FAQ for Owners

When acquiring an owner-occupied domestic property, the URA will offer an Owner-occupier* the market value (valued on vacant possession basis) of the property plus Home Purchase Allowance (HPA) so as to assist him to purchase a replacement flat. The assessment of HPA is based on the value of a notional flat, which is defined as a seven-year-old flat in a comparable quality building, situated in a similar locality in terms of characteristics and accessibility, and located at the middle floor with average orientation.

In other words, the HPA is the difference between the value of the notional replacement flat and the open market value of the property being acquired. Each owner-occupier is entitled to receive HPA for no more than three properties.

In assessing the unit rate of a notional replacement flat of seven years old, the URA will appoint valuation consultant firms to conduct analysis on the transactions in the nearby area. The notional replacement flat will be located at the middle floor of a notional building with average orientation and without sea view. The assessment involves comparing the acquired properties with the sale transactions of similar properties and making necessary adjustments for various factors such as the date of transaction, age, orientation, floor, quality, size, accessibility and environment of the flat.

An owner of vacant property will be offered the market value (valued on vacant possession basis) of his property plus Supplementary Allowance (SA). An owner of tenanted property will be offered market value subject to tenancy plus SA. The SA amount is normally 25% to 75% of the HPA, depending on the number of properties an owner owns and the occupancy status of the properties. For details, please see "Principles adopted by the URA on Property Acquisition" Appendix II.

* "Owner-occupier" here means an owner who occupies his property as his sole residence.

The URA will conduct independent valuation for properties in each and every redevelopment project to ensure objectivity. The valuation should reflect the market value of the properties at the time.

The URA used to appoint two valuation consultant firms for advice on HPA assessments. Although the practice was effective, the URA thinks that the new method of appointing seven consultant firms for valuations provides a more broad-based, objective and credible valuation of the HPA.

The URA always attaches significance to the views of the community and strives to solicit their support for urban renewal. We also want to engage into a negotiation with affected owners on a pragmatic basis.

Eligible and qualified valuation consultant firms interested in providing valuation assessments for the URA are invited to take part in an open and fixed price tendering system, during which seven valuation consultants are selected by ballots administered by independent third parties.

The highest and lowest valuations will be discarded. The remaining five will be averaged. Names of the seven valuation consultants and their valuation data will be made public.

The URA believes that the new assessment system can enjoy confidence of the affected owners. They may think it pointless to employ their own surveyors, thus speeding up the whole acquisition process.

The URA acquires properties in the redevelopment area through private negotiation and appoints two valuation consultant firms to assess the market value of the related properties to be acquired.

Calculation of the market value of a property is based on the saleable area. The definition of saleable area is based on the Code of Measuring Practice (CMP) issued by the Hong Kong Institute of Surveyors (HKIS) in March 1999.

According to the CMP, the saleable area of a unit comprises the floor area exclusively allocated to that unit including balconies and other similar features but excluding common areas such as staircases, lift shafts, lobbies and communal toilets. It shall be the area contained within the enclosing walls of the unit measured up to the exterior face of an external wall or the centre line of a separating wall between adjoining units, as the case may be. Enclosing walls separating a unit from a lightwell, a lift shaft or any similar vertical shaft, or a common area, shall be deemed an external wall and its full thickness shall be included. All internal partitions and columns within the unit shall be included.

Saleable area describes the ownership and occupation of the premises in relation to the building structure. As such it also reflects to a certain extent the rights and liabilities appurtenant to the premises.

An owner who partially occupies his flat and lets out part of it will be paid the market price (valued on vacant possession basis) of the property, the full HPA for the area he occupies and the SA at 75% of the full HPA for the tenanted area.

HPA is the difference between the market value (valued on vacant possession basis) of the property being acquired and the cost of a 7-year old domestic flat on vacant basis of similar size in a similar locality.

For example, assuming the market value of a domestic flat on vacant possession basis is HK$800,000 and the cost of a replacement flat of 7 years old and similar size in a similar locality is HK$2,000,000, full HPA is HK$1,200,000.

If an owner of the above domestic flat who occupies half of the flat and leases out the other half, this owner will get the market value of this flat (valued on vacant possession basis), which is HK$800,000 and 100% HPA of the owner-occupied portion, which is HK$600,000 and SA at 75% of HPA of the tenanted portion, which is HK$450,000. In total, this owner will receive an acquisition offer of HK$1,850,000.

In order to encourage owners to sell their properties to the URA, an incidental cost allowance will be offered to owners of domestic properties to assist payment of removal expenses and expenditure relating to the purchase of a replacement property. The amount shall be determined and announced as and when a project is launched.

