If you have ever come across advertisements posted by real estate agents, you may have noticed that there may be remarks like “Premium Paid” for flats under Home Ownership Scheme (HOS). Then what exactly is “Premium Payment”? What are the things to note and how to calculate the amount of premium to be paid?
1. What is “Premium Payment”?
In fact, the HOS was launched by the Housing Authority (HA) with the intention to provide residents of public rental housing (PRH) or other eligible persons with an opportunity to acquire their own flat at a price lower than the prevailing price by waiving the land premium. For example, the new HOS flats launched in 2019 were sold at a price that was 41% lower than the market price at that time. As such, to avoid the speculation of HOS flats, the premium shall be paid if the HOS flats are to be sold in the free market.
2. Can the Agreement for Sale and Purchase be signed prior to applying for the assessment of premium?
If the 5-year alienation restriction period of the HOS flat has not expired, the owner must submit the completed application form for assessment of premium to the Housing Department (HD) in advance. Any Agreement for Sale and Purchase signed before HA’s acceptance of the premium assessment application will be deemed invalid. Contrarily, owners of HOS flats of which the 5-year alienation restriction period has expired can submit a premium assessment application to HA within 28 days after the Agreement for Sale and Purchase has been signed.
3. Can I simply pay the premium without selling the HOS flat?
Sure. Upon the payment of the premium, the HOS flat owner will receive a Certificate for Removal of Alienation Restrictions, and he can then sell his HOS flat anytime as he wishes.
4. How to calculate the amount of premium to be paid?
The premium is calibrated based on (1) the prevailing market value of the HOS flat when the premium assessment application is submitted, (2) the initial market value of the HOS flat at the time of purchase, and (3) the purchase price.
If the prevailing market value of the HOS flