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Hong Kong property

Overdue law on land titles could have simplified flat-buying in Hong Kong, Audit Commission says

A lack of consensus among stakeholders has led to government dragging its feet in the enforcement of an ordinance that was enacted 13 years ago

PUBLISHED : Thursday, 23 November, 2017, 8:01am
UPDATED : Thursday, 23 November, 2017, 12:29pm

Buying a flat in Hong Kong could be much simpler and less costly if the implementation of a land law had not been delayed for more than a decade, the city’s official auditor said in a report released on Wednesday.

The Audit Commission said the Land Titles Ordinance, enacted in 2004, aimed to simplify the land and property registration system. But the ordinance has not been enforced for 13 years.

Under the existing deeds registration system, the Land Registry only serves as an index, and does not legally prove that a person is the true owner of a property.

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As such, property or land buyers have to hire a lawyer to review each and every title document for transactions in the past 15 years before proceeding with the purchase.

This process is to verify ownership and to ensure that there are no outstanding problems, such as government orders to remove illegal structures, or unpaid management fees.

Changes under the new law were supposed to give legal recognition to a registered person as the true owner. This would do away any need to review title documents, therefore avoiding high lawyer fees and administrative delays.

This new system has long been adopted by countries such as Britain and Australia. In Hong Kong, the old deeds system has been in place since 1884 and the government has been discussing a conversion to a title registration system since 1988.

The Audit Commission said the government had “underestimated the complexity of the issues and the work involved” in implementing the ordinance and the new system.

“The Development Bureau and the Land Registry need to set a targeted implementation date and devise an action plan with a timetable for implementing the land title registration system as soon as practicable,” the commission stated in its report.

The government said the law would not come into effect until stakeholders and officials reached a consensus on a number of contentious issues. An amendment bill also has to be passed.

There will always be stakeholders [opposing], but the government will have to be the one to draw the line
Lawrence Poon, policy expert

“Conversion of land and property (involving over three million land registers) under the deeds registration system dating back to over a hundred years ... is a very challenging task,” the report stated.

“Despite enormous and continuous efforts made over the years, a general consensus among the major stakeholders over the main issues has yet to be reached,” it said.

The issues include whether existing land titles would be automatically converted under the new system, if there would be a grace period for landlords making a claim to the property to sort out unregistered interests, and whether there was a need for a compensation cap if landlords suffered any loss of ownership due to fraud.

City University real estate policy expert Lawrence Poon Wing-cheung said a lack of consensus among stakeholders was “not a reasonable excuse” for such a long delay.

“There will always be stakeholders who will not agree on certain things, but the government will have to be the one to draw the line,” Poon said.

He urged the government to submit the amendment bill to the Legislative Council this year. Poon suggested that the law could be at least enforced for any new property or land transactions, while the conversion issue of existing titles could be left on the discussion table until a consensus was reached.

“If other countries were able to do it, why can’t we?” Poon said.