RICS supports lowering the threshold for compulsory sale of old buildings from 90% to 80%
RICS Hong Kong Response
HONG KONG, March 15 /PRNewswire-Asia/ -- The Hong Kong Special Administrative Region Development Bureau has recently proposed to lower the compulsory sale application threshold for three classes of land lot, which includes:
- Buildings of more than 50 years old;
- Industrial buildings of more than 30 years old and located within
non-industrial zones, and;
- Each unit of the lot holds more than 10% undivided shares of the lot.
(Logo: http://www.prnasia.com/sa/2009/08/17/200908171721.jpg )
In order to alleviate the problem of the rapid growth of dilapidated buildings due to lack of repairs or management in Hong Kong, RICS Hong Kong expressed full support to this Government's initiative of lowering the threshold for compulsory sale of old buildings from 90% to 80% for the following reasons:
1. The desire of majority individual owners to sell their individual units
jointly with a view to secure much higher prices, i.e. prices which
reflect the redevelopment potential of their premises
Since the enactment of the Land (Compulsory Sale for Redevelopment) Ordinances, the majority unit owners (over or near 90% ownership) of a building or a lot jointly advertised in the newspapers offering to sell their near or over 90% ownership interests in the open market by tender or auction, with the views that there will be bids from developers to buy their joint ownership interests at a higher than existing use value of their individual units, i.e. values reflecting the redevelopment potential of their relevant buildings or lots. This fact clearly illustrates the genuine needs from the great majority of individual unit owners of the old buildings in Hong Kong for such an application system for compulsory sale of lots in place.
In particular, there are many 6-storeyed old buildings of more than 50 years old, and each storey or unit will own 1/6th undivided share of the building or lot. Very often, although the majority 5 individual units' or storeys' owners were offering their joint ownership interest for sale to developer, as their joint interests only comprised 83.4% ownership of the lot, i.e. still less than 90%, this could not enable the buyer or developer to apply to the Land Tribunal for compulsory sale of the lot or old building under the existing policy. The proposed lowering of threshold to 80% ownership would certainly help to facilitate the pace of the redevelopment of these abundant 6-storeyed old buildings of more than 50 years of age in Hong Kong.
2. Interests of 10% minority owners are duly protected under the prevailing stringent requirements stipulated by the Ordinance
As stipulated in the Ordinance, the Lands Tribunal shall not make an order for sale unless and until the Tribunal is satisfied that:
The redevelopment of the lot is justified, due to the age or state of repair of the existing development on the lot; or if any, specified in regulations made under section 12; and
The majority owner has taken reasonable steps to acquire all the undivided shares in the lot; negotiating for the purchase of such of those shares as are owned by that minority owner on terms that are fair and reasonable.
In many past applications, the Lands Tribunal had ordered the applicants to submit more detailed and recent evidences of the dilapidated state of the subject premises, and the steps taken to negotiate to buy the remaining unit(s) at fair, reasonable and market values etc., before it would consider the applications.
3. Reserve Price duly set by the Lands Tribunal to reflect redevelopment value
The Lands Tribunal will also determine a fair and reasonable reserve price when granting its compulsory sale order by public auction. This reserve price will always, as a rule, be assessed by an independent professional valuation surveyor, and the reserve must reflect the redevelopment value of the lot, i.e. usually higher than the existing use value or open market prices of the individual units by individual sales, so there would not be any unfair treatment of the minority owners in all compulsory order sales. The professional surveyor will also assess the respective existing use values of all individual units of the building, so that respective existing use values will serve as the basis for apportionment of the final sale price achieved in the then compulsory auction between all the individual units' owners.
4. The proposed 80% ownership threshold is relatively high when compared with the statutory thresholds required in other Asian Cities:
China (Guangzhou and Shanghai) 66.6%,
Japan (Tokyo) 66.6%
Korea (Seoul) 66.6%
Singapore 80%
Taiwan (Taipei) 50% to 66.6%
David Tse, RICS International Governing Councilor and Chair of External Affairs and Public Concerns Committee of RICS Hong Kong, says, "Many of the old buildings of over 50 years old in Hong Kong are in dilapidation state, i.e. near the end of their physical lives, due to the lack of proper maintenance or management. The proposed relaxation of 90% ownership threshold to 80% ownership threshold will greatly help to facilitate or encourage the private sector to lead redevelopment projects, with a result that the unfortunate collapse of an old building on Ma Tau Wai Road would not happen again."
Tse further remarks that, "Chartered Valuation Surveyors, or in fact all RICS members, are under the strict requirements of the Royal Charter of RICS to act with integrity and to put public interests in front of all individual member's private interests, in that they will always assess the pre-requisite Reserve Price for the compulsory auction sale, or the respective existing use values of individual units in an honest, objective, open and transparent manner. There will not be any unfair or discriminatory valuations against the minority owners. In a surveyor's mind, the interests of the minority owners are as important as the interests of the majority owners."
About RICS & RICS Asia
RICS (Royal Institution of Chartered Surveyors) is the mark of property professionalism worldwide. It covers all aspects of property, construction and associated environmental issues. RICS has 140,000 members globally and represents, regulates and promotes the work of property professionals throughout 122 countries.
The RICS Asia supports a network of over 11,000 individual professionals across the Asia Pacific region with an objective to help develop the property and construction markets in these countries, by introducing professional standards, best practice and international experience. It promotes RICS and its members as the natural advisors on all property matters. It also ensures that services and career development opportunities are provided to members.
The RICS Asia region covers national associations and local groups locating in Brunei, Malaysia, Singapore, Thailand, The People's Republic of China and the SAR Hong Kong. It also has members working across the region such as Bangladesh, Bhutan, Burma/Myanmar, Cambodia, Indonesia, Japan, Kiribati, Laos PDR, Macao, Mongolia, Nepal, North Korea, South Korea, Taiwan, The Maldives, The Philippines, Timor East and Vietnam. For more information, please visit: http://www.ricsasia.org .
Media enquiry, please contact:
RICS Asia Public Relations Representative
Ms Ava Lau / Ms May Cheung
Tel: +852-2372-0090
Fax: +852-2372-0490
Mobile: +852-9829-2913
+852-9099-2218
Email: [email protected]
[email protected]
SOURCE Royal Institution of Chartered Surveyors
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article