Developer pounces as new law takes effect

HONG KONG: It may not be The Peak but for tenants of a run-down 57-year-old low-rise in North Point it's home. Now under a new rule on property acquisitions that is about to change.

The buildings will be the first to be redeveloped under the city's new compulsory acquisition rules, which lowers the percentage of flats a developer has to acquire in a particular building that's at least 50 years old before they can make the hold-outs sell up.

In this case the developer Soundwill Holdings has accumulated 87.9% ownership, equal to seven out of eight flats, in two adjoining buildings at 13 and 15 Mercury Street.

That was enough to trigger the new compulsory sale rule in which the threshold to force a sale was lowered to 80% of a building's flats from 90%. The rule came into effect on April 1. Some tenants complained they would not be able to find accommodation in the area.

Soundwill plans to redevelop the buildings into a hotel or a commercial project. The firm did not disclose what it was paying the owners.

A man who declined to give his full name said he and his wife and a daughter had rented a 200 sq ft room in the building at 13 Mercury Street for eight years.

"At first, we were told to leave on August 7, but now the landlord has agreed to extend for several months."

He said the landlord had divided the 1,000 sq ft flat into five rooms ranging from 80 sq ft to 200 sq ft and charged between HK$1,000 and HK$2,000 a month.

"The monthly rental of HK$2,000 (RM807) accounts for one-third of my salary."

He said it was impossible for him to find another room in the same area at that price. He hopes the landlord, who had agreed to sell the flat to Soundwill can offer him compensation. "The landlord is certainly earning big money from the sale of the unit," he said.

Lee Lai-hing, a 71-year-old Chinese herbal medicine practitioner, said that he was staying put for the moment. He began renting his 900 sq ft ground-floor shop at 15 Mercury Street in 1991 and his lease does not expire until December next year.

"I don't care about the compulsory sale as I have the right to stay here until the lease expires," he said. He said the landlord had approached him only several weeks ago about the sale.

"We are in discussions ... I will not move if the compensation is not good," said Lee, who did not say how much he wanted.

He said the landlord charged him HK$26,700 a month.

"There is no way I can lease a similar sized shop in the area at the same rental," he said.

Vivian Chan, executive director of Soundwill, declined to comment, saying that the tenants should negotiate terms with the landlord.

"There is only one unit that is still unsold at 13 Mercury Street and therefore we have applied for the compulsory sale law," she said. As of August 17 seven compulsory land sale applications had been lodged with the Lands Tribunal since April 1.

Charles Chan, managing director of Savills Valuation and Professional Services, expected developers would become more active in redeveloping old projects in urban areas after the relaxation of the compulsory sale rule.

"Previously, securing 90% ownership of a property before they could apply for a forced sale was extremely difficult," he said.
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