Following is a question by the Hon Lee Cheuk-yan and a reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (June 22):
The New Territories Small House Policy is originally intended to allow a male indigenous villager at least 18 years old who is descended through the male line from a resident in 1898 of a recognised village in the New Territories ("indigenous villager") to apply once during his lifetime to the authorities for permission to erect for himself for self-occupation a small house on a suitable site within his own village. It has been reported that the selling of small house rights (commonly known as "'ding' rights") by indigenous villagers is rampant. Quite a number of indigenous villagers who did not own any land signed secret agreements with land owners, under which the indigenous villagers purchased lands nominally from the land owners and applied to the authorities for construction of small houses while the land owners funded the construction of those small houses; the indigenous villagers were required to transfer the ownership of the completed small houses to the persons designated by the land owners and received a huge sum of money from the land owners in return. In this connection, will the Government inform this Council:
(1) given that an indigenous villager may transfer ownership of his small house granted by way of building licence or land exchange after paying a land premium calculated on a discounting factor during the five-year alienation restriction period or without paying any land premium on expiry of such restriction period, and some members of the public have pointed out that such an arrangement is tantamount to encouraging indigenous villagers to transfer ownership of their small houses for profits, which is contrary to the original intent underlying the Small House Policy, whether the authorities will require indigenous villagers to pay full land premium for selling such small houses so as to reduce the incentive for transferring the ownership of small houses; if they will, of the details; if not, the reasons for that;
(2) as there are views that indigenous villagers' transfer of ownership of small houses shortly after completion for profits is contrary to the original policy intent that small houses are provided to indigenous villagers for self-occupation, whether the authorities will consider prohibiting indigenous villagers from transferring, within a certain period of time, such ownerships for all types of small house grants; if they will, of the details; if not, the reasons for that; and
(3) whether the authorities will formulate measures to combat the sale of "ding" rights, including whether they will resume the pre-2007 practice of requiring an indigenous villager applying for building a small house to make a statutory declaration that he has never made any arrangements to dispose of his "ding" rights or his eligibility to apply for a small house grant; if they will, of the details; if not, the reasons for that?
The Small House Policy (the Policy) was introduced in 1972. Under the Policy, in general, a male indigenous villager aged 18 years old or above who is descended through the male line from a resident in 1898 of a recognised village in the New Territories may apply to the authority once during his lifetime for permission to build for himself a small house on a suitable site within his own village.
In accordance with the existing policy, alienation of small houses before the issue of the Certificate of Compliance (CC) is generally prohibited. If, after approval of his application and completion of a small house, a small house applicant intends to transfer ownership of his small house, he is required under the applicable alienation restriction to make an application to the Lands Department (LandsD). If the application is approved, he is required to pay the necessary land premium.
My reply to various parts of the question is as follows:
(1) At present, the alienation restriction and land premium mechanism for small houses are briefly outlined as follows:
(a) For a small house grant by way of a building licence, i.e. construction of a small house on the land owned by the applicant himself, when the small house licensee transfers ownership of his small house within the five-year alienation restriction period after the issue of CC, he is required to make an application to LandsD; and if approved, subject to payment of the necessary land premium before selling his small house. A small house licensee is free to transact his small house upon expiry of the five-year alienation restriction period of the building licence without the need to make an application to LandsD. Thus, no land premium is involved in such a case.
(b) If a small house on government land is granted by way of a private treaty grant (PTG), the small house grantee is required to make an application to LandsD for removal of the perpetual alienation restriction clause in the grant when he, at any time after the issue of CC, transfers ownership of his small house. If the application is approved, he is required to pay the necessary land premium before selling his small house. The land premium payable is the market value of the lot concerned to be assessed on the basis of the land grant provisions of the lot and with reference to relevant information on the market transactions of the property.
Separately, there are a comparatively smaller number of small house grants by way of PTGs of government land in village expansion areas or by way of land exchange. Applicable alienation restriction and land premium mechanism apply to those types of grants.
