Developer moves in on shop owner

PUBLISHED : Monday, 03 May, 2010, 12:00am
UPDATED : Monday, 03 May, 2010, 12:00am

The owner of a soy sauce shop in Causeway Bay is likely to feature in the first case under a new compulsory-sale rule for private redevelopment. He has twice received an offer from a developer for a Haven Street shop in an old building since the new law came into force last month.

The law, passed by the Legislative Council in March with strong support from the functional constituencies, allows developers to force the sale of remaining flats in a building older than 50 years once they have acquired 80 per cent of the property interests in it. This is down from the previous 90 per cent threshold.

Lawyers have expressed concern that the new law challenges the Basic Law, which protects property rights. Many see it as riding roughshod over private property rights.

Victor Sin Ho-yuen, having lost his shop at 44 Haven Street under the 90 per cent threshold, is no stranger to the compulsory-sale law.

Under the new law, a shop at 42 Haven Street that Sin owns, and also his flat, are being seen by the industry as the first premises lined up for compulsory sale.

His properties, accounting for 12 per cent of the ownership of No 40 and No 42, are the only two unsold to Soundwill Holdings - which, in the name of Haven Properties, has acquired ownership of the rest of the two blocks over the past few years.

While negotiating with Sin, the developer gained approval from the Buildings Department in March to redevelop the blocks in Haven Street into a 35-storey apartment block with a clubhouse.

And to show it 'has taken reasonable steps to acquire' the remaining properties - a series of unanswered offers being a prerequisite for an application for compulsory sale - Soundwill has sent two letters in the past month to Sin with an offer - which he declined to quote - to buy his units, each of 1,200 sq ft.

'What I want is ... a shop in the same area so I can continue my business, and a flat nearby so my mother doesn't need to adapt to a new place,' Sin said.

A Soundwill Holdings spokeswoman confirmed the company would soon apply for a compulsory sale while negotiating with Sin. She would not comment on his call for a shop-for-shop option.

Sin said a consultation service available at the Housing Society and the Institute of Surveyors - which the Development Bureau offered when lobbying lawmakers to pass the law - was useless.

Staff at the Housing Society's building management consultation centre in Wun Sha Street, Tai Hang, could only explain to him the contents of the law, 'which I may know even better', he said.

'I asked what else I could do to keep my properties since I have no money for litigation, but the officer only said I could apply for legal aid.' The property owner, however, may not be eligible for the means-tested aid.

The Institute of Surveyors gave him a list of firms that handle compulsory sale cases. 'I asked if the institute could provide a free valuation service, and the answer was no.'

The bureau has promised a mediation system to protect minority owners but there is no launch date.

The 90 per cent rule was introduced under the Land (Compulsory Sale for Redevelopment) Ordinance, which was passed by the pro-government Provisional Legco in 1998, and was reduced to 80 per cent under the new rule passed last month.

Constitutional law expert and former Bar Association chairwoman Gladys Li said in a speech to the legal profession last month that the ordinance had a complete lack of balance and challenged the Basic Law. Important policy considerations were not reflected in the bill, she said.

In 1998 when drafting the bill, government officials said the law would target defective titles, untraceable owners, those owners who had died without leaving a will or owners demanding unreasonably high prices. But the statute does not mention these groups of owners.

At one stage it was suggested an 'undue hardship' provision be inserted so the Lands Tribunal, in determining whether redevelopment was justified, would consider the interests of minority owners.

The officials then in charge dismissed the need for such a provision, saying the tribunal would consider 'other relevant factors', including owners' hardship.

However, since the law was applied, judges have repeatedly said that they have no factors to consider other than the 'economic lifespan test': if the repair cost of the building exceeds the enhancement in market value brought by the work, redevelopment is justified.

'There is absolutely no room for the tribunal to take into account all relevant factors [including owners' hardship],' Li said.

A lot of middle-class home owners may be further affected with inadequate compensation to find a flat in the same area, now that the threshold was lowered, and the government may relax development restrictions in the Mid-Levels as well in a few years time, she said.

Gordon Cruden, former president of the Lands Tribunal, said in his book Land Compensation and Valuation Law that the ordinance was 'the culmination of long-voiced complaints by developers'.

'The statutory power to permit the compulsory purchase by a private owner of another owners' estate ... goes considerably beyond previous legislation,' Cruden wrote. He said the law was different from land resumption laws made for the government or the Urban Renewal Authority, which must have a public purpose for land resumption.

'The private purchases are generally made for spot development for private profit and are not part of a wider comprehensive development plan for the public good,' he said.

Reforms should be introduced to address the shortcomings of the present public auction system, as in practice the developer was the sole bidder. The government could consider whether the sale price should be determined by the tribunal, he said.

'Where minority owners ... consider they are disadvantaged ... relief might in certain circumstances be available under the Bill of Rights or the Basic Law,' he said.

Sin does not see a judicial review as the answer.

'I'm already facing a court case and I'm appealing over the sale price of my lost shop. It would be too much of a burden for me.'