Risk and profit sharing

THOUGH there is no satisfactory mechanismfor protecting minority owners' interests, thegovernment has by means of a division votebulldozed the 80% threshold for compulsory salethrough the Legislative Council. The new rule takeseffect on April 1. Why it is unfair to minority owners tolower the threshold is obvious. As it has done nothingto make things fairer, the government should look atthe issue when it reviews its urban renewal strategy.

The compulsory sale mechanism is denouncedmainly because (1) compulsory auctions may turn outto be compulsory acquisitions rather than genuineauctions and (2) when a developer applies for an orderto sell a flat, its owner is virtually in litigation with thedeveloper, but there is such a disparity in strengthbetween them that justice is rarely seen to be done.

The government says minority owners' interestsare protected because it is the Lands Tribunal thatoperates the mechanism. However, cases have arisenthat show justice is not manifest when minority ownersfight against developers. If it believes the compulsorysale mechanism is essential for encouragingdevelopers to carry out redevelopment projects, thegovernment ought to see that public agencies maysuitably step in when the Lands Tribunal considers adeveloper's application for an order to sell. Forexample, such agencies may provide a minority ownerwith professional assistance in respect of the existinguse value and the redevelopment value of the flat inquestion if he has not the means to retain anybarristers, surveyors or architects.

If a developer wants to buy a person's flat forredevelopment, it is natural for him to demand the bestpossible price. The Urban Renewal Authority (URA) isoften in dispute with flat owners though there is astatutory provision that requires it to pay the owner of aflat enough money to buy a seven-year flat of thesame size in the same district. When a developeracquires properties for redevelopment, price hagglingmay be even fiercer. A crumbling flat in an old buildingmay indeed have a very low existing use value.

Nevertheless, it may be valuable because it may be ina location where flats fetch very high prices. Such a flathas a high redevelopment value. Minority owners placeemphasis on redevelopment potential. It is natural forthem to want to share profits with developers.

There is no denying that developers are exposedto risk when they invest money to redevelop oldbuildings. However, we believe it will help reducedispute and speed up urban renewal for developers tooffer minority owners options that would balance theirrespective interests. The following are some examples.Option one: A minority owner receives from adeveloper one-off compensation and agrees that thedeveloper will hear no more from him.

Option two: This is a "risk and profit sharing"option. A minority owner gets part of his compensationfirst from a developer and receives after the completionof the redevelopment project the remainder, which isdependent on the profit from the project.

Option three: the "flat for flat" and "shop for shop"offer.

This principle applies also to URA redevelopmentprojects. As the URA is supposed to be a non-profitbody, it should all the more uphold the "risk and profitsharing" principle. If it does so, it can carry outredevelopment projects more efficiently, urban renewalwill have a breakthrough, and wealth can be storedamong the people. It may be operationally complicatedto offer minority owners various compensation options.However, the government should seek improvementsalong these lines if it would speed up urban renewalwithout detriment to social harmony for it to do so.

明報英語網「雙語社評」english.mingpao.com/critic.htm

風險分擔利益分享重建困結迎刃而解

明報社評

2010.03.18

在未有完善機制保障小業主權益的情况下，政府利用立法會分組點票的操作，使降低強拍門檻至八成得以強渡關山，下月1 日實施。降低強拍門檻對小業主不公平之處，顯而易見，由於這次並無任何措施使事態朝公平合理方向發展，政府在檢討市區重建策略之際，應該一併檢視有關情况。

強拍機制最使人詬病之處，有兩點：（1）強拍並非真正拍賣，實質是強收；（2）當小業主與發展商爭持到強拍階段，實際上就是打官司，但是兩者之間實力懸殊，法律的公正難以體現出來。

政府認為強拍機制有土地審裁處把關，就可以保障小業主利益，但是從上述情况看來，法律的公正性在小業主與發展商角力時，根本不能體現出來。因此，政府若認為強拍是推動發展商參與重建的要件，就應該設立機制，讓公權力在審裁處階段作適度介入，例如就現用值（existing use value） 及重建值（redevelopmentvalue）等估計方面，給無能力聘請大律師和測量師、建築師的小業主，提供專業協助。

關於市區重建，小業主盡量叫高賠償價，乃人之常情，市建局有賠償當區7 年樓齡的準則，尚且與小業主爭拗不絕；發展商收樓重建，一方叫價，一方壓價，爭議必然更多。若單以現用值而言，一些舊樓「溶溶爛爛」，確實不值太多錢，若加上重建值，則一些舊樓所坐落地區，升值潛力甚高，情况不一樣了。小業主着眼於發展潛力。小業主欲與發展商分利，也屬人之常情。

發展商投資重建舊樓，無可否認存在一定風險，我們認為在收樓賠償方面，若發展商提供不同方案供小業主選擇，應可化解爭端，平衡雙方利益，加速重建進度。例如：

方案1：是小業主可選擇一筆過賠償，自此與發展商再無轇轕；

方案2：發展商以「風險分擔利益分享」原則，供小業主選擇，具體是小業主首筆只取部分賠償，待重建完成後，按項目盈虧，與發展商分取其餘款項；

方案3： 「以樓換樓」和「以舖換舖」。

上述原則，也可以適用於市建局的重建項目。市建局重建，一向標榜不牟利，這樣的話， 「風險分擔利益分享」更有推行基礎，若市建局採納，加強了重建效率，不但為市區重建打開一個新局面，還可以起到藏富於民的邊際效果。收樓賠償增加不同選擇，操作起來會較繁複，但是若能加快推動重建，又無損社會和諧，則政府應該朝這方向思考改善。

Glossary

denounce /dI'na ʊns/criticise severely.

retain

If you retain a lawyer, you pay him moneyregularly or in advance so that he will work foryou.

without detriment tonot resulting in harm or damage to.