Government stands firm on premiums for co-operative sites

Government stands firm on premiums for co-operative sites

Danny Chung

The government is standing firm on the requirement to pay premiums should owners of flats built under the civil servants co-operative building society scheme want to redevelop them in cooperation with developers.

Speaking at the Legislative Council Panel on Development on redevelopment of civil servants quarters, Secretary for Development Paul Chan Mo-po said any proposal to change the way in which owners get released from the responsibility to pay premiums for removing the restriction on alienation was equivalent to using public funds to subsidise owners.

“This route needs sufficient reasons of public interest to support it before we can consider it,” Chan said.

According to a paper prepared by the bureau, there are a total of 238 civil servants co-operative building societies of which 177 have been dissolved.

Chan pointed out that of the 177 cases, which involved 4,640 flats, about 46 percent of owners have applied to Lands Department for removal of the alienation restriction.

Of these owners, 67 percent have already paid the assessed land premium to remove the restriction.

So far only 13 co-operatives out of the 238 have fully paid the premium to remove the restriction of which 11 have been redeveloped.

Chan said apart from co-operating with developers on redevelopment, owners of such civil servant flats could also apply to the Urban Renewal Authority for inclusion in its Demand-led Redevelopment scheme.

A civil servant's co-operative building society on Dumbarton Road in Kowloon City  (Danny Chung)

A civil servant’s co-operative building society on Dumbarton Road in Kowloon City (Danny Chung)

Due to shortage of housing, the redevelopment of civil servants quarters has come under the spotlight as many are in prime locations in the urban areas.

According to the bureau’s paper, if the 227 co-operatives not yet redeveloped are eventually redeveloped, they would provide 963,000 square metres (10,365,732 square feet) of domestic gross floor area.

Despite the government’s insistence on land premiums, Chan said the Development Bureau in conjunction with other policy bureaus was currently studying how to get solve the problem of redevelopment .

“We are adopting an open minded attitude to finding a way,” Chan said.

The civil servant co-operative scheme was set up in 1952 to provide housing for civil servants.

These co-operatives typically paid only one-third of the market value of the land and could get government loans to pay the premium and construction costs.

To start redevelopment, the co-operative had to be first dissolved and the flats assigned to the owners.

The owners then had to pay a premium to the government to remove the restriction on alienation to allow assignment, usually to a developer that is co-operating with the owners of the flats.

After getting ownership, the developer would pay another premium to the government to allow redevelopment of the site to its maximum extent allowed under planning and building regulations.

However the payment of the first premium by the owners has been a sticking point.

Legislator Chiang Lai-wan pointed out a case in Cheung Sha Wan where the owner was told in 2010 by Lands Department that the premium for removal of the alienation restriction was HK$1.27 million based on existing value assessment.

However in 2012, the owner was told that the premium would be HK$3.3 million based on redevelopment value assessment.

She said owners have been complaining about the change in assessment since it was put into effect in April last year.

Secretary for Development Paul Chan Po-mo says the Development Bureau was studying, in conjunction with other government bureaus, how to solve the problem of redevelopment of civil servant's quarters (Legislative Council website)

Secretary for Development Paul Chan Po-mo says the Development Bureau was studying, in conjunction with other government bureaus, how to solve the problem of redevelopment of civil servant’s quarters (Legislative Council website)

Chan acknowledged the problem of using existing value or redevelopment value for premium assessment but said a legal charge against the title for the flat would prescribe the manner of premium assessment.

He added the government’s preliminary assessment on the whole issue was that it would be difficult to find a one-size fits all solution to every case.

“The location is different, the scale is different, and the development density is different. So when we approach it in a concrete manner, we need more time [for study],” he said.

Deputy Secretary for Development (Planning and Lands) 2 Rex Chang Wai-yuen pointed out that one third of the land value paid as premium by the co-operative initially was in fact based on the upset price.

The upset price in turn was based on two-thirds of the market value of the land at the time.

Owners seeking to sell their flats to developers for redevelopment had to pay two-thirds of the market value of the land as premium.

Joseph Ho Chin-choi, managing director at LCH (Asia-Pacific) Surveyors, said it was natural for civil servants to feel paying premium was unfair.

“But to the public, it would be fair because they would say, ‘we’ve struggled too and have no space but they can get 1,000 square feet with a big balcony too’,” Ho said.

However Ho said with the government currently looking high and low for land to build on, there should be a newer mechanism to release the redevelopment potential of these co-operative sites.

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