Land (Compulsory Sale for Redevelopment) Ordinance

Important Achievements / Opinions

1. Opinion On The Reduction Of The Threshold For Compulsory Sale For Redevelopment

The Land (Compulsory Sale for Redevelopment) (Amendment) Bill 2023 was passed in the Legislative Council in mid-2024. I supported and welcomed the amendment, which is the result of extensive consultations between the Development Bureau and the property industry to resolve technical issues that had hindered redevelopment.
Unified ownership is the first step in redevelopment projects. Since the implementation of the Land (Compulsory Sale for Redevelopment) Ordinance in 1999, the threshold for compulsory sales has not been reviewed or adjusted significantly. In the past 25 years, only those sites that met the compulsory sale threshold within the legal framework have been successfully redeveloped. The remaining sites are those that technically cannot meet the current threshold requirements, such as buildings with "dual staircases".
Together with the industry, I strongly support several key proposals in the Bill. These include allowing two or more adjacent sites that have met the required criteria to be merged for ownership calculation and to be developed together. Additionally, the Bill streamlines the legal process for compulsory sales, such as allowing the Lands Tribunal to bypass the issue of whether redevelopment should take place if the building is 50 years or older and that all small owners agree to redevelopment.
I believe these proposals will encourage more and bigger redevelopment projects, facilitate improved planning of these projects, and shorten the time required to process applications.

2. Critics Said Lowering The Compulsory Sales Application Threshold Is Giving Favours To Developers. My Views Are As Below:

Lowering the compulsory sale threshold is not about helping developers acquire old buildings. It is about urban safety, building safety, and public safety because the redevelopment of dilapidated, old buildings is an urgent matter.
In Hong Kong, the typical design life of reinforced concrete buildings is generally 50 years. According to government data, there were over 10,000 buildings in Hong Kong that were 50 years or older by the end of 2023. It is estimated that the number of such buildings will increase by about 620 each year on average over the next 10 years. By 2032, the number of these buildings will rise to 15,800, and 22,900 by 2042.
The pace of redevelopment of old, dilapidated buildings is far behind the speed at which buildings are aging. The new compulsory sale threshold will help accelerate the pace of urban redevelopment, which is beneficial to the society as a whole. It will also reduce the high-risk hazards, such as falling debris, caused by urban decay.
The tragedy that occurred in 2010 when a tenement house collapsed on Ma Tau Wai Road, resulting in the death of four people, is still fresh in our memory. The building that collapsed was built in 1955 and had exactly 55 years of history at the time of the incident. There are many more similar hidden "urban time bombs" in society. For the sake of public safety and building safety, accelerating the redevelopment process is essential. The Government has an unshrinkable responsibility in helping to unify ownership.

3. The Government Has Given Full Consideration To Ways Of Supporting Small Flat Owners

It is worth mentioning that the Bill gives full consideration to assisting small property owners. The proposal allows minority owner-occupiers to stay for an additional six months after a compulsory sale, aligning with the arrangement benefiting tenants. A dedicated office for small property owners will also be established to strengthen support services for those affected by compulsory sales. During the discussions in the Bills Committee, members agreed that a "guide" will be produced to illustrate the compulsory sale application process and the distribution of sale proceeds for different property combinations, using clear examples or diagrams to explain to small property owners.
Under existing law, small property owners are not without means to oppose redevelopment. After receiving notice of a developer's application for compulsory sale, owners can object to the Lands Tribunal and present evidence from experts, such as structural engineer reports, to prove that the building's overall structure remains safe and does not require redevelopment. They can also submit reports from surveyors to challenge the developer's valuation of the property and the proposed purchase price increase due to the expected development potential.
According to the Government's compensation principles for land requisition, small property owners' litigation costs (such as lawyer fees and expert witness fees) will be borne by the large developer initiating the litigation. Of course, the Lands Tribunal will also review whether the lawyers or experts involved acted unreasonably and will determine the proportion of litigation costs that the large developer should bear.

