Hong Kong updates its Land (Compulsory Sale for Redevelopment) Ordinance

The Land (Compulsory Sale for Redevelopment) (Amendment) Ordinance 2024, gazetted on 26 July 2024, comes into effect today (6 December 2024).

The amendments seek to facilitate and streamline the compulsory sale regime under the Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545) (the “Ordinance”) which has been in operation for over 25 years since 1999.

Major amendments in the Ordinance include:

1. Lowers threshold for application for compulsory sale of lot for certain categories of buildings;
2. Allows and facilitates multiple lots application and imposes requirements on purchaser that redevelopment of certain multiple lots must be under, or form part of, “one site”;
3. Streamlines the legal process of application at the Lands Tribunal; and
4. Enhances support to minority owners residing in affected property.

Lowering compulsory sale  thresholds

By amending the Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice (Cap 545A) (the “545A Notice”), the application threshold lowers from the lowest of 80% to 65% for certain categories of buildings¹.

Differentiation is not only by age of the building, but also its location.

Buildings in designated areas will be allowed a lower application threshold, reflecting priority for urban redevelopment to areas with more old and dilapidated buildings.

Designated areas are defined by Outline Zoning Plans (OZPs) in (1) Sai Ying Pun & Sheung Wan OZP No. S/H3/34; (2) Wan Chai OZP No. S/H5/31; (3) Yau Ma Tei OZP No. S/K2/24; (4) Mong Kok OZP No. S/K3/36; (5) Cheung Sha Wan OZP No. S/K5/39; (6) Ma Tau Kok OZP No. S/K10/30; and (7) Tsuen Wan OZP No. S/TW/35.²

Application threshold is summarised below:

Facilitating multiple -lots compulsory sale

Prior to the amendments, an applicant is only allowed to take the simple average of ownership threshold to meet the application threshold for buildings connected by staircase intended for common use by the occupiers.

As a result of the amendments, apart from allowing simple averaging for buildings connected by common staircase, an applicant can, in certain situations, take advantage of a new averaging requirement of ownership percentages of the multiple lots to meet the application threshold, in order to facilitate redevelopment of a larger site.

Various types of multiple-lots application are as follows:

1. Type 1 – Two or more lots that are majority-owned lots (meaning each lot meets the application threshold);³
2. Type 2 – Two or more lots that are staircase-connected lots in which case the majority owner may take simple average of the acquired undivided shares in the lots to meet the application threshold;⁴
3. Type 3 – Two or more lots that are adjoining lots where:⁵
   1. the following is satisfied: (A) in the case of two lots, they adjoin each other along a common boundary; or (B) in the case of three or more lots, each lot adjoins at least one of the other lots along a common boundary;
   2. the lots are adjoined to form a cluster of lots bound by a continuous boundary;
   3. the percentage of the undivided shares owned by the majority owner in each lot is – (A) for a lot belonging to a specified class of lots, not less than 65%; and (B) for a lot not belonging to a specified class of lots, not less than 90%; and
   4. the averaging requirement (calculation method as prescribed in the Ordinance⁶) is fulfilled for the lots, each of which belongs to a specified class of lots;
4. Type 4 – Three or more lots that are composed of more than one set of staircase-connected lots or a combination of any two or more of the following, and that are adjoined to form a cluster of lots bound by a continuous boundary:
   1. one or more majority-owned lots;
   2. one or more sets of staircase-connected lots;
   3. one or more sets of adjoining lots; ⁷
5. Type 5 – allowing one or more additional lot to be added to Type 4 if:⁸
   1. the application covers at least one set of staircase-connected lots;
   2. the additional lot, or each of the additional lots, belongs to a specified class of lots;
   3. the following is satisfied – (A) if only one additional lot is covered – the additional lot adjoins a set of staircase‑connected lots along a common boundary; or (B) if more than one additional lot is covered – at least one of the additional lots adjoins a set of staircase-connected lots along a common boundary;
   4. the additional lot or lots, together with the other lots the subject of the application, form a cluster of lots bound by a continuous boundary;
   5. the percentage of the undivided shares owned by the majority owner in the additional lot, or each of the additional lots, is not less than 65%; and
   6. the averaging requirement is fulfilled for the lots (excluding the staircase-connected lots) the subject of the application.

