot by other means).  A reserve price which has "taken into account the redevelopment potential of the lot" will be higher than the total existing use values of all properties on the lot as the former reflects the value derived from, among others, a better utilisation of the plot ratio of the lot.  When handling compulsory sale cases, the Tribunal judge always sits with an experienced surveyor who will offer professional advice on the cases in the capacity of a Tribunal member.

After the lot has been sold, sale proceeds will be apportioned on a pro rata basis in accordance with "… the values of the respective properties of each majority owner and each minority owner of the lot" as assessed in the above-mentioned valuation report (that is, in accordance with the ratio between the existing use values of the respective properties of the majority and the minority owners).

With regard to the past 22 cases in which the Tribunal granted compulsory sale orders and the subject lots were successfully sold by public auction, the transaction prices were on average 2.6 times the existing use values of the lots.  In other words, the proceeds apportioned to each minority owner after public auction were 2.6 times the then market value of their respective properties.  We consider that the provision for the Tribunal to approve reserve price under the Ordinance can ensure that the minority owners are reasonably compensated.  However, we must point out that "2.6 times" is only an average figure based on the above-mentioned cases.  Obviously, the redevelopment value of land lots varies from site to site. 

We have not made comparison between the prices at which the properties on the lots were sold compulsorily and their prices upon redevelopment.  This is because various costs and risks are involved in the process of redevelopment, and the final prices of the redeveloped properties are affected by many factors, including the overall economic situation and the market price of the properties, or even the change of land use, such as a change from domestic use to commercial use.  Hence, the prices of the redeveloped properties cannot serve as suitable indicators to assess whether the minority owners have been reasonably compensated.

(c) Pursuant to the Legal Aid Ordinance, legal aid is only available to proceedings in the Lands Tribunal under Part II of the Landlord and Tenant (Consolidation) Ordinance.  Nevertheless, legal aid may be granted, subject to means and merits tests, to a person who appeals against the decision of the Tribunal.  At present, the Government has no plans to amend the relevant provisions of the Legal Aid Ordinance.

However, the Development Bureau attaches much importance to providing administrative support to minority owners before the commencement of legal proceedings under the Ordinance.  As we have pointed out in the motion debate on "Reviewing the operation of the Land (Compulsory Sale for Redevelopment) Ordinance" at the Legislative Council meeting of December 1, 2010, the Development Bureau will launch a Pilot Mediation Scheme for compulsory sale cases in late January this year.  This scheme, to be piloted for one year, aims to facilitate parties involved in or contemplating compulsory sale applications under the Ordinance to undertake mediation on a voluntary basis.  The Government will provide financial support for the pilot scheme, including its setup and operating costs, as well as the financial assistance to be provided to eligible elderly minority owners in paying mediator fees.  If both parties, namely, the majority owners and the minority owners, who are or who will be involved in compulsory sale applications, are willing to join the mediation scheme, staff of the service provider of the pilot mediation scheme will first explain the operation of the mediation mechanism to both parties.  To enhance transparency, we will request the service provider of the pilot mediation scheme to provide a list of its accredited mediators and a standard charging rate to facilitate both parties joining the scheme to make their choice.  All accredited mediators are independent professionals who are professionally trained in mediation.  They will, in an unbiased and confidential manner, help both parties discuss and negotiate on a balanced footing, with a view to reaching consensus.

Further, the Development Bureau will, at around the same time, launch a Pilot Scheme on Outreach Support Service for Elderly Owners.  We will be engaging a social welfare agency to provide outreach support service to elderly minority owners of old buildings.  The social welfare agency will develop a network with elderly centres in various districts to proactively explain to elderly owners the general practice of property acquisition and the process of compulsory sale under the Ordinance.  The agency will also refer the elderly owners to professionals such as surveyors for advice and assistance if they wish, and to check their cases for them free of charge, including ascertaining through the various Government departments such as the Land Registry, the Buildings Department and the Planning Department, if the properties in which they reside fall within one of the specified classes of lot for which the 80% compulsory sale application threshold applies under the Land (Compulsory Sale for Redevelopment)(Specification of Lower Percentage) Notice which came into effect on April 1, 2010.

To step up publicity and public education to help minority owners know their rights and the support measures provided by various agencies, as well as the caveats that they should watch out for when approached by developers or their intermediaries during voluntary acquisition or compulsory sale, the Development Bureau will also launch a video on the Ordinance in late January this year.  The video will explain in a user-friendly manner the scope of the Ordinance as well as the process of compulsory sale to enable affected owners to know their rights and the protection for them under the Ordinance.  The video will also introduce to the public the support and assistance available to them, including the further information service available at the 10 Property Management Advisory Centres of the Hong Kong Housing Society, the role of the Estate Agents Authority (EAA) in regulating the practice of estate agents in the acquisition of old buildings, and the assistance the EAA renders to the minority owners.  The video will also introduce the Pilot Mediation Scheme and the support service by the social welfare agency to be commissioned by the Development Bureau.

 

Ends/Wednesday, January 5, 2011
Issued at HKT 14:31

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