Further Suggestions

1. Increase The Number Of "Designated Areas"

During the deliberation process, the Government has made a commitment to review the redevelopment situation in various old districts regularly and to consider increasing the number of "designated areas" at an appropriate time. There are only seven "designated areas" in the first batch of designated areas proposed in the Bill. Many areas with a significant number of old buildings have been left out. The compulsory sale threshold for these 7 "designated areas" has been relaxed, attracting most redevelopment resources. My concern is whether this will cause other old buildings outside the "designated areas" to face a longer waiting period.
This is a significant issue that I am quite concerned about. I have made recommendations to the Development Bureau. I hope that the Development Bureau will reconsider my suggestion and increase the number of "designated areas" when they review the issue regularly.

2. Establish A Mechanism For Reassessing The Reserve Price For Land Auction

Since the beginning of this year, five projects have undergone compulsory sales. Of them, two failed to receive any bids, resulting in the auction being declared void. In one of the cases, a large property owner had applied to the Lands Tribunal for a three-month extension to the compulsory sale period and a reassessment of the reserve price. Unfortunately, the Lands Tribunal only approved the extension of the sale period and rejected the application for price adjustment.
There can be up to a two-year gap between the submission of an application for compulsory sale and the actual auction. During this period, property valuations may experience significant changes. In addition to its commitment to increasing manpower resources for the Lands Tribunal to enhance efficiency in handling cases, the Government should establish a mechanism for reassessing the reserve price for auctions to avoid situations where auctions fail due to an unattractive price.

3. Relax The Plot Ratio And Allow Transfer Of Plot Ratio Across Districts

Currently, the pace of urban redevelopment is too slow. Besides lowering the compulsory sale threshold, the Government should formulate a strategy to accelerate the redevelopment of old districts and improve their overall long-term development. This could include providing more favourable redevelopment conditions, such as relaxing the plot ratio, to make better use of land in older areas.
In addition, the authorities should review the effectiveness of the plot ratio transfer in promoting redevelopment in areas like Yau Ma Tei and Mong Kok and extend the scheme to other old districts when feasible, allowing the transfer of plot ratios across different districts.

4. Early Refund Of Additional Stamp Duty Paid In Redevelopment Projects Under The "Spicy Measures"

It often takes over 10 years to acquire ownership and meet the compulsory sale threshold. The introduction of "Spicy Measures" has increased acquisition costs, which caused delays in the redevelopment process. Now that all "Spicy Measures" have been removed, the Government should refund the additional stamp duty paid in the redevelopment projects under the "Spicy Measures" as soon as possible. This will enable the industry to reinvest those resources, helping to expedite the completion of redevelopment projects.

5. Suggest Government-industry Consultations To Address The "Adverse Possession" Issue

"Adverse Possession" is a challenge that cannot be avoided in urban redevelopment. But it has not been addressed in the current Bill. The Government should continue holding consultations with the industry to work towards a solution that will accelerate the pace of urban renewal.

6. Further Steps The Government Can Take In Managing Land Supply

I am pleased with the progress the Development Bureau has made in managing land supply. The Government can do more. First, the Government could consider allowing land premiums to be paid in installments, which would encourage the development of ongoing projects. At the same time, the Government should explore the possibility of resuming open land auctions in parallel with the current tendering system. Secondly, the standards for adjusting land premium amounts should be reviewed more flexibly, in perhaps every six months, to better reflect market conditions. Thirdly, the creation of a "white zone" for land reserves would allow for more flexible land use and better align with future development needs. Finally, infrastructure-first development should be firmly implemented, especially for large-scale projects in the Northern Metropolis. For example, the land sale regulations included an eco-friendly mass transit system in the Kai Tak development plan. Although the development of most sites have already been completed with more than 15,000 units ready for sale, the transit system is still not in place. This delay will cause inconvenience to residents.

Background / Latest Developments

The Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545), commonly known as the Compulsory Sale Ordinance, was introduced in response to the aging urban areas in Hong Kong. Both public and private sectors have been working together on urban renewal projects. The ordinance is aimed to encourage private sector's participation to help facilitate the redevelopment of buildings with fragmented ownership.

