Home Ownership Scheme

Home Ownership Scheme flats are flats sold under a government subsidized-sale programme aiming to help people who meet certain financial criteria to buy their own homes.The Housing Department gave some priority to public housing tenants in buying Home Ownership Scheme flats and allowed them to apply on Green Form status.The purpose was to encourage public housing tenants to give up their public housing units to buy Home Ownership Scheme flats instead, but any Home Ownership Scheme flat bought has to be used as the home of the buyer.

In order to prevent the misuse of government resources and to deter people from breaking the rules, any unlawful mortgage, charge, assignment or other “alienation” created and any unlawful agreement entered into which relates to a Home Ownership Scheme flat is void under Section 17B of the Housing Ordinance.Furthermore, the parties thereto commit a criminal offence under Section 27A of the Housing Ordinance and are liable to a fine of HK$500,000 and to imprisonment for 1 year.

Recent Case

In the recent case of Cheuk Shu Yin v Yip So Wan and Lo King Fai (CACV 163/2009), the Court of Appeal looked into a case where a qualified person bought a Home Ownership Scheme flat using money belonging to an unqualified person.

Facts

The defendants are husband and wife and are the registered joint owners of a Home Ownerships Scheme flat.The two defendants made their application on a Green Form in 1999 and bought the property in April 2000.

The defendants, being elderly persons, had been allocated a public housing unit by the Housing Authority.After they purchased the property by applying on Green Form status, they had to return the public housing unit to the government.

The Claim

Madam Cheuk, the defendants’ daughter-in-law, alleged that the source of the money for buying the property was the joint assets belonging to her and Lo Yeuk Wai, her husband.Therefore after her husband’s death, she should be the beneficial owner of the property and the defendants were just trustees.In 2006, Madam Cheuk filed a claim in the High Court to ask for a declaration to that effect.

The Counterclaim

The defendants made a counterclaim, asking the court to declare that they were full beneficial owners of the property which was occupied by Madam Cheuk.The defendants further asked the court to order her to deliver up vacant possession of the property.

Court of First Instance’s Judgment

The case was heard before Fung J at first instance.The judge held that the money for buying the property originated from the joint assets of Madam Cheuk and Lo Yeuk Wai but not from the defendants.Fung J also made the declaration that Madam Cheuk and Lo Yeuk Wai were the beneficial owners of the property and that the defendants were trustees thereof.

The Appeal

The defendants were aggrieved by Fung J’s judgment.They filed a Notice of Appeal on 15 July 2009 to ask the Court of Appeal to reverse the decision and to order Madam Cheuk to vacate the property and to deliver up vacant possession of the property to them.

The Court of Appeal’s Judgment

The Court of Appeal held that Fung J had sufficient reasons to find that the money for buying the property came from the joint assets of Madam Cheuk and Lo Yeuk Wai, but not from the defendants.

However, the determination of the issue about the source of the money for the purchase of the property does not mean that the issue about the ownership of or interests in the property can be disposed of automatically.

The Court of Appeal pointed out that one cannot overlook the fact that the property is a Home Ownership Scheme flat; that the defendants had relinquished the public housing unit allocated to them; and that the purchase of the property was a result of their successful application on Green Form status in accordance with a scheme under which they enjoyed certain priorities.

The Court of Appeal looked at Section 17B of the Housing Ordinance which provides that if the person to whom a Home Ownership Scheme flat is sold purports to alienate it in breach of the terms, covenants and conditions in the Schedule to the Housing Ordinance, including but not limited to failure to pay premium to the Housing Authority, the purported alienation shall be void.

The Court of Appeal rejected Madam Cheuk’s claim that she held certain interests in the property.Although the property was bought in the names of the defendants with money contributed by Madam Cheuk and Lo Yeuk Wai, Madam Cheuk’s claim that she was the beneficial owner of the property is a claim against the law.The Court of Appeal held that the arrangement which, according to Madam Cheuk, entitles her to hold the beneficial interests in the property is void under the law and is unenforceable.

Appeal Allowed

In view of the above, the finding made by Fung J that Madam Cheuk and Lo Yeuk Wai are the beneficial owners of the property and that the defendants are the trustees is wrong in law and should be overruled.The Court of Appeal further ordered Madam Cheuk to deliver up vacant possession of the property to the defendants.

Letting of Home Ownership Scheme flat

It is note-worthy that Section 17B of the Housing Ordinance also applies to letting of Home Ownership Scheme flats.In Leung Wai Chi v Leung Lai Ching [2010] 2 HKLRD 812, the Court of Appeal held that a contract for the letting of a Home Ownership Scheme flat was void and that the owner was not entitled to recover arrears of rent from the tenant, because such tenancy agreement was in contravention of section 17B of the Housing Ordinance.

Conclusion

In Hong Kong, it is quite common for family members to pool their resources together to purchase landed property for investment or residential purposes.For Home Ownership Scheme units, because of the restrictions imposed by Section 17B of the Housing Ordinance, no resulting trust can arise in favor of a member of the family who provided or contributed to the purchase money.