Q1. What will happen to the tenancy if there is an acquisition by Urban Renewal Authority or compulsory sale involving the premises in regulated tenancies? Can a landlord terminate the regulated tenancies unilaterally or not offer second term tenancy in the offering period if the landlord believes that there will soon be a foreseeable acquisition or compulsory sale?
Early Termination of Regulated Tenancies
Unless the tenant has violated the mandatory terms implied for every regulated tenancy provided in Schedule 7 of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7), the landlord cannot terminate the tenancy before the expiry of the term. Even if the tenancy has any conditions for forfeiture other than the specified provisions, they should be deemed invalid and shall be void.
A mere “belief” that the unit concerned is to be included in a redevelopment plan by the Urban Renewal Authority is a not sufficient reason to terminate the regulated tenancy before its expiry or not to offer the second term tenancy to the tenant in the specified offer period. If the premises are included in a redevelopment plan or are ordered by the court for a compulsory sale, the ownership of the premises will be transferred while the tenants, compensated or resettled, are required to move out in accordance with statutory procedures.
The Urban Renewal Authority (“URA”) was established under the Urban Renewal Authority Ordinance (Cap. 563) as the statutory body to undertake, encourage, promote and facilitate urban renewal of Hong Kong.
When a resumption is ordered, a Government Notice will be published in the Gazette and a freezing survey will be conducted. A copy of the Government notice will be affixed on or near the properties affected, and sent to the registered owners thereof, where possible. Under normal circumstances, the Government will give a period of notice of 3 months from the date upon which the notice was affixed on or near the properties and upon expiry of the period specified in the notice, the ownership of the properties will revert to the Government. Upon the date of reversion, all legal rights and interests of the owners no longer exist. Henceforth, the former owner is not entitled to collect rents or fees of any kind from his tenant or the occupant.
Eligible persons will be offered compensation or ex-gratia allowances. Rehousing arrangements may be made for occupiers of domestic flats (ex-tenants), if applicable.
In order to assess the compensation and allowances as well as to identify persons eligible to compensation or rehousing, the Government will appoint the URA to send staff to properties to be resumed to conduct surveys. The area occupied by each household will be identified and relevant information can be obtained. If both parties fail to reach an agreement on the compensation, the case can be referred to the Lands Tribunal for adjudication.
As to eligible domestic occupiers, whether they opt for cash compensation or rehousing, they have to follow the necessary procedures before receiving the compensation or rehousing unit.
In order to encourage the redevelopment of dilapidated buildings, the Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545) was brought into force on 7th June 1999. The Ordinance enables people who hold a specified majority of the undivided shares in a lot to make an application to the Lands Tribunal for an order to sell it for redevelopment.
When making an order for compulsory sale, the Tribunal may order that compensation be paid to a tenant for termination of tenancy. The Tribunal may specify in directions that:
- tenancies shall be terminated immediately upon the purchaser becomes the owner; and
- tenants are to deliver vacant possession only upon expiry of 6 months immediately following the day the purchaser becomes the owner.
The Lands Tribunal may take into account the following in determining the amount of compensation:
- the tenants’ representations; and
- the benefit afforded to the tenants for not being required to deliver vacant possession until six months after the purchaser becomes the owner of the lot.
Lease covers both oral or written agreement.
Upon the sale of the lot, each ex-owner will be responsible for paying the compensation to their own “ex-tenants” if compensation is specified in the order issued by the Lands Tribunal. The trustee will deduct the compensation amount specified by the Lands Tribunal from the sale proceeds before releasing the residual amount to the owners.