Private columbarium operators face stricter financial regulations as government tries to address Hong Kong’s shortage of urn spaces
- Owners will have to deposit 15 per cent of sales revenues in a designated bank account until all available niches are sold
- The measures are intended to protect customers in the event of columbariums going out of business
Hong Kong private columbarium operators who demand prepayments in full from customers will have to adhere to stricter financial arrangements in the interests of consumers, regulators announced on Thursday.
The statutory Private Columbaria Licensing Board said it would require operators to contribute to a rainy day trust to ensure they had sufficient cash flow to sustain operations and recurrent expenditures in the long run.
It costs only about HK$2,900 (US$370) to buy a niche at a government-run crematorium, but in space-starved Hong Kong, people have to wait more than four years for a public niche.
This mismatch between supply and demand has fuelled a fierce private market where niche placements can sell for as much as HK$300,000.
A new licensing scheme for private columbariums was put in place last year to regulate private operators and ensure better protection for consumers.
“Consumers are not really purchasing ownership rights to a niche, but merely placement rights,” said board chairwoman Avia Lai Wong Shuk-han, adding that it was customary in the industry to demand payment partially or in full, rather than in instalments.
“If a columbarium sells all available niches, they will have no continuous revenue stream. This means that if they run into liquidity problems later or have to shut, customers bear considerable risk.”
With the new licensing regime, operators cannot – unlike before – simply expand their facilities and sell more niche placements without having to go through statutory procedures again.
To discourage licensed operators from selling all niches in one go – or even worse, cash out and close shop – operators would be required to set up a designated bank account in which 15 per cent of sales revenue would be placed until all niches were sold.
Once the balance reaches HK$5 million, they would have to transfer the funds to a trust held by a licensed bank. The funds can be withdrawn to be used to fund basic operations and maintenance. Regular audits and spot checks would be carried out to ensure compliance.
“Columbarium customers are different from other customers – they want to buy the rights so their deceased have a place to rest in peace in perpetuity,” said Lai, who also heads the Private Columbaria Affairs Office under the Food and Environmental Hygiene Department.
“Our objective is to ensure that private columbariums can continue operating to serve that purpose.”
Operators that have no empty niches to sell already allow payment in instalments or ask for not more than 70 per cent of the amount to be paid for a 30-year period, would not have to set up such a fund.
Ng Yiu-tong, chairman of the Funeral Business Association said operators were already facing enough trouble acquiring the licenses.
“Now with these additional financial requirements, it will be near impossible to get one,” he said.
At least 10 government departments are involved in the licence vetting process, including those in charge of lands, fire services and environmental protection.
Under the new Private Columbaria Ordinance, which came into effect last year, any private columbarium must obtain a licence before it sells or lets out new niches.
With thousands now waiting for space at private facilities and for some of those facilities to get licensed, former lawmaker Ip Kwok-him, now deputy chairman of the board, said pressure was mounting on both sides to get things moving.
“The problem now is that we’re not getting all the information and documents we need [from applicants],” he said. “They want us to move faster but we must follow all the rules and it will take them time, effort and money.”
Around 140 operators have submitted applications since last year, but not one has met all the conditions for the granting of a license yet.
The city is estimated to face a shortage of 400,000 urn spaces by 2023 and the problem is aggravated by the ageing population, with about 50,000 deaths each year.