Originally published 28 January 2010
Keywords: Hong Kong, compulsory sale threshold, Compulsory Sale for Redevelopment, Compulsory Sale Order
The Land (Compulsory Sale for Redevelopment) (Specification of Lower Percentage) Notice 2010 (the "Notice") has recently been issued by the Government to lower the compulsory sale application threshold to 80 percent for three classes of lots. The Notice will come into operation on 1 April 2010.
Under section 3(1) of the Land (Compulsory Sale for Redevelopment) Ordinance (Cap.545) (the "Ordinance"), a person or persons must own not less than 90 percent of the undivided shares in a lot before an application can be made to the Lands Tribunal for an order for compulsory sale of all the undivided shares in the lot ("Compulsory Sale Order").
The Ordinance was passed in 1999 to facilitate redevelopment of old buildings by enabling developers to overcome the problem of, among other things, "missing owners" and owners who hold out in order to demand a "ransom price" for their outstanding units. An owner whose unit is sold pursuant to a Compulsory Sale Order will be entitled to a pro rata share of the sale proceeds which would reflect the redevelopment value of the old building.
The Ordinance empowers the Chief Executive in Council to specify by notice in the Gazette a lower percentage for the application threshold in respect of any specified classes of lots.
Lower Threshold for Three Specified Classes of Lots
By the Notice, the threshold is lowered to 80 percent for the following three classes of lots:
- A lot with each of the units on the lot representing more than 10 percent of all the undivided shares in the lot. In such a case the building should have less than 10 units.
- The building is more than 50 years old.
- The building is an industrial building which is more than 30 years old and it lies within a non-industrial zone under a draft or approved Outline Zoning Plan prepared under the Town planning Ordinance.
The Notice contains provisions permitting certain subdivision of units without losing the ability to satisfy the requirement of the first specified class (buildings with less than 10 units). A unit which is subdivided into two or more units on or after 1 April 2010 and where the subdivision does not involve an alteration of the size of any common area or any change in the liability of any person in relation to the common areas and facilities is to be treated as a single unit.
General requirements for Compulsory Sale Order
An applicant applying for a Compulsory Sale Order must satisfy the Lands Tribunal that (a) the redevelopment of the lot is justified due to the age or state of repair of the existing building and (b) the majority owner has taken reasonable steps to acquire all the undivided shares in the lot.
JSM has extensive experience with applications for Compulsory Sale Orders acting for developers.
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