Circular No. 04-03 (CR) August 2004
Disposition of HOS Flats in the Open Market

In response to recent enquiries and further to Circular Nos. 99-05, 99-07, 00-05, 00-13, 01-01, 01-13, 02-02 and 02-07, the Authority would make the following clarification on some practical problems encountered by practitioners in relation to the disposition of HOS flats of over 5 years in the open market.

According to the Housing Ordinance (Cap. 283), flats under the Home Ownership Scheme, the Private Sector Participation Scheme and the Tenants Purchase Scheme of the Hong Kong Housing Authority are subject to restriction on alienation (including sale, lease or re-mortgage) unless and until such restriction is lifted. The conditions for the lifting of restriction are provided for in the Schedule to the Ordinance.

While a flat is subject to restriction on alienation, the owner shall not alienate, convey, charge or part with possession of the flat, nor enter into any agreement purporting to do so. However, in the case of a sale, the parties may enter into an agreement for sale and purchase (including provisional agreement for sale and purchase), provided that such agreement contains a special condition providing for the premium as assessed by the Director of Housing to be paid to the Hong Kong Housing Authority 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.

According to sections 17B and 27A of the Housing Ordinance, for a flat currently subject to restriction on alienation, except in the above situation (i.e. where the relevant agreement for sale and purchase contains the special condition), any agreement or other instrument purporting to sell, let or otherwise alienate the flat shall be void, and any person entering into such agreement or other instrument commits an offence. An estate agent who aids or abets the commission of the offence may be guilty of the same offence.

The Authority strongly reminds practitioners to refrain from any illegal act in the handling of flats subject to restriction on alienation under the Housing Ordinance. Furthermore, in cases where it is intended to modify a standard-form provisional agreement for sale and purchase by incorporating the special condition mentioned above, given that such modification involves the parties' rights and liabilities and may also affect other terms and conditions in the agreement (such as those relating to the completion date, etc), the matter should therefore be handled by a qualified lawyer.

As regards the procedures relating to the disposition of flats under the HOS Secondary Market Scheme, please refer to Circulars 99-02, 00-05 and 00-13. For other details, practitioners may call the Housing Authority Hotline at 2712 8000.


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