My Take | Canny developers exploiting loophole at the expense of minority owners

Few people outside its neighbourhood have heard of Leung Faat Noodle Shop. But its fight with a subsidiary of Lai Sun Development should concern us because it involves a basic private property right. It could leave gaping loopholes for developers to exploit at the expense of minority flat owners on old private estates targeted for redevelopment.

The case centres on a decades-old, family-owned shop on the ground floor of an old building in Sham Shui Po. The owners are the last holdout since the developer has bought all the other units in the building. That takes care of the 80 per cent minimum requirement for a forced sale of the holdout unit. But for a forced sale to go ahead, the developer needs to go further by meeting one of three conditions. In this case, it means each unit in the building must make up 10 per cent or more of the total lot size of the building. As originally constructed, the units were too small, so the developer knocked down the walls and combined the units on each floor to make them exceed the 10 per cent rule. This turned out to be perfectly legal, as the Land Registry registered the change in ownership structure, thereby giving the new units official approval.

The Lands Tribunal must now decide whether to approve the developer's compulsory purchase of the noodle shop. If the company is allowed to go ahead, its clever strategy could open the floodgates for other developers to follow. In future cases, it's not just a matter of making the units bigger to meet requirement, but by combining and reducing their numbers, it makes it easier to exceed the 80 per cent threshold. The tribunal should clarify these key issues and close the loopholes to better protect owners from aggressive developers.

The city's developers, already the richest people, have armies of corporate strategists and lawyers for such clever tactics. For example, the sale of Apex Horizon hotel suites by Pearl Wisdom, a subsidiary of Cheung Kong controlled by tycoon Li Ka-shing, had to be cancelled over regulators' objection.

Its clever executives had wanted to exploit a legal loophole to allow buyers to avoid paying residential stamp duty. These corporate types are certainly smart. You just wish they had a little more class.