Small houses on government land granted by way of PTGs are different from small houses granted by way of building licences. In the former case, a PTG grantee is required to pay land premium at market value when his application for removal of the alienation restriction is approved; in the latter case, since land is owned by the small house applicant himself in the first place, the land premium payable for removal of the five-year alienation restriction mainly reflects the difference in the land value under two situations, namely, the situation under which the small house lot is subject to the prevailing requirement of alienation restriction and the situation under which the small house can be freely transacted ahead of that period after removal of the alienation restriction requirement. It does not involve the charging of land premium at market value of the private lot concerned again by the Government. Specifically speaking, the shorter the remaining period of alienation restriction, the lower the level of land premium, and vice versa.
At present, there is already a suitable mechanism for assessing land premium for small houses. We do not have any intention to change the concerned mechanism at this time.
(2) Before February 1976, small house grants did not contain any clause on alienation restriction. In February 1976, the Government included the five-year alienation restriction clause in all small house grants, and extended in August 1978 the alienation restriction period of small houses on government land granted by way of PTGs to cover the entire period of the land grant (i.e. "perpetual alienation restriction"). Nevertheless, this perpetual alienation restriction is not non-removable. As mentioned in (1)(b) above, a small house grantee may make an application to LandsD for removal of the alienation restriction. If the application is approved and subject to payment of the necessary land premium at market value, the grantee is free to transfer ownership of his small house.
I trust that it is recognised that the existing policy has been operating for a long time and involves numerous considerations. Any suggestions to change the Policy require detailed consideration in a holistic and comprehensive manner without overlooking any relevant aspect of the complex issues involved, such as legal, environmental, land use planning, land supply and demand, and the rights and interests of relevant stakeholders, all of which require careful examination. We have no plans to conduct consultation on prohibiting alienation of small houses for a certain period of time as suggested in the Honourable Lee's question. Without conducting thorough consultation and undertaking comprehensive review, we should not and cannot lightly agree to changing the existing alienation restriction. In any case, quite a substantial number of small houses are granted by way of building licences referred to in (1)(a) above on private land owned by the licensees themselves in the first place. Also, introducing a period of moratorium on the removal of alienation restriction renders it impossible for small house licensees or grantees to transfer ownership of small houses in response to changes in their personal or family circumstances and needs, and thus may not be reasonable. It is not easy to formulate a new policy that is appropriate and acceptable to stakeholders in all aspects within a short time. Given that the work priorities of the Development Bureau are to increase land supply in the short to medium term and to implement and control costs of various public works projects, the review or consideration of suggestions to amend the Policy would not be a priority task in the remainder of the current term of the Government, as it is not realistic nor practicable as far as time is concerned.
(3) At present, when processing an application for building a small house, LandsD will require the applicant to make a statutory declaration regarding his status as an indigenous villager and the fact that he has never previously received any concessionary small house grant from the Government, etc.. For an applicant who applies for a small house grant by way of a building licence or land exchange, he is required to declare in his statutory declaration that he is the sole legal and registered owner of the concerned lot on which he wishes to erect a small house.
When executing a small house grant, the small house applicant is also required, through the warranty clause stipulated in the small house grant, to expressly warrant that he has never made any arrangements to transfer his right to develop a small house or his eligibility to apply for a small house grant. LandsD may take lease enforcement action where a breach of grant conditions by the grantee or licensee is found.
The decision made by the District Court earlier regarding a case of "selling small house rights" illustrates that it is against the law to obtain government approval by deception through false representation or fraud. Criminal prosecution can be initiated if the illegal acts are established by the law enforcement departments, and this is so even if the person concerned has not made any statutory declaration about his not engaging in those acts. In the light of the relevant Court decision, LandsD will continue to follow up on suspected cases of grantees or licensees having deceived LandsD in the process of issuing small house grants or having breached the warranty clause. LandsD will fully cooperate with the law enforcement departments in their investigations as appropriate.
Ends/Wednesday, June 22, 2016
Issued at HKT 15:49