Owners' rental and job income will not affect the URA's acquisition offer.

A building in single ownership is valued either on its existing use value plus ex-gratia allowances for shops and HPA/SA and incidental cost allowance for domestic units in multiple ownership or on its redevelopment value (assuming redevelopment of the building on its own) plus an ex-gratia allowance of 5%, whichever is higher.

The URA will first identify the category of rooftop interest a property belongs to before making the appropriate arrangement. There are generally three categories of rooftop interests.

Type 1: Open rooftop interest
This type of rooftop interest has a registered title not tied to any main units in the building and is transferable. Transaction records are registered in the Land Registry. The URA will acquire such type of rooftop interest from the owners. No matter a rooftop property is tenanted or vacant, the owner will be offered the market value of the property on an open roof basis (disregarding any illegal structure or any rent passing). In addition, the URA will pay the owner an ex-gratia allowance at 10% of the said market value.

An owner-occupier* of a rooftop property will be offered the market value of the property on an open roof basis (disregarding any illegal structure). If the owner-occupier meets eligibility criteria of the Hong Kong Housing Authority or Hong Kong Housing Society for rehousing, he may also elect for a re-housing unit. If he does not elect for re-housing, the URA will pay the owner an ex-gratia allowance at 10% of the said market value.

If there is a tenanted structure on the rooftop and the owner sells the property subject to tenancy, the related tenant is entitled to the cash compensation or rehousing under the same policy as tenants in the main units in the building.

Type 2: Rooftop interest which belongs to the top floor unit
This type of rooftop interest belongs to the top floor unit, i.e. top floor property with rooftop. The URA will acquire such kind of rooftop interest together with the top floor unit (disregarding any illegal structure or rent passing). If there is a tenanted additional structure on the rooftop and the owner sells the property with tenancy, the related tenant will be entitled to the cash compensation or rehousing under the same policy for tenants in the main units of the building.

Type 3: Common interest
This type of rooftop interest is commonly owned by all owners of units in the building and is non-transferrable. With regard to this type of rooftop, the URA does not have the legal right to compensate or rehouse occupiers until the interests of the whole building is acquired by the URA or resumed by the Government.

The URA understands that some of the rooftop occupiers paid to "acquire" the rooftops but, in effect, the legal interests do not belong to them. It is difficult for the URA to treat them as owners and make offers. Once the URA is in a legal position to deal with rooftop occupiers, they will be compensated or rehoused in accordance with the URA's rehousing and compensation policy for tenants.

* "Owner-occupier" here means an owner who occupies his property as his sole residence.

The URA acquires properties that are affected by redevelopment through private negotiation. According to market practice, the buyer will pay 10% of the acquisition price to the vendor when the two parties execute the sales and purchase agreement. The balance will be paid when the owner delivers vacant possession of the property. If an owner faces difficulties and wants the URA to make special arrangement in respect of the down payment, the URA will pay a maximum of 30% of the acquisition price as down payment at its discretion for special cases.

On the other hand, URA has secured agreement from various banks that they agreed to offer bridging loans with favorable conditions to the owners to assist the purchase of replacement flats, in case they have such needs.

According to the acquisition policy of the URA, in case there is a change of ownership within an announced project area after the date of the first written notice served by the URA to the owner informing him of the implementation of the project, or the date the Government Notice published in the Gazette under Section 23 of the Urban Renewal Authority Ordinance where applicable, the URA is not prepared to pay HPA, SA or any ex-gratia allowance to the new owner. Only the market value will be offered.

According to the acquisition policy of the URA, "immediate family members" means parents, children, dependent brothers and sisters, grandparents, grandchildren, stepparents, spouse's parents and spouse's stepparents. Each owner-occupier* is entitled to receive HPA for no more than three properties.

* "Owner-occupier" here means an owner who occupies his property as his sole residence.

If a property is owned by joint owners/a company, each joint owner/shareholder of that company will be subject to the same principles applicable to individual owners. The HPA and SA will be calculated pro rata to the shares of each joint owner and the shareholdings of each shareholder in the company.

An owner of non-domestic property will receive the market value of his property (valued on vacant possession basis). The URA will also pay the owner an allowance. The allowance for tenanted or vacant non-domestic property is 10% of its market value (valued on vacant possession basis) or one time its Rateable Value, whichever is higher. The allowance for owner-occupied non-domestic property is 35% of its market value (valued on vacant possession basis) or 4 times its Rateable Value, whichever is higher. An owner-occupier may claim for business loss, as an alternative to the above allowance, if he so chooses.

