Legal update
25 March 2025
Background
For nearly two centuries, Hong Kong has adopted a “deeds registration system” under the Land Registration Ordinance (Cap. 128 of the Laws of Hong Kong) (“LRO”). The existing deeds registration system governs priority of instruments registered in the Land Registry, but does not serve as a guarantee of title to the property. As a result, in order to ascertain whether a vendor has good title, it is still common practice for the purchaser to engage solicitors to inspect historical title deeds and documents relating to the relevant property for each conveyancing transaction.
This title investigation process is labour-intensive, time consuming, and sometimes inevitably subjective and uncertain. Further, upon completion of each transaction, the purchaser or mortgagee must safekeep the voluminous title deeds and documents, which will similarly be required for future transactions.
On the other hand, a “title registration system” recognises the person registered in the title register kept by the Land Registry (“Title Register”) to be the true owner, and the Title Register will be conclusive evidence of title.
A title registration system was introduced by the enactment of the Land Titles Ordinance (Cap. 585 of the Laws of Hong Kong) (“LTO”) in 2004, but the LTO has yet to come into operation to date due to a number of unresolved legal and operational issues.
After lengthy consultation and discussion, on 28 February 2025, the Hong Kong Government gazetted the Registration of Titles and Land (Miscellaneous Amendments) Bill 2025 (“Amendment Bill”) to amend the LTO, with a view to implementing the title registration system by stages. The title registration system, as modified in the Amendment Bill, will represent a significant step forward in modernising the land system in Hong Kong, which we welcome and support.
The Amendment Bill will revamp almost the whole LTO and is a piece of complex and extensive legislation. In the first part of this update, we summarise the legal positions and key differences under the existing regime, the LTO and the Amendment Bill. In the second part, we have selected and further elaborated on some salient features of the Amendment Bill which may be of interest to readers. Any reference to a section of the LTO in this update is a reference to the relevant section of the LTO as may have been amended or added by the Amendment Bill.
“New Land First” proposal
Before delving into the summary, the most significant feature of the Amendment Bill is certainly the Government’s proposal to adopt the title registration system to “new land” first.
The concept of “new land” is introduced in the Amendment Bill to mean land held under a Government lease or an agreement for a Government lease granted on or after the commencement date of the LTO. Subject to certain exceptions (please refer to item 1 of Part 2 below), “new land” generally includes land granted by the Government through land sale, private treaty grant and land exchange (each a “New Land”). New Land is free from prior interests or title defects and provides a clean start to the Title Register.
After the implementation of the title registration system to New Land, the Government will work out the mechanism for conversion or transition of the existing land interests into the Title Register.
Part 1 – A succinct summary
The legal positions and key differences under the existing regime, the LTO and the Amendment Bill are summarised below:
View the table in actual size
Part 2 – Salient features
We have selected some salient features of the Amendment Bill for further elaboration below.
1. Exceptions to New Land
Some pieces of land may at first glance appear to fall within the scope of New Land, but are in fact excluded from the title registration system for the time being, namely:
land held under short term tenancy from the Government which is usually of temporary nature (typically for seven years or less);
land granted to extend the term or size of an existing Government lease (e.g. by an extension letter);
land where the lease is modified without being surrendered and re-granted (e.g. by deed of variation or modification letter);
land deemed to be held under a new Government lease upon renewal by virtue of the Government Leases Ordinance (Cap.40 of the Laws of Hong Kong);
land under a Government lease deemed to be issued upon issuance of Certificate of Compliance by virtue of the Conveyancing and Property Ordinance (Cap.219 of the Laws of Hong Kong); and
land held under a direct lease from the Government under the Block Crown Lease (Cheung Chau) Ordinance (Cap.488 of the Laws of Hong Kong).
2. Indefeasible title
Under the existing LTO, the MR rule allows the court to restore ownership to innocent former owners if they lost their titles as a result of fraud. The Amendment Bill proposes to abolish the MR rule (by repealing the relevant section under the existing LTO). This provides for title certainty to a purchaser who genuinely pay for valuation consideration to buy the property. The innocent former owner would have no recourse against such purchaser, but could instead be potentially compensated through the Indemnity Fund, subject to the revised cap of HK$50 million.
However, where the purchaser is a party to the fraud or has knowledge of the fraud or has contributed to the fraud (in other words, the purchaser is not bona fide), the court may still grant an order to rectify the Title Register under section 82 of the LTO.
The Land Registrar will also have the power to make a restriction order under section 78 of the LTO to prohibit the registration of property transfer if fraud is suspected.
3. Nature of indemnifiable loss and time limit for application
For parties entitled to be compensated for their loss of title through the Indemnity Fund, sections 85 and 85D of the LTO clarify the amount of indemnity payable in case of fraud, mistake or omission.
Generally, the amount which a person is entitled to be indemnified in relation to a fraudulent entry is the lesser of:
the value of the indemnifiable interest as at the date on which a specified order is made in relation to the entry; and
the value determined by the Financial Secretary.
On the other hand, the amount indemnifiable in case of mistake or omission is the actual and foreseeable amount of loss suffered as a result of the indemnifiable mistake or omission.
Those entitled to be indemnified should be mindful of the time when the application has to be made. If the court is satisfied that an entry was registered or omitted by fraud, mistake or omission, and subsequently makes a specified order to rectify, the party who failed to recover the property must claim for indemnity within one year after the rectification order is made.
4. Introduction of “overriding interests”
Under the existing registration system, registrable instruments that are not registered in the Land Registry would be void against bona fide purchaser or mortgagee for valuable consideration, except that this does not apply to a tenancy or lease at market rent for less than three years.
