LCQ15: Building Covenant period

Following is a question by the Hon Leung Che-cheung and a written reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (January 23):


According to media reports, since 2010, the Government has sold a total of 52 residential sites which may provide about 21 900 flats, but so far only six projects have been granted the consent to commence building works, involving 3 673 flats, while the remaining sites are still vacant, involving 18 200 residential flats. In this connection, will the Government inform this Council:

(a) of the details of the residential sites provided to the market by the authorities by methods of land disposal such as auction, tender and lease modification/land exchange, etc. since the financial year of 2010-2011 (set out in the table attached);

(b) given that the developers of development projects are required to complete the construction of the specified minimum gross floor area and obtain Occupation Permits from the Building Authority within the Building Covenant period (the period) as stated in the land grant documents or lease conditions, of the details of the criteria currently adopted by the authorities for setting the period; whether developers who apply for and are approved of extending the period are subject to any penalties apart from having to pay additional land premiums (if any); if they are, of the penalties; if not, the reasons for that; whether the authorities had rejected in the past five years any application for extending the period; if they had, how the authorities followed up such cases; under what circumstances the authorities will resume the land; and

(c) whether the authorities have planned to set a shorter period in the land grant documents or lease conditions in the future so as to shorten the time between land disposal and the sale of residential flats in the market?



My reply to the three parts of the question is as follows -
(a) The sources of private housing land supply include sites sold by the Government, railway property developments projects, projects of the Urban Renewal Authority, private development projects subject to lease modification/land exchange and private redevelopment projects not subject to lease modification/land exchange.  According to the information as at January 13, 2013, the information about the housing land provided by the Government to the market through auction, tender and lease modification/land exchange, etc. is set out in Annex I and Annex II respectively in the order of site disposal date from April 1, 2010 to January 13, 2013.  The Annexes do not include information about private redevelopment projects not subject to lease modification/land exchange.

In general, after the land lease has been executed, a developer shall appoint an authorised person to co-ordinate the building works in accordance with the Buildings Ordinance; and the authorised person should prepare plans and submit them to the Buildings Department (BD) for approval. The developer shall also employ a registered contractor to carry out the construction works in accordance with the approved plans. After the approval of the plans, prior written consent from BD should be obtained and BD should be informed of the date of commencement of works before the carrying out of the works. Depending on the actual circumstances of the development project and complexity, generally it takes one to two years from site disposal to application to BD for commencement of works.

(b) For a development project, the lot owner is required to complete the construction of the minimum gross floor area (GFA) specified in the land grant or lease conditions and obtain an occupation permit from the Building Authority (BA) within the Building Covenant (BC) period specified in the land grant or lease conditions. In general, the BC period for residential developments ranges from 48 to 72 months from the date of the land lease document, the actual period of which depends on the scale and complexity of the development. Factors such as the need to demolish the original building before redevelopment or to submit the required impact assessment to the Government are considered before a reasonable BC period is fixed.

Should the lot owner of a development project anticipate that he will not be able to complete the construction of the minimum GFA specified in the land grant or lease conditions and obtain the occupation permit from the BA within the BC period, he will normally apply to the Lands Department (LandsD) for an extension of the BC period with justifications. In processing the application, the LandsD will consider the justifications given by the lot owner and the progress of the development.

If the application for extending the BC period is approved, the applicant will be required to comply with the conditions imposed by LandsD, including the payment of premium.  Hence, the lot owner will have to pay for delay to the development. In the event that the lot owner refuses to pay the premium or the Government refuses to extend the BC period, the Government may re-enter the site under the Government Rights (Re-entry and Vesting Remedies) Ordinance (Cap. 126). During the five years from January 1, 2008 to December 31, 2012, one application for extension of BC period was rejected by LandsD on the grounds of unsatisfactory development progress over a long period of time, and re-entry action was taken in accordance with the above-mentioned Ordinance.

(c) The Government has considered that, if a BC period is too constrained, this might affect building quality. In view of this, the Government will take into account the above related factors, such as development scale and complexity as well as the circumstances of each development project, in setting a reasonable BC period for the development project. The Government adopts an open attitude and is monitoring the actual situation of property development. The Government will consider whether there is room for adjusting the general criteria for setting the BC period.

Ends/Wednesday, January 23, 2013
Issued at HKT 17:54