- To enable early implementation of title registration system in Hong Kong, the Land Registry (“LR”) is actively pursuing the “new land first” proposal (“the Proposal”). Support in principle for the Proposal has been obtained from all key stakeholders subject to some outstanding issues to be resolved.
- Under the Proposal, title registration will be implemented on new land first (see the meaning of “new land” under “Definition of New Land” below), while the conversion of the existing land (“LRO land”) which is the subject of a Government lease with a register (“LRO register”) kept under the Land Registration Ordinance (Cap. 128) (“LRO”) will continue to be pursued and considered in a subsequent legislative exercise.
- Salient features of the title registration system under the Proposal are:
- Provision of indemnity
Under the current deeds registration system, innocent parties who suffer loss as a result of loss of ownership of their properties in fraud cases can only recover their loss from the fraudsters, which may not be fruitful as the fraudsters would probably have absconded when the fraud is discovered.
Under the title registration system, indemnity is, subject to a cap, available to persons who suffer loss due to property fraud that causes an entry being made in, or removed or omitted from the Title Register and results in the loss of ownership. Parties entitled to indemnity can claim against the Land Titles Indemnity Fund to be set up under the Land Titles Ordinance (Cap. 585) (“LTO”) as compensator of first resort without having to first pursue remedies against the fraudsters.
- Application of caution mechanism
Under the LRO, only instruments affecting land can be accepted for registration and shown on the land register. Uncertainty may arise as a potential purchaser cannot solely rely on the land register to ascertain whether there are any unwritten interests which may affect the property.
The title registration system introduces a caution mechanism for all persons to have their interests or claims (whether in writing or unwritten) noted and protected by registration of a caution on the Title Register. The general principle is that a registered owner is not bound by any prior unregistered interests. This encourages holders or claimants of interests in land to register a caution in respect of their interests or claims as soon as possible.
- Mandatory issuance of title certificates
Under the current deeds registration system, no title certificate is issued by the LR. A property owner is required to keep all title documents relating to the property and produce the same to the purchaser in a sale of property in order to prove his title to the property.
Under the title registration system, the Title Register is conclusive evidence of the title to the property and a purchaser is not required to look behind the Title Register and check the historical title documents of the property. To help industry practitioners to verify the identity of property owners, having considered the majority of the key stakeholders’ inclination and with reference to overseas experience, title certificates with advanced security features are proposed to be issued mandatorily to property owners. When an owner sells his property, the title certificate is required to be returned to the LR for cancellation together with the application for registration of the sale.
- Provision of indemnity
- The Proposal will secure an early start of title registration in Hong Kong which will enable the public and industry practitioners to enjoy the benefits of title registration system earlier. Issues relating to the conversion of existing LRO land such as the handling of the LRO registers with indeterminate ownership can be dealt with at a later stage. It will enable the LR to focus its resources on setting up the title registration system and consolidate actual experience gained from running the title registration system. Getting title registration started on new land first will also have a demonstrative effect that will help build support for the extension of the new registration system to existing LRO land. As compared to finalising the mechanism for conversion of the existing LRO land, the implementation of title registration on new land is relatively straightforward. The task of preparing an amendment bill for implementing title registration on new land will also be simpler.
- Title certainty and indefeasible title are the major benefits of a title registration system. Purchasers or interested parties can rely on the Title Register to ascertain the ownership of the property. Under the Proposal, to achieve title certainty, the mandatory rectification (“MR”) rule under section 82(3) of the LTO shall not apply to new land. In other words, immediate indefeasibility of title (meaning a bona fide purchaser for valuable consideration and in possession of the property will get immediate indefeasible title) shall apply from the first day of the implementation of title registration system.
