The Hong Kong Housing Authority (HA) endorsed on 26 May 2005 a new arrangement on premium payment regarding the Home Ownership Scheme (HOS)1 and the Tenants Purchase Scheme (TPS). Under the new arrangement, owners of HOS and TPS flats within the third to fifth year of the alienation restriction period (3rd to 5th-year flat) may apply to the HA for payment of the premium for the uplifting of the restriction on alienation so that they can sell, let or otherwise alienate their flats in the open market.

By virtue of paragraphs 1(a)(ii) and 4(b)(i) of the Schedule to the Housing Ordinance (Cap. 283), the HA will process the premium application for owners within the 3rd to 5th-year of the alienation restriction period only upon the owner's submission of an offer to assign his flat to the HA and after the HA has declined to accept such offer. Only after the HA has declined such an offer that the owner can enter into any agreement for sale and purchase (including provisional or formal agreement).

Accordingly, the owner should first submit an application for premium assessment using the form specially applicable for the 3rd to 5th - year flats under which the offer to assign the flat to the HA and application for premium assessment are incorporated therein. Upon receiving the HA's written confirmation to decline the owner's offer to assign the flat and acknowledgement of the premium application, the owner may then enter into an agreement for sale and purchase (including provisional or formal agreement) in respect of his flat with a purchaser in the open market. As in the case of the sale and purchase agreement for disposal of the HOS/TPS flats where the 5-year restriction period has expired, any such sale and purchase agreement, if entered into before the premium as assessed has been paid to the HA, must contain a condition that the premium as assessed by the Director of Housing (the Director) be paid to the HA prior to the assignment and within 28 days of the date of the agreement or within such period as may be otherwise stipulated by the Director.

If the owner of a 3rd to 5th-year flat enters into an agreement for sale and purchase (including provisional or formal agreement) with a purchaser in the open market before his offer is declined by the HA, such act of entering into the agreement for sale and purchase will be in breach of the Schedule and section 27A of the Housing Ordinance. Furthermore, if an agreement for sale and purchase entered into with a purchaser in the open market (be it a flat within 3rd to 5th-year or after the 5-year period) before the assessed premium is paid to the HA does not contain a condition providing for the payment of such premium to the HA prior to the assignment and within 28 days of the date of the agreement or within such period as may be otherwise stipulated by the Director, such failure will also constitute a breach of the Schedule and section 27A of the Housing Ordinance. In both cases, the agreement for sale and purchase entered into will be void. Any person who commits an offence under section 27A of the Housing Ordinance is liable to a fine of $500,000 and to imprisonment for one year. A practitioner who aids or abets the commission of the offence under section 27A of the Housing Ordinance may be guilty of the same offence. For other matters relating to the above, please refer to Circular No. 04-03(CR).

The premium assessment procedures for 3rd to 5th-year flats and the application form are available at the HA's websitewww.housingauthority.gov.hk

For practitioners' ease of reference, the Appendix gives a brief summary of the current arrangements under which HOS/TPS flats owners may alienate their flats.

September 2005

1 Include flats sold under Private Sector Participation Scheme (PSPS), Buy or Rent Options (BRO) and Mortgage Subsidy Scheme (MSS).