A fairer division of the spoils

PUBLISHED : Sunday, 08 October, 1995, 12:00am
UPDATED : Sunday, 08 October, 1995, 12:00am

STRATA-titled ownership of property is such a common feature in Hong Kong that everyone takes it for granted. To most homeowners, their home is a flat in a multi-storey building constructed on a site many times smaller than the building's total floor area.

It is a far cry from the notion of a detached house on a lot solely owned by the homeowner, who can demolish and rebuild it at will.

The owner of a unit in a multi-storey building consisting of hundreds of units is in a much more complex situation.

Although he owns his unit, he certainly cannot demolish or rebuild it as he wishes because its four walls are shared with adjoining units and all the units share a common structure.

Above all, the building is built on a lot with only one title and what individual unit owners own are just a number of 'equal undivided shares' in the lot.

The law requires that all the unit owners share a common responsibility to maintain the building. The consent of all owners is needed before redevelopment can take place.

Herein lies the crux of the urban renewal problem in Hong Kong.

While the law is well developed in relation to carving up the title for a lot on which a multi-storey building is built, it is not so adept in regrouping strata-titles into one when the site demands redevelopment.

In theory, nothing can stop individual owners from reaching agreement among themselves on how the lot they jointly own should be redeveloped.

In practice, human nature is such that getting hundreds of individual owners to agree to any proposal is virtually impossible.

The onerous task of regrouping strata-titles thus falls on the shoulders of risk-taking property developers.

They undertake the laborious process of buying all the units from individual owners.

But developers face two hurdles: individual owners may hold out for an exorbitant price, plus the owners of some units cannot be traced.

Either problem will mean no redevelopment can take place - as the developer sees costs escalate.

Worse, where ownership problems are so complex that property developers are deterred from making any acquisitions, individual owners who want to sell and get out but who find no buyers can only watch their building fall into disrepair.

The Land Development Corporation, which is empowered to invoke the Crown Land Resumption Ordinance, is able to overcome the problem of minority owners refusing to sell by using its compulsory resumption powers.

But the limited capacity of the LDC relative to the scale of the urban renewal problem demands that a more accessible mechanism is introduced to allow the private sector to overcome the problem of regrouping strata-titles.

Mr To's proposal is one that deserves consideration.

He admits that details still need to be worked out. A key issue is how the interests of the strata-title owners can be harmonised.

At present, each owner is allotted a number of 'equal undivided shares in the lot' according to the size of his or her unit.

But while units of similar sizes are allotted the same number of shares, their market values differ.

They vary depending on factors such as which floor a flat is on and what direction it faces.

As for the problem of absentee owners, a property professional suggests it could perhaps be addressed by setting up a government administered trust.

It would look after the interests of those owners who cannot be traced, until they come forward.