- Under the Proposal, after commencement of the title registration system, new land will immediately enjoy the following status or benefits: (a)Title certainty – the Title Register shall be conclusive evidence of title;(b)Indefeasible title – bona fide purchasers of new land for valuable consideration and in possession of the land will be entitled to immediate indefeasibility of title upon registration as owner. The MR rule will not apply;(c)Simplified conveyancing – title will only be subject to registered matters appearing on the Title Register, except for overriding interests (i.e. interests that affect the property notwithstanding that they are not registered, e.g. public rights and leases for a term not exceeding 3 years); and(d)Indemnity – indemnity, subject to a cap, will be available to persons who suffer loss due to property fraud that causes an entry being made in, or removed or omitted from the Title Register and results in the loss of ownership; and indemnity, without a cap, will be payable for losses suffered due to errors in the Title Register caused by mistake or omission of the LR staff.
 Where the lessee is to take possession of the property forthwith under the lease at the best rent without a premium.
- The definition of new land under the Proposal has been explored by the LR in consultation with the Lands Department and the key stakeholders. It is proposed that the definition of new land under section 20 of the LTO (“section 20 definition”) be adopted as the scope of new land under the Proposal. According to the section 20 definition, subject to the stated exceptions, new land basically covers all new Government grants on or after the appointed day for the commencement of the LTO (“the appointed day”), and will include land granted by way of land sale (auction or tender), private treaty grant and land exchange.
- The exceptions to the new land definition have been under review. Taking into account comments received from the key stakeholders and after consultation with the Development Bureau, the Lands Department and the Department of Justice, it is considered that amendments to the section 20 definition are needed to reflect the policy intent regarding the exceptions to new land.
- In gist, it is proposed that new land under the Proposal means land granted under a Government lease or an agreement for a Government lease on or after the appointed day with a lease term expressed to run from or after the appointed day, but does not include: (a)land granted under a short term tenancy (i.e. with a term of not more than 7 years);(b)land that is the subject of an instrument executed on or after the appointed day for the primary purpose of extending the lease term or the area of land that is the subject of a Government lease or an agreement for a Government lease in effect immediately before the appointed day;(c)land held under a Government lease deemed to be granted under Part II of the Government Leases Ordinance (Cap. 40); and(d)land held under a Government lease granted, or deemed to be granted under section 14 of the Conveyancing and Property Ordinance (Cap. 219), on or after the appointed day pursuant to an agreement for a Government lease which was in effect immediately before the appointed day.
- Under the Proposal, title registration system will apply to new land first, and the existing LRO land will continue to be dealt with and registered under the current deeds registration system and existing laws. Parallel running of two registration systems is not uncommon in overseas jurisdictions. For example, in England and Wales, Ireland, Scotland and Singapore, parallel running of title registration system and its original land registration system has lasted or has been lasting for a relatively long period of time. It is noted that such parallel running of registration systems has not caused confusion in the jurisdictions concerned.
- Implementing title registration on new land first will allow the industry practitioners, the public and the LR to familiarise with the operation of the new system without disturbing the current deeds registration system. It will also provide solid experience for the Government and the stakeholders to deliberate on the mechanism for the conversion of existing LRO land. The LR will keep in view the progress of the implementation of title registration system on new land. After a few years of implementing title registration on new land and subject to the reaching of consensus with the key stakeholders on the conversion mechanism, another legislative exercise will be commenced to extend the title registration system to existing LRO land.
- Individual title registers will be opened for properties registered under the LTO. Similar to the unique Property Reference Number (“PRN”) assigned to each LRO register, each individual title register will bear a unique reference number called Title Number (“TN”). A person can easily differentiate a title register from a LRO register. If the register contains a TN, it is a title register. Alternatively, if the register contains a PRN, it is a LRO register. The online services of the Integrated Registration Information System will be enhanced so that a common platform will be available to support online search of both the LRO and LTO records. By entering the lot number or address of the property concerned on the common platform, the system will direct searchers to the relevant LRO register (with PRN shown) or title register (with TN shown) as the case may be.
- Before the commencement of title registration system on new land, the LR will prepare guidance notes and provide briefings and training on title registration system to the industry practitioners. Publicity and public education programmes will also be arranged to enlighten the practitioners and the public on the new registration system.