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Title Registration

Post-enactment Review and Preparation for Title Registration

Introduction


  • The Legislative Council (“LegCo”) passed the Land Titles Ordinance (Cap. 585) (“LTO”) in July 2004. The LTO aims to replace the present deeds registration system under the Land Registration Ordinance (Cap. 128) (“LRO”), which does not provide guarantee of title to property, with a title registration system under which the title register (“Title Register”) will be conclusive evidence of the title to and the interests in registered land, with a view to providing greater assurance and certainty to property titles as well as simplifying the procedures of checking title documents in conveyancing.
  • As significant changes had been made to the key parts of the Land Titles Bill (e.g. the conversion mechanism of existing land with a register kept under the LRO and the rectification provisions) at a late stage during the scrutiny of the Bill, at the request of the Bills Committee of the LegCo, the Government undertook to conduct a comprehensive review of the LTO and consider making further amendments to the LTO in consultation with the key stakeholders before its commencement.
 
Engagement with Stakeholders
  • After the enactment of the LTO, the Land Registry (“LR”) established a LTO Steering Committee (“LTOSC”) and a LTO Review Committee (“LTORC”) to steer and carry out the review of the LTO. These Committees comprise representatives of the key stakeholders including the Consumer Council, the Estate Agents Authority, the Heung Yee Kuk, the Hong Kong Association of Banks, the Hong Kong Bar Association, the Hong Kong Mortgage Corporation Limited, the Law Society of Hong Kong, the Real Estate Developers Association of Hong Kong as well as the Development Bureau and relevant Government departments.
  • The LR had either resolved or identified solutions for most of the issues raised during the scrutiny of the Land Titles Bill by the LegCo by May 2007. However, during the post-enactment review of the LTO, further issues were identified and substantial amendments to the LTO were required. To ensure efficient operation of the new system, the LR informed the then LegCo Panel on Planning, Lands and Works that a Land Titles (Amendment) Bill (“LT(A)B”) would be prepared and submitted to the LegCo before commencement of the title registration system.
  • The Government reported in December 2008 to the LegCo Panel on Development on the preparation of the amendments to the LTO and the remaining matters to be settled. The two major issues covered in the report were the conversion mechanism, and the rectification and indemnity arrangements. The conversion mechanism refers to the mechanism for bringing existing land (with a register kept under the LRO) under the LTO. The rectification and indemnity arrangements deal with how the Title Register is to be put right if there is an error in it and how an innocent party who has relied on the Title Register and suffered loss due to an error in the Title Register or fraud resulting in loss of ownership is to be compensated.
  • To briefly illustrate these core issues, for example, it was found that there were cases where ownership of property could not be determined from the land register (such as multiple registers of the same lot number or a single register that appeared to contain more than one chain of title to the same property). Under the enacted LTO, there is no mechanism for the Government to withhold these cases from conversion or to deal with the consequences if they are converted automatically. For the rectification and indemnity arrangements, it was considered that the mandatory rectification (“MR”) rule under the enacted LTO might have the unintended effect of undermining confidence in the title registration system and thus reducing the efficiency with which conveyancing could be conducted. It was also noted that there might be cases, for example, where the land had been resumed by or surrendered to the Government since the fraud and rectification in favour of the former owner was a practical impossibility.
 
Public Consultation
  • A three-month public consultation was conducted in early 2009 to gauge views from the public and stakeholders regarding a modified conversion mechanism, and proposed modifications to the rectification and indemnity arrangements. In the consultation papers, a gradual upgrading conversion approach was proposed, and exceptions to the MR rule were introduced to confine its scope of application. The consultation revealed that the public in general supported retaining the automatic conversion mechanism under the enacted LTO. To address the known cases with indeterminate title, it was accepted that modifications might be made within the enacted automatic conversion framework to withhold these cases from automatic conversion. As to rectification, the outcome of the public consultation indicated that two of the proposed exceptions to the MR rule (i.e. where, since the fraud, the property had been surrendered for public purpose or resumed, or the property had been developed or redeveloped and sold to multiple new purchasers and it would be inequitable to restore title to the former registered owner[1]) were considered generally acceptable, and certain modifications were needed to address the concerns raised by stakeholders.
 

[1] In further consultation with key stakeholders, it was considered that there should only be one exception to the MR rule, i.e. where the property had been surrendered for public purpose or resumed by the Government.

Joint Subcommittee on Amendments to LTO
  • Given that the preparation of amendments to the LTO involved important and complicated issues, a Joint Subcommittee on Amendments to LTO was established under the LegCo Panel on Development and the LegCo Panel on Administration of Justice and Legal Services in February 2009 to monitor the work in a more focused manner and provide inputs in the bill drafting process[2].
   

[2] The Joint Subcommittee was dissolved after submitting a report to the LegCo Panel on Development and the LegCo Panel on Administration of Justice and Legal Services in October 2011. It was considered that when the Government was able to come up with a full package of necessary amendments to the LTO after the consultation exercise, it would be appropriate for the Government to report the work progress with relevant proposals to the two LegCo Panels.

