COVID-19: Relief Measure for Hong Kong Developers on Building Covenant Extensions

Background

• The COVID-19 pandemic has posed challenges to developers on timely completion of development projects.
  
  
• On 8 April 2020, the government announced a series of relief measures, one of which is to allow an extension of the building covenant (“BC”) period¹ specified under the land grant at nil premium for up to six calendar months (“Measure”).
  
  
• On 29 April 2020, the Lands Department (“LandsD”) issued Practice Note No. 4/2020 to provide details on the implementation of the Measure.

Who can Benefit?

• The Measure applies to all types of developments with unfulfilled BCs as at 8 April 2020, including those already expired or previously extended, but not to land grants executed after 8 April 2020 nor to those developments the BCs of which are not imposed by the LandsD (e.g. orders for compulsory sale issued by Lands Tribunal).

How to Benefit?

• If a further extension is later applied for, the six-month period extended (at nil premium) under the Measure is disregarded for premium assessment purposes.

How to Apply?

• Developers may submit applications for approval to LandsD up to 31 October 2020. Late applications will not be entertained.
  
  
• For fresh applications, developers may use the sample application letters set out at Appendix I of the Practice Note.
  
  
• For existing applications LandsD is currently processing, developers must notify LandsD in writing to indicate the period of extension they are applying for under the Measure.
  
  
• Premiums already paid for any extensions previously granted would not be refunded.
  
  
• The government has sole and absolute discretion to consider the applicability of the Measure to each individual case.

Practical Implications

• For a developer who has not commenced strata title sale of units in a development under the consent scheme, it should consult its authorised person in adjusting the proposed sale programme, taking into account the extension that may be granted under the Measure.
  
  
• For a developer who has already sold units in a development under the consent scheme, it is contractually bound by the relevant agreements for sale and purchase to complete the development by the estimated material date (in case of residential units) or by the estimated completion date (in case of non-residential units), subject to an extension of time (if any) as may be granted by the authorised person on such grounds permissible under the relevant agreements for sale and purchase.

For further details, please refer to Practice Note No. 4/2020.

¹ This is the period imposed on a developer within which it is required to complete the development of the relevant lot in accordance with the conditions of the land grant.