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LCQ1: Arrangement for compulsory sale of land for redevelopment

     Following is a question by the Hon Albert Ho Chun-yan and a written reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (February 17):


     The Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545) stipulates that any person who owns a specified percentage 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 (order for sale) for the purpose of redevelopment of the lot. The Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice (Cap. 545 sub. leg. A), which came into operation on April 1, 2010, specifies, in respect of three classes of lots, a lower threshold for the application for an order for sale, i.e. from owning not less than 90 per cent of the undivided shares in the lot to not less than 80 per cent. It has been reported that since the lowering of the application threshold, quite a number of lots under compulsory sale each of which was sold at an auction to the bidder who made the only one bid at the reserve price. On the other hand, under Cap. 545, lots under compulsory sale will generally be sold by auction only, but some property owners have pointed out that such an arrangement lacks flexibility. In this connection, will the Government inform this Council:

(1) of the respective numbers of applications for an order for sale received and approved by the Lands Tribunal in each of the past five years and, among those applications which were approved, the number of cases in which the lots concerned were sold at the reserve prices;

(2) whether it will amend Cap. 545 to stipulate that the Lands Tribunal, in granting an order for sale, may specify that the lot concerned be sold by open tender; if it will, of the details; if not, the reasons for that; and

(3) whether it will amend Cap. 545 to include "the maintenance condition of the building concerned" as one of the considerations that the Lands Tribunal must take into account in deciding whether or not to grant an order for sale?



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

(1) Over the past five years, the Lands Tribunal (the Tribunal) received a total of 161 applications for compulsory sale of land under the Land (Compulsory Sale for Redevelopment) Ordinance (the Ordinance), of which 51 have been granted compulsory sale orders, one struck out, 71 adjourned or withdrawn by applicants for various reasons and 38 still being processed. The annual numbers of applications received and granted an order for sale by the Tribunal are as follows:

Year   No. of Application   Approved Case for
                            Compulsory Sale
2011        46                     14
2012        57                     29
2013        16                     5
2014        25                     3
2015        17                     0
Total       161                    51

     When the Tribunal has decided to grant a compulsory sale order, it will normally approve a reserve price which is determined by independent professional(s) and has "taken into account the redevelopment potential of the lot", and appoint a trustee to sell the lot by public auction (except which all owners of the lot have agreed to seek the Tribunal's approval under the Ordinance for selling the lot by other means, see paragraph (2) below for details). A reserve price which has "taken into account the redevelopment potential of the lot" will normally be higher than the total existing use values of all units on the lot as the former reflects the value derived from a full utilisation of the plot ratio of the lot. Among the 51 approved applications, the lots of 50 applications have been sold at the reserve price.

     According to the records of the past 78 cases in which compulsory sale orders were granted by the Tribunal and the subject lots were successfully sold by public auction, the transaction prices were on average two times the existing use values of the lots at the prevailing time. In other words, the proceeds apportioned to each minority owner after public auction were two times the then market value of their respective units.  

(2) It is clearly stipulated in section 5(1)(b) of the Ordinance that "if the whereabouts of each minority owner of the lot is known, the lot may be sold by any other means:

(i) agreed in writing by each minority owner and majority owner of the lot;
(ii) approved by the Tribunal in its absolute discretion; and
(iii) in accordance with such conditions, if any, as the Tribunal specifies in directions."

     Therefore, the existing Ordinance allows the Tribunal to dispose of land and properties by means other than public auction, including open tender, subject to the above conditions being met.

(3) The state of repair of the building is one of the factors to be taken into account by the Tribunal in making an order for sale. It is provided in section 4(2)(a)(i) of the Ordinance that "the Tribunal shall not make an order for sale unless, after hearing the objections, if any, of the minority owners of the lot the subject of the application under section 3(1) concerned, the Tribunal is satisfied that the redevelopment of the lot is justified...due to the age or state of repair of the existing development on the lot...".

Ends/Wednesday, February 17, 2016
Issued at HKT 15:06


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