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LCQ8: Compulsory Land Sale

     Following is a question by the Hon Regina Ip and a written reply by the Secretary for Development, Mrs Carrie Lam, in the Legislative Council today (November 3):


     By publication of the Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice in the Gazette in January this year, the Development Bureau specified that with effect from April 1 this year, in respect of three specified classes of land lot, where a person or persons make an application to the Lands Tribunal for an order to sell all the undivided shares in a lot for the purpose of the redevelopment of the lot, the percentage of undivided shares in the lot that such person or persons shall own, otherwise than as a mortgagee, is reduced from the original not less than 90% to not less than 80%.  In this connection, will the Government inform this Council:

(a) given that when this Council scrutinised the aforesaid subsidiary legislation, the Development Bureau undertook to introduce a mediation mechanism to help minority owners negotiate on a more equal footing with the persons who had applied for compulsory land sale, how the mediation mechanism which is being contemplated will operate, and of the detailed timetable for its implementation;

(b) given that the Urban Renewal Strategy Review which is being conducted has made a preliminary proposal of a "flat for flat" compensation option for residential property owner-occupiers affected by redevelopment projects, and that I have learnt that the property owners affected by private redevelopments are also very much in need of a similar arrangement, whether the authorities will consider also including this arrangement in the Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545); if so, of the timetable for the review; if not, the reasons for that; and

(c) given that quite a number of owners of old buildings have relayed to me that from time to time they are subjected to harassment suspected to be acquisition-related, whether the authorities have measures in place to ensure that individual owners who, for various reasons, do not wish to participate in the acquisition can continue to live in peace in their own premises; if so, of the details?



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

(a) To follow up on the commitment made when the Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice was considered by the Legislative Council, the Development Bureau, over the past few months, has been working closely with the Department of Justice and the Joint Mediation Helpline Office Limited, which comprises the eight major mediation service providers, to set up a pilot mediation scheme for compulsory sale cases before the end of this year.  The pilot mediation scheme aims to facilitate parties involved in or contemplating compulsory sale applications under the Land (Compulsory Sale for Redevelopment) Ordinance (the Ordinance) to undertake mediation on a voluntary basis.

     The proposed pilot mediation scheme will be financially supported by the Government (including the setup and operating costs of the scheme, and the financial assistance to eligible elderly owners) for a trial period of one year.  If both parties (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 their accredited mediators and their charges 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 to get both parties into dialogue and negotiate, with a view to reaching consensus.

     In addition, the Judiciary is in the process of drawing up a "Practice Direction" which will suggest how those who have filed compulsory sale applications to the Lands Tribunal may undertake mediation before their cases are heard by the Lands Tribunal.

     On the other hand, to provide further assistance to elderly minority owners of old buildings, we will engage a social welfare agency to proactively explain to elderly owners the general practice of acquisition and the process of compulsory sale under the Ordinance, and to refer them to professionals such as surveyors for advice if they wish.

(b) According to the draft of the revised Urban Renewal Strategy, the Urban Renewal Authority (URA) will provide an offer of "flat for flat" as an alternative option to cash compensation and ex-gratia payment to the owner-occupiers of domestic units affected by URA's redevelopment projects.  The "flat for flat" arrangement is not intended to enhance the level of compensation but is meant to provide a choice to owner-occupiers.  It should be noted that the option of "flat for flat" is still based on the compensation level of a 7-year old replacement flat in the same district as approved by the Finance Committee of the Legislative Council.

     Redevelopment implemented under the Ordinance is to facilitate owners of buildings in multiple ownership to redevelop their lots or to sell their lots jointly.  As the redevelopment potential of individual private redevelopment projects differs significantly from the existing market value, and such private redevelopments could not be considered to be on par with redevelopment projects implemented by the URA on the grounds of public interest, we do not consider that there are sufficient justifications to lay down requirements for "flat for flat" in the Ordinance.  Nonetheless, the Ordinance has already provided adequate protection for minority owners.  The Lands Tribunal will only make an order for compulsory sale if it is satisfied that the majority owner has taken reasonable steps to acquire all the shares of the lot, including negotiating for the purchase of property interests of minority owners on terms that are fair and reasonable.  Where an order for sale by auction is granted by the Lands Tribunal, the auction will be subject to a reserve price as approved by the Lands Tribunal which takes into account the redevelopment potential of the lot.  The proceeds from the sale of the lot shall be apportioned among the majority and minority owners on a pro-rata basis according to the ratio as approved by the Lands Tribunal.  Moreover, if the majority and minority owners undertake mediation, they can discuss compensation options, including "flat for flat".  In fact, there were past cases where private buildings were acquired with a "flat for flat" arrangement.

 (c) At present, acquisition of old buildings is generally carried out by estate agents.  Some developers will engage estate agents to assist them in acquiring old buildings, while some companies specialising in the acquisition of old buildings will also engage in estate agency business.  The Estate Agents Authority (EAA) is tasked under the Estate Agents Ordinance and its subsidiary legislation to regulate the practice of estate agents.  The EAA issued the Code of Ethics to promote integrity in the professional conduct of estate agents.  In keeping with the changes of the trade, the EAA will also review the practice of estate agents from time to time and issue new Practice Circulars as practising guidelines for them.

     The EAA is greatly concerned about the practice of estate agents in the acquisition of old buildings. In May this year, the EAA invited estate agents engaged in the acquisition of old buildings to attend a seminar to discuss estate agents' practices in such acquisition activities. The EAA subsequently issued a Practice Circular in August this year on estate agents' practice in the acquisition of old buildings to stipulate clearly the relevant legal requirements and code of conduct with which practitioners should comply.

     The Practice Circular requires that estate agents carrying out acquisition of old buildings must inform their clients whether they are acting on behalf of the owner or of the purchaser and disclose to their clients the monetary reward or other benefits they will receive in relation to the acquisition.  They must not harass owners or employ any improper tactics to exert pressure on the owners to sell their flats, and they should advise elderly owners to be accompanied by family members or close relatives when entering into price negotiation. They must also explain the terms and conditions contained in the agreement for sale and purchase to the owners, and should avoid making arrangements for owners to sign on any provisional agreement for sale and purchase with the terms of the transaction (such as the parties involved in the agreement, property price, deposit, transaction date, etc.) left blank.

     Since the Practice Circular came into force, the EAA has incorporated its contents into the programmes of its Continuing Professional Development Scheme to further remind estate agents on matters to which they should pay attention when engaging in such acquisition activities.  For companies which mainly engage in such acquisitions, the EAA will approach the company management and tender advice to them where necessary with a view to enhancing the practitioners' service and professionalism.  Upon receiving requests for assistance from the public, the EAA will also liaise with the estate agencies concerned immediately to help resolve the cases.

     If an estate agent is suspected to be involved in any malpractice, the EAA will investigate the case and take disciplinary action against the estate agent concerned if the case is substantiated.

     The Development Bureau and the EAA have been working closely over the past few months to handle complaints through case referrals.

     If the minority owners are subject to harassment suspected to be acquisition-related, including building management, public health or security issues, they may seek help from the relevant government departments, including the District Office(s), the Food and Environmental Hygiene Department and the Police.

     To step up publicity and public education on the rights of minority owners and the caveats that these owners should watch out for when approached by developers on voluntary acquisition or compulsory sale, we plan to launch a video on the Ordinance later this year.  The video will explain in a user-friendly manner the acquisition and/or compulsory sale process to educate owners of old buildings on their rights and the support and assistance available to them.

Ends/Wednesday, November 3, 2010
Issued at HKT 17:16


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