According to the above policy, properties with higher rates may not necessarily get higher offers. It is because the market value of a property is the deciding factor in both calculation methods.

In assessing the acquisition offer for non-domestic properties, the URA appoints two independent valuation consultant firms to assess the market value of the properties. The consultant firms will make reference to the market transactions of similar properties in similar locality around the date of valuation. The assessment involves comparing the properties with the sales transactions of similar properties and making necessary adjustments for various factors such as location, environment, building condition, age, accessibility, date of transaction, size etc.

The URA will determine the market value of a property based on the higher valuation between the two consultant firms and make offer to the owner together with an ex-gratia allowance.

In assessing the market value of a property, the consultant firms will also consider factors such as the Rateable Value, location of the property and the environment when necessary.

No value, compensation or ex-gratia allowances will be paid in respect of structures, which are not erected in compliance with the Buildings Ordinance and the terms of the Government lease under which the property is held. However, the headroom of a property may affect the market value of the property. The consultant firms appointed by the URA will take this factor into consideration when assessing the market value of the property.

With respect to a property with rooftop, the URA will make an offer to the owner taking the interest of the rooftop into account. An owner of tenanted rooftop property will be offered the market value of the property on an open roof basis (disregarding any illegal structure or any rental income), together with an ex-gratia allowance at 10% of the said market value. There is no compensation for any illegal structure on the rooftop.

The URA acquires properties that are affected by redevelopment through private negotiation. According to market practice, the URA will pay 10% of the acquisition price to the related owner when the two parties execute the sales and purchase agreement. About one month later, both parties will normally execute the deed of assignment. At that time, the balance of the acquisition offer will be paid and the owner will deliver keys of the property. If an owner encounters difficulties and asks for special arrangement on the date of delivering vacant possession, he can make such request. The URA will make necessary arrangement for special cases at its discretion. In principle, the URA wants to complete the transaction as soon as possible so that the implementation of the project will not be affected.

* "Owner-occupier" here means an owner who occupies his property as his sole residence.

If an owner-occupier of a shop chooses to claim business loss as an alternative to ex-gratia allowance, heads of claim may include permanent or temporary loss, such as:
(1) permanent or temporary loss of business profit;
(2) loss on forced sale of fixtures & fittings and stock;
(3) loss of business goodwill;
(4) severance payments to employees under the Employment Ordinance (Chapter 57);
(5) expenses on connecting telephone line; and
(6) costs on printing removal notice.

Supporting documents such as receipts and invoices would be required to substantiate the claim, including:
(a) business registration certificate;
(b) financial statements (e.g. balance sheet, profit and loss account) covering the claim period as well as the three preceding years;
(c) monthly analysis of sales/income;
(d) tax returns in support of the claim;
(e) tenancy agreement, if applicable;
(f) inventory of stock and the value of the respective items; and
(g) evidence of the new shop's address

The above two lists are not exhaustive. The URA will consider each case according to its circumstances.

Under the URA's acquisition policy, the acquisition price will be assessed and calculated according to the use of the property set out in the occupation permit (i.e. domestic or non-domestic purpose). The acquisition price includes the market value of the property and an ex-gratia allowance. This is also applicable to shops and basements.

Although the URA will assess and calculate the acquisition price in accordance with the use of the property set out in the occupation permit, the HPA is payable to an owner-occupier of non-domestic property which has been issued with an occupation permit other than for domestic use but nevertheless has been used for domestic purpose for a long time provided that such use is not prohibited under the Government lease of the property. The URA will make decision on compassionate grounds and according to the actual use of the property for individual cases.

The URA acquires properties in redevelopment areas through private negotiation. However, it may not be able to reach agreement with all owners due to various reasons, such as title problems, probate cases or untraceable owners, etc. In order to improve the environment, the Government may consider repossessing the remaining interests pursuant to the Lands Resumption Ordinance. It should be noted that the interests of owners and tenants would be protected by the law during the resumption process.

When the Government approves the resumption application of the URA, a Government Notice will be published in the Gazette. Copies of the Government Notice will also be affixed in the redevelopment area. The ownership of the properties will revert to the Government three months after the notice is published. 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, if applicable.

In order to assess the compensation and allowances as well as to identify persons eligible to the above 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.

For details, please refer to the "Land Resumption and Compensation in the Urban Area" booklet published by the Lands Department or visit its web site: http://www.info.gov.hk/landsd/public/ulm.htm.

If both parties fail to reach 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.

Even after the publication of the Government Notice, the URA will continue to negotiate with owners before the reversion of property interests to the Government, given that the transactions can be completed before the date of reversion.