Response to reports on redevelopment of buildings under Civil Servants' Co-operative Building Society Scheme

There were recent reports on the redevelopment of buildings under the Civil Servants' Co-operative Building Society Scheme (CBS) quoting the criticism of some CBS residents and Legislative Council member Dr Edward Yiu that "the Government changed the approach on the assessment of land premium four years ago and has been charging a higher amount of land premium payment since then, which has obstructed the implementation of CBS redevelopment projects". A Government spokesman said today (November 15) that the statements quoted in the reports were not based on objective facts, and that the criticism against the Government were unfair. Therefore, there is a need to clarify the issues to set the record straight.
The Civil Servants' Co-operative Building Society Scheme (CBS Scheme), which was launched in 1952, is an old form of civil servant housing benefit for the purpose of providing accommodation for CBS members and their families. Under the CBS Scheme, the Government would grant land at a concessionary premium of one-third of the full market value of the land concerned and offer Government loans with a view to enabling eligible civil servants to build residential buildings through forming cooperative societies (CBS buildings).  The legal titles of the land and the buildings concerned are held by the respective CBSs. Under the respective underlease that a CBS signed with its members, CBS members have the right to use the flats but do not possess the legal titles to them. The Government has already conveyed the above information to the concerned parties on various occasions and released it to the public. Such information is also clearly documented in relevant records at that time. Therefore, it is undisputable that the CBS members had paid only one-third of the land premium when the land was granted to the CBSs at that time.
In response to the requests of CBS members, the Government announced in 1985 arrangements for allowing the transfer of the legal titles of the land and the residential buildings originally held by the CBSs to individual CBS members subject to certain specified conditions. Subsequently, the Government formulated guidelines on the "Surrender and Regrant Approach" in 1987 (which were subsequently superseded in 1993 by guidelines on the "Modification of Lease Approach"), which set out in a comprehensive manner the specific arrangements for transfer of the legal titles of the respective properties to the CBS members. According to the said guidelines, individual CBS members may, after the dissolution of the CBS, acquire titles to their properties and land by deeds of assignment subject to specific alienation restrictions. The requirement for payment of the two-third outstanding land premium for removing the alienation restrictions was clearly set out in the said guidelines and modification letters to the leases entered between Government and CBSs for transferring the legal titles to the respective flats and land to individual CBS members at the prevailing time. The two documents also explicitly state that Lands Department (LandsD) has to adopt the "existing use value" or the "redevelopment land value" approach, whichever resulting in the higher value, as the basis in assessing the land premium for removal of the alienation restrictions payable by CBS flat owners. In addition, the guidelines have also precisely stipulated that a further land premium (second land premium) payment will be required for redevelopment of the buildings so as to fully utilise the maximum development parameters permitted under the relevant Outline Zoning Plans. The requirement for payment of the second land premium by a party who wishes to redevelop CBS buildings is no different from that for other ordinary redevelopment sites.
The LandsD has all along assessed the land premium payable by CBS flat owners for removal of the alienation restrictions based on the aforesaid approach, and has never made any revision to the approach being adopted. Legislative Council member Professor Edward Yiu’s allegation that the Government had changed the approach on making assessments on the land premium payable four years ago is groundless and not true. The fact that the amount of land premium to be charged varies over time in response to the property market and building conditions may create misunderstanding amongst some CBS flat owners with regard to the Government's policy on the assessment of land premium.
CBS flat owners have in the past made repeated calls for the Government to make concessions on the land premium payable for redevelopment CBS buildings. As the premium payable to the Government for the removal of alienation restrictions on CBS buildings is an outstanding payment that CBS owners owe the Government, there is insufficient ground for the Government to make concessions on the payment. Similarly, there is also no sufficient ground for justifying a concession on the second land premium payment, which is also applicable to other redevelopment projects.  Making concessions on both premium payments will represent a major departure from the established policy and practice of the Government. As a matter of fact, owners of over 1 400 CBS flat units have already paid the land premium for the removal of the alienation restrictions imposed on their units based on the aforesaid arrangements. Eleven CBS redevelopment projects have also been completed and two CBS sites are being redeveloped.

Ends/Tuesday, November 15, 2016
Issued at HKT 22:42