The LTO and the Amendment Bill introduce a list of exhaustive definitions of “overriding interests”, which are interests that affect the land despite not being registered, such as (among others) easements out of necessity and rights of way. This means that the registered owners of New Land may be subject to certain unregistered overriding interests. That said, under section 46 of the LTO, generally the vendor will have an obligation to provide the purchaser with the full particulars of the relevant overriding interests which the vendor has, or ought reasonably to have, knowledge.
Under section 48 of the LTO, the grant of lease of New Land could only be effectual if such lease is registered in the Title Register. This raises the question of whether a tenancy or lease at market rent held in good faith for less than three years (which is not required to be registered under the existing the LRO) must also be registered in the Title Register. To align with this prevailing legal position, both LTO and the Amendment Bill have already specified such tenancy or lease as an overriding interest, the registration of which in the Title Register is not necessary.
5. Interests of purchasers for valuable consideration not affected by notice
Interests not registrable under the existing LRO (such as resulting trust or constructive trust in favour of other family members or occupants of the property) are common in Hong Kong due to informal family arrangement. Under the doctrine of notice, a purchaser who has actual or constructive notice of such non-registrable interests will take the property subject to such non-registrable interests.
After section 28A of the LTO comes into operation, purchasers of New Land for valuable consideration without fraud will no longer be affected by such non-registrable interests. The exception is when the purchaser acquired the property as a result of fraud, even though the purchaser has paid valuable consideration for acquiring the property. The operative effect of this section 28A also means that the doctrine of notice in Wong Chim-Ying v Cheng Kam-Wing ([1991] 2 HKLR 253) will cease to apply to New Land, to the extent varied by section 28A.
Practically, this means that, in the absence of fraud, even if a purchaser is aware of certain non-registrable interests in a property, their title to the property will not be affected by such non-registrable interests.
6. Effect of breach of trustee’s duty
A trustee may be registered as owner, chargee or lessee of New Land. If the trustee disposes of New Land in breach of the trustee’s duty, the transaction will still be valid and enforceable if the purchaser is bona fide acting in good faith and has provided valuable consideration. The disposition cannot be overturned simply because of the breach of trust.
While the above protection is offered to bona fide purchasers, the LTO and Amendment Bill do not extend the indemnity to other affected third parties (such as the beneficiaries of the relevant trusts).
In other words, such third parties will probably have to claim relief against defaulted trustees through legal proceedings for breach of duty.
7. Rights of succession
The LTO and the Amendment Bill stipulate that certain succession rights in relation to New Land will not be affected by the title registration system. Specifically, under section 58 of the LTO, the right of owners of New Land to dispose of their New Land through a will is preserved. The law governing intestate succession also remains unchanged.
Furthermore, the operation of sections 15 and 18 of the New Territories Ordinance (Cap.97 of the Laws of Hong Kong), which address matters related to land in the New Territories, is preserved by the said section 58 (to the extent they apply to New Land).
The law of intestate succession is also not affected by the LTO and the Amendment Bill. Nevertheless, it is very common for beneficiaries under intestate estate to enter into deed of family arrangement to reallocate the distribution of estate among the beneficiaries. It remains to be seen how such family arrangement may interact with the title registration system.
8. Stamp duty charge on the registered land
The Amendment Bill provides (through a proposed additional amendment to the Stamp Duty Ordinance (Cap.117 of the Laws of Hong Kong)) that there will be a charge in favour of the Collector of Stamp Revenue on the registered land, when an instrument relating to the registered land is submitted to the Stamp Office for adjudication and the adjudication is pending.
Such charge will stand until the earlier of the date on which such instrument is stamped, or the date on which the Stamp Office confirms that no stamp duty is payable on such instrument or that such instrument is not chargeable with stamp duty.
There is uncertainty (from the text of the LTO and Amendment Bill) as to how this charge impacts on the security of banks and lenders who provide secured financing involving instruments that require adjudication. Banks and lenders may therefore have to seek additional legal protection from the borrower to cover such potential stamp duty exposure.
9. Interaction with Companies Ordinance
Section 37(2) of the LTO states that in relation to registered charges, in case of conflict or inconsistency between the provisions of the LTO and the provisions of Part 8 of the Companies Ordinance (Cap.622 of the Laws of Hong Kong), the latter should prevail over the LTO.
One important possible consequence is that if a company creates a charge relating to registered land, such charge should be registered in both Title Register and the Companies Registry. However, where the charge is (only) registered in the Title Register but is not registered with the Companies Registry within the prescribed time period, the charge will then be void against any liquidator and creditor of the company by virtue of section 337 of the Companies Ordinance. The registration of the charge in the Title Register cannot cure such defect.
Conclusion
As mentioned above, we welcome the introduction of the title registration system beginning with New Land first, as we agree that it will offer a higher degree of certainty in property ownership, simplify the traditional conveyancing process and enhance business efficiency in property transactions with respect to New Land.
As the Amendment Bill will go through discussions and debate in the Legislative Council, we expect there will be further improvements and clarifications. Inevitably, there are also likely to be teething problems and legal issues arising from the new regime coming into force.
Meanwhile, we also look forward to the Government introducing plans in due course for a progressive, comprehensive and seamless conversion of existing lands registered under the LRO to become lands regulated under the title registration system.
Our team is prepared to support and guide our clients on any issues relating to the title registration system which they may encounter. Please feel free to reach out to any of us if you have any enquiry or would like to learn more on how we can help you to better prepare for the implementation of title registration system.