Further, the majority owner can now include wholly-owned lot⁹ in the multiple-lots application in Type 2, Type 3, Type 4 and Type 5¹⁰.

Streamlining determination of compulsory sale application

In determining whether an Order for Sale is to be made, the Lands Tribunal has to be satisfied that (i) redevelopment of the lot is justified having regard to the age or state of repair of the existing development on the lot (the “age or state of repair requirement”); and (ii) the majority owner has taken reasonable steps to acquire all the undivided shares in the lot (the “reasonable steps requirement”).¹¹

Now:

1. For buildings of 50 years or over, if the whereabouts of all the minority owner(s) of the lot(s) are known, and each of them has filed a notice of no objection¹², the applicant will be dispensed with the age or state of repair requirement.
2. Both the age or state of repair requirement and the reasonable steps requirement do not apply to a lot that is wholly owned by the majority owner¹³.

Support to minority owners

As a result of the amendments in the Ordinance, a minority owner may continue to occupy the property for a period not exceeding six months after the day on which the purchaser of the lot becomes the owner of the lot if the person (i) has filed a notice of occupation, and (ii) has satisfied the Tribunal that the person has occupied the property for not less than three months immediately before the date of filing notice of occupation.¹⁴

Apart from that, the Government has also put in place the following administrative measures to support minority owners:

1. The Development Bureau has set up the Dedicated Office of Supporting Services for Minority Owners under Compulsory Sale (DOSS) which is responsible for formulating the policy and scope of the one-stop, enhanced support services provided to affected minority owners;
2. The Urban Renewal Authority (URA) has set up the Support Service Centre for Minority Owners under Compulsory Sale (SMOCS) which operates independently from the URA and is accountable to the DOSS. The SMOCS provides enhanced support services to affected minority owners, either through in-house or outsourced parties, as appropriate.

Enhanced support services include handling general enquiries on the statutory/legal rights of minority owners, provision of preliminary professional advice (provided by volunteer lawyers and surveyors), promoting mediation, provision of independent valuation reports to facilitate mediation, referral to legal and other professional services for litigation, emotional counselling, and assistance in finding alternative accommodation and relocation.

Additional conditions imposed on the purchaser of lots through Order for Sale

New requirements are imposed on purchasers with respect to redevelopment of the lots bought and sold through an Order for Sale:

1. Under Type 3, Type 4 or Type 5 application, the purchaser, or each successor in title of the purchaser, must redevelop the subject lots in such a way that they form one site or part of one site¹⁵ .
2. Redevelopment must be completed and made fit for occupation within six years from the date the purchaser of the lot became owner if the Order for Sale is only for one lot (this is same prior to the amendments), but extended to within seven years if the Order for Sale is for two or more lots. ¹⁶

¹ Each class of lots specified in section 4 of the 545A Notice is referred to as “specified class of lots” under the Ordinance.

² Schedule of the 545A Notice

³ Section 3(2)(a) of the Ordinance

⁴ Sections 3(2)(b) and 3(8)(a) of the Ordinance

⁵ Sections 3(2)(c) and 3(8)(b) of the Ordinance

⁶ Sections 3(8)(c) and 3(9) of the Ordinance

⁷ Section 3(2)(d) of the Ordinance

⁸ Section 3(2A) of the Ordinance

⁹ The Court of Appeal ruled in Bond Star Development Ltd v Capital Well Ltd [2004] 2 HKLRD 855 that the objective of the Ordinance is to resolve disputes between the majority owner and minority owner, thus the Ordinance is not intended to permit an application where there is no minority owner when the majority owner already owns 100% of the lot. Accordingly, prior to the amendments in the Ordinance, a wholly-owned lot cannot be included in an application.

¹⁰ Section 3(2B) of the Ordinance

¹¹ Section 4(2) of the Ordinance

¹² Section 4(2A) of the Ordinance

¹³ Section 4(2C) of the Ordinance.

¹⁴ Section 4B(1) of the Ordinance

¹⁵ Sections 4C of the Ordinance

¹⁶ Section 1 of Schedule 3 of the Ordinance