Sunday, September 9, 2007

Flat Owners: Beware of Duress

If you think that as the registered owner of a piece of private property you have the right to live in that property for as long as it physically lasts, so long as you are not behind with utilities and rates payments, think again.

Ever since The Land (Compulsory Sale for Redevelopment) Ordinance was enacted in 1998 and came into operation in 1999, developers in Hong Kong have been able to force auction of the entire residential building for redevelopment purpose, provided they have already acquired 90 percent of the units in that building.

As reported in The Standard, the authorities are considering, in view of demands from developers, lowering that forcible sale threshold to 80 percent where the building in question is at least 40 years old.

If they pass this into law, this is what it means. If you are the owner of one of the ten remaining units (in a 50-unit 40-year old building) that have not yet been acquired by the interested developer who already owns the other 40 units, no matter how unwilling you are to sell your unit for whatever reasons, you will have no other option but to surrender. Owners of the other nine remaining units will face the same fate. Under current legislation, the developer needs to have acquired 45 units first before he can apply for compulsory sale of the whole building.

Our private property right is supposed to be protected by law in a society that embraces capitalism like Hong Kong. But I guess, under the circumstances, it depends on whose private property right we are talking about.

Aggrieved flat owners in affected buildings are in fact in a similar situation as those distressed property owners affected by any of the Urban Renewal Authority (URA) redevelopment schemes. The former and the latter are on equal footing in one aspect: both groups don’t have any redress channel. The aggressor in the latter case is the quasi-government body whose motive is arguably public interest, whereas in the former case it is the private developer whose motive is private profit.

According to the Housing, Planning and Lands Bureau’s industry consultation paper dated March 2006, there are over 7,500 private buildings in Hong Kong that are aged 40 years or over (about 20% of the total number of private buildings).

In the present booming property market, developers will no doubt be coveting older buildings in what has traditionally been classified as luxury residential areas. In this respect, some flat owners in say upper Mid-Levels or Ho Man Till Hill, once their building is targeted for acquisition, might find their private property right a little precarious.

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