Implemented In 1999

The Compulsory Sale Ordinance was passed and implemented in 1999. According to the ordinance, when a major property owner holds 90% or more of the ownership shares in a site, they can apply to the Lands Tribunal for an order to redevelop the site, which may include compulsory sale. The major property owner/applicant can also apply to the Lands Tribunal for a compulsory sale order.

Upon the completion of hearing of an application, the Lands Tribunal may determine that the property's age or condition warrants its redevelopment. The tribunal may issue a sale order if it accepts the applicant has taken reasonable steps despite the failure to acquire the remaining ownership.

From 2010 To Present

In order to increase the chances of redevelopment of old buildings and address the issue of dilapidated buildings, the threshold of acquisition of ownership for redevelopment was reduced from at least 90% to no less than 80% in three types of sites. They are sites where:

Each unit on the site must hold at least 10% of the total ownership share of the site (which means indivisible shares).
All buildings must be 50 years old or older.
The site must not be within an industrial zone and that all buildings on the site must be industrial buildings that are 30 years old or above.

The applicant must submit a series of evidence and recommendations to the Lands Tribunal to obtain a "Sale Order" and bear the associated costs. The trustee's fees, along with the reserve price for the auction, will also be determined by the Lands Tribunal after careful consideration. Those will also become part of the conditions of the "Sale Order". Additionally, the applicant must submit a valuation report on the redevelopment value of the site as a reference for setting the reserve price.

When the Lands Tribunal considers the reserve price for auction, it will also review the content and details of the valuation report, including the valuation methods, benchmarks, parameters, and assumptions used by the valuer, to ensure they are applicable and reasonable. The Tribunal will also consider the valuer's identity, qualifications, and impartiality.

Compulsory sale applications are subject to strict scrutiny by the Lands Tribunal in accordance with the law. Even if minority property owners do not raise an objection, the Tribunal will still examine the case according to the law to protect the interests of all property owners. If minority owners disagree with the applicant's valuation of the property's current value or other grounds for the application, they can raise objections, and the Lands Tribunal will make a ruling on the dispute.

Finally, if a major property owner wants to apply for a "compulsory sale", they must send the application document to all minority owners in the site and, as required by the law, post notices in both Chinese and English at prominent locations on each building on the site. Additionally, the notice must be published in at least one Chinese-language and one English-language newspaper in Hong Kong.

Below are the steps for a compulsory sale (Generally, this process will take about two years)

Prepare a valuation report within three months before applying for a compulsory sale order, detailing the current value of each unit on the site.
Apply to the Lands Tribunal for the "Sale Order".
Submit the application and a copy of the valuation report to all owners. Additionally, the purchaser must prepare a report on the redevelopment value and submit it to the Lands Tribunal and all owners.
The purchaser applies for a hearing date.
Conduct a preliminary hearing: prepare witness statements, expert reports and related documents from all parties.
The Lands Tribunal will hold a formal hearing for the application.
The Lands Tribunal will make a ruling on the sale order.
If the application is successful, the Lands Tribunal will typically sell the site through public auction with a preset reserve price. Anyone may place a bid, but a deposit must be paid. Unless directed otherwise by the Lands Tribunal, the auction and sale of the site must be completed within three months from the date the sale order is issued.
If the site is not sold within this period, the trustee, major property owner, or minority owners may apply to the Lands Tribunal for an additional three-month extension to enforce the compulsory sale of the site. If the site is still not sold within the extended period, the compulsory sale will become invalid.
The proceeds from the sale of the site and related costs will be distributed among the major and minor property owners based on the valuation of their properties as assessed in the valuation report. The distribution arrangement may also be adjusted according to the Lands Tribunal's decisions.

Latest Update Revision In 2024

Due to the urgency of the problem of rapid aging buildings in Hong Kong, the Government proposed amendments to the Compulsory Sale for Redevelopment Ordinance in 2023. The Land (Compulsory Sale for Redevelopment) Bill 2023 was published in December 2023. It was passed after its third reading in July, 2024. New provisions and revised provisions have been included into the Ordinance, taking effect from December 6, 2024.

Four key aspects of the amendments

1. Lower the threshold for compulsory sale applications

The Bill seeks to take into account two factors, namely age of the building and the need for redevelopment in the district. The threshold for compulsory sale applications for private buildings aged 50 years or more will be lowered from the current 80% to 70% or 65%. The older the building, the lower the threshold. The concept of "designated areas" will also be introduced so that buildings in areas with a greater need for redevelopment will be given a lower compulsory sale threshold. This will encourage private developers to concentrate their resources on redeveloping designated areas.
According to data in 2022, seven "designated areas", namely Cheung Sha Wan (including Sham Shui Po), Ma Tau Kok (including Kowloon City and To Kwa Wan), Mong Kok, Yau Ma Tei, Sai Ying Pun and Sheung Wan, Wan Chai, and Tsuen Wan, have either met or exceeded the indicators set by the Development Bureau. The indicators are the number of old buildings in the districts and their overall maintenance conditions. Specifically, it means there are approximately 300 private buildings over 50 years old and about 20 private buildings with mandatory inspection notices in each of these districts).
The Development Bureau has stated that it will review the redevelopment situation in various old districts regularly and propose revisions to the "designated areas" list when appropriate. To make adjustments promptly, the Development Bureau has suggested negative vetting of amendments to the list of "designated areas" through subsidiary legislation for the authorities to revise the list before members' scrutiny.
Under the Bill, the compulsory sale threshold for industrial buildings in non-industrial zones that are 30 years old or older is proposed to be lowered from the current 80% to 70% to accelerate the transformation of non-industrial zones.

2. Facilitate compulsory sale applications for adjacent sites

The second goal of the Bill is to facilitate compulsory sale applications for adjacent sites. Why is this necessary? The primary purpose is to improve land use efficiency and encourage larger redevelopment projects, which would bring greater planning benefits to the community. Furthermore, small property owners can benefit from a larger share of the sale proceeds due to the increased redevelopment value, achieving a win-win situation. Smaller sites that may not have sufficient redevelopment value to develop independently can also obtain redevelopment opportunities by combining with adjacent sites for a compulsory sale application.

3. Streamline the legal process for compulsory sales

To expedite the processing of compulsory sale applications, the Bill proposes that if all private buildings on a site are 50 years or older, and all small property owners have been contacted and have authorized their legal representatives to submit a non-objection to redevelopment to the Lands Tribunal, the compulsory sale applicant will be exempt from the requirement to prove that the buildings on the site should be redeveloped due to their "age" or "maintenance condition". With the relaxation, the Lands Tribunal can proceed directly to the valuation stage, thus speeding up the approval process for compulsory sale applications.

4. Strengthen support for small property owners affected by compulsory sales

The fourth aspect is to enhance support for minority property owners affected by compulsory sales. The Development Bureau has established a dedicated office to oversee the creation of a new "Support Service Centre for Minority Owners under Compulsory Sale", commissioned by the Urban Renewal Authority. The center reports to the Development Bureau and is government-led. It officially began operations in August 2024.
The Support Service Center's work includes strengthening public education and outreach, such as organizing community visits and outreach activities through district councils, care teams and sub-district home affairs offices. This aims to raise public and small property owners' awareness of private property acquisition activities and the compulsory sale application process. Additionally, the Support Center will partner with professional service organizations and professionals from various sectors, including lawyers, surveyors, mediators, social workers, and designated non-governmental organizations, to provide comprehensive, one-stop support for minority property owners affected by compulsory sale applications.
The Development Bureau has indicated that the Support Service Center will offer referrals for legal and related professional services, emotional counselling, and assistance in finding alternative housing, with all services provided free of charge. The center will actively promote and encourage minority property owners to participate in mediation, with the aim of resolving compulsory sale disputes through mediation rather than litigation.
If the case does proceed to compulsory sale litigation and reaches the Lands Tribunal, the Support Center will provide minority property owners with a list of professional service providers for referral. The Government is also preparing a loan guarantee scheme to help minority property owners who may need financial assistance to hire lawyers and other professionals to represent them in presenting arguments and making statements at the Lands Tribunal.