Consent scheme sets rules for developers

PUBLISHED : Tuesday, 18 January, 2011, 12:00am
UPDATED : Tuesday, 18 January, 2011, 12:00am

The Lands Department launched a consent scheme in 1961 to regulate the sale of uncompleted flats. The scheme, originally designed to ensure buyers would get their purchase on time, requires developers to demonstrate they have adequate financial reserves to complete a development.

The scheme is applied through inserting a clause in the land lease before the site is put to auction. A similar clause is also added to a lease when a developer applies for redeveloping any site bought before 1961 or involving a change of land use, which requires lease modification.

However, the scheme does not apply to sites of 'unrestricted leases' - sites sold or granted in the early colonial period.

Because such sites do not have restrictions on development potential or land use, developers do not need to modify the lease, and therefore, land officials have no way of adding the consent-scheme clause to the document.

Such sites are located mainly on Hong Kong Island and Kowloon areas such as Yau Tsim Mong. They are not found in the New Territories as sites there are mostly agricultural land, for which redevelopment would require lease modification.

Under the consent scheme, developers have to use a standard form of sale and purchase agreement. Under the current scheme, developers are required to provide sales brochures, specify in printed advertisements the number of flats available for sale, and disclose the names of developers and any holding company.

The department will issue warnings to developers which do not comply. Theoretically, it can stop the sale of a project, but this has not happened in at least five years.