The government established the Small House Policy in 1972, allowing male indigenous residents of the New Territories a lifelong right to acquire lots to build houses at concessionary land price for self occupation, which is also known as ‘concessionary right’.
Small houses are one of the many small village houses in the New Territories. |
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The Lands Department is responsible for the supervision of small houses’ exterior and area. |
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After the completion of works, owners may move in to the small house after acquiring the certificate of compliance from the government. |
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If the small house is built at an earlier stage and is a self-occupation property of the resident, it can be sold after premium payment. |
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Some developers may purchase small houses from male descendants and sign the Letter of Authorization and a will with them. The developer will also sign a Letter of Intent with the buyer to assure that the male descendants will sell out the property at fixed price. The developer will collect the deposit from the buyer in order to settle the premium payment. After paying the premium, the developer will sign the agreement and grant with the buyer as the authorized representative. |
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| There are 2 types of small houses: |
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Male decedents may apply for the ’Free Building License’ from the Lands Department. |
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Developers may apply for ‘Private Treaty Grant’ from the Lands Department by paying the Concessionary Premium, i.e. a price 30-40% lower than the market price |
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| Lands in the New Territories – Demarcation District (D.D.) and LOT |
| I. Restriction of Gross Area |
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The building should cover an area not exceeding 700 sq. ft. |
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The building should not consist more than 3 storeys and its height should not exceed 27 feet |
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| II. Block Government Lease |
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Specifications of the Demarcation District will be included in one Block Government Lease, while details of each lot will be specified in the appendix respectively. Appendix information include: |
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| 1. Lot Numbers |
2. Grant Duration |
3. Name of the Grantee |
| 4. Lot Usage |
5. Area |
6. Government Rent |
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| III. Building License |
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Farmland owners may build small houses in an assigned area of his/her lot. Restrictions of development and related terms are specified in the license. |
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| IV. 3 Certificate of Exemption |
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The new Buildings Ordinance (Application to the New Territories) Ordinance has established a series of regulations on small village buildings. Owners should apply for 3 Certificates of Exemption for building works, drainage works and site preparation from the Lands Department. Any property being built without acquiring the Certificate of Exemption will be regarded as unlawful building. |
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| V. Certificate of Compliance |
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Under the New Grant, it is indicated that the grantee shall not alienate and mortgage the property without the compliance of the Lands Department. Thus the grantee will apply for the Certificate of Compliance immediately after the completion of development in order to fulfill the requirements of the New Grant. |
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Most small buildings in the New Territories are exempted from the above constraints and are available for occupation without the Occupation Permit. In general, buyers and banks will only accept the Certificate of Compliance as the official document certifying the legality and completion date of the property. |
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Under particular circumstances, the owner may apply for Certificate of Compliance several years after the completion of work. Hence, the property age cannot be determined by such certificate alone. |
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| VII. Premium Payment |
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In general, restrictions on sale/purchase or alienation of the small house will be specified in the Government Grant. Only after the recipient of the Certificate of Compliance and paying the premium to the Lands Department that such terms can be deleted. Otherwise, no formal sale or purchase is allowed. Any sale/purchase or forms of alienation of the property before the premium payment will be a violation to the Government Grant and the Lands Department is entitled to confiscate the lot in questions. |
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All 3 storeys of the house must be included in the calculation of premium. Storey-based premium calculation is not allowed. |
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All small houses built on private lands are not permitted to alienate within 5 years. Owners must pay the premium to the Lands Department before alienation if the property has to be sold before the deadline. |
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| VIII There are 2 types of premium payments of small houses |
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Free Building License |
The premium shall be calculated at concessionary rate. The difference against the market price shall be paid when applying for Consent to Assign. |
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Private Treaty Grant |
The premium shall be calculated as the land price before the building of houses. The difference against the land price shall be paid when applying for Consent to Assign. |
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| IX Uncompleted Small Houses |
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It refers to any uncompleted small houses which have yet been granted the certificate of compliance |
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No premium is allowed to pay for any uncompleted small houses which have yet received the certificate of compliance |
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The purchase of small houses without paying the premium is not protected by law and the buyer will not own the land title |
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If the property is built by a particular developer, buyers may not be able to retrieve the deposit in cases of delay or incompletion. |
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Mortgage of uncompleted small houses will not be accepted by banks |
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| X Others |
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Certain lots of village houses may attach to slopes. Buyer should check if the responsibility of slope maintenance is borne by the government, private party or both. According to the Building Regulations, if a slope is found to be ‘dangerous’ or ‘potentially dangerous’ in nature, the owner or responsible parties shall carry out the maintenance. |
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If the village house is sold together with a garden, the buyer should verify to see if its entitlement is covered by the grant or within the restrictions of government Tenancy Agreement Regulation. If restricted, the garden is prohibited to be sold together with the property. |
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If the village house is sold together with a rooftop, the buyer should verify to see whether its entitlement is separately included in the grant or shared with another party. The entitlement of rooftops can be verified in general searches. |
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Generally speaking, village houses should be valuated by the bank or surveyor in order to determine its market price before transaction. Both transaction parties should hire their own solicitors to enquire about the grant and other documents. After verifying the terms of sale/purchase restriction in the grant, the parties may sign the sale and purchase agreement and settle the deposit. |
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