A New Conversion Mechanism – Two-Stage Conversion Mechanism
  • Subsequent to the public consultation conducted in 2009, there were divergent views from stakeholders as to the application of the MR rule. On the one hand, there were views against the MR rule and favouring the proposal of indefeasibility of title. It was considered that the MR rule would undermine the certainty of title and conclusiveness of the Title Register, and work against the objective of simplifying the conveyancing procedures as a purchaser might be encouraged to go behind the Title Register to investigate previous transactions in order to obtain greater assurance that his title would not be at risk. On the other hand, the LR had also received views favouring the retention of the MR rule under the enacted LTO to protect the interests of innocent former owners. To address the conflicting views and balance the concerns of various stakeholders, a new proposal, Two-Stage Conversion Mechanism with modifications to the rectification and indemnity arrangements incorporated in the proposed mechanism, was put forward to the LTOSC for consideration in 2011. The LR conducted briefings and discussion sessions with individual stakeholders for exchanging views on the proposal.
  • Taking into account the comments received from members of the LTOSC on the proposed Two-Stage Conversion Mechanism, the LR refined the conversion proposal for members’ further consideration in June 2013. In developing the revised proposal, the LR considered that basic screening of the land registers kept under the LRO to identify cases with broken or multiple title chains was necessary as it would enhance title certainty and help reduce the indemnity risks.
  • The LR put up four conversion options for comments by members of the LTOSC in June 2014. One of the options was to implement the LTO first on land granted by the Government after the commencement of the LTO, while the conversion of existing land and properties would be pursued in a subsequent legislative exercise. The other three options all involved basic screening of the existing land registers, but at different periods of time. The LR conducted various discussions and exchanged views with individual members of the LTOSC on the four conversion options between June 2014 and November 2016. However, no consensus was reached among the LR and the key stakeholders on how and when basic screening of the existing land registers should be conducted.
A Pragmatic Alternative - “New Land First” Proposal
  • The LTOSC met in December 2016 to discuss the four conversion options and consolidate stakeholders’ views in taking forward the LTO review exercise. At the meeting, the majority of members indicated support for the implementation of title registration system on new land first (i.e. “new land first” proposal) as this option would secure early implementation of title registration system in Hong Kong entailing its benefits.
  • Since then, the LR had been actively pursuing the “new land first” proposal. In consultation with the key stakeholders and relevant Government departments, the LR had explored the scope of new land and proposed pertinent amendments to the LTO for the implementation of the “new land first” proposal. By end of 2018, all key stakeholders had expressed support in principle that the “new land first” proposal be pursued subject to some outstanding issues being resolved. The scope of new land as proposed by the LR under the “new land first” proposal and the proposed implementation of electronic lodgement (“e-lodgement”) under the LTO regime were submitted to the LTORC and LTOSC for discussion and endorsed by the LTOSC in December 2019. Besides, having considered the majority of the key stakeholders’ inclination and with reference to overseas experience, the LR had no objection to the Law Society of Hong Kong’s proposal of mandatory issuance of title certificates under the LTO and would propose relevant amendments to the LTO. The LR is seeking consensus among the key stakeholders on other major outstanding issues for implementing the “new land first” proposal, including the requirement on verification of applications by solicitors, the indemnity arrangements and the caution mechanism. The LR will continue to work closely with the key stakeholders and will refine the proposed major LTO amendments in the light of their comments, with a view to finalising a full package of proposed amendments to the LTO and introducing the LT(A)B to the LegCo for scrutiny.
Overseas Jurisdictions Study
  • During the review of the LTO, the LR noted that in recent years, there have been initiatives to review and update the land registration legislation in some overseas jurisdictions in the light of their operational experience. With an aim to enhancing the proposed amendments to the LTO and to better prepare for the implementation of title registration system in Hong Kong, the LR conducted researches on the latest developments of title registration legislation and good practices in six overseas jurisdictions with common law background. The research was completed in late 2018 and a study report was circulated to members of the LTORC and LTOSC for discussion. Taking into account the comments from members of the LTORC and LTOSC, the LR will incorporate the recommendations in the study report into the proposed amendments to the LTO as appropriate.
Consultation with Other Government Departments
  • As part of the post-enactment review exercise, the LR has also consulted various Government departments and worked closely with them to discuss relevant matters and to address and resolve issues arising from the inter-relationship between the LTO and enactments under other departments’ purview.
Preparation for Title Registration
  • Briefings and seminars on the review of the LTO and latest developments, including the “new land first” proposal and the proposed Two-Stage Conversion Mechanism, dummy run of typical transactions under the LTO and proposed introduction of e lodgement under title registration, have been delivered to the key stakeholders and legal practitioners. The LR will continue with the preparatory work for the drafting of the LT(A)B and its subsidiary legislation. Preparatory work on the operational side for the implementation of title registration system, including development of IT system, preparation of conveyancing and application forms and practice guides, and planning of publicity and public education programmes, is in progress.
Way Forward
  • The title registration system is inherently complicated as it involves complex legal issues and carries significant implications. Throughout the years, the LR has been making continuous efforts in engaging the key stakeholders for achieving early implementation of the title registration system in Hong Kong. The LR will continue to liaise closely with the key stakeholders to address their concerns and reach agreement on the major issues for implementing the “new land first” proposal so that the public and industry practitioners can enjoy the benefits of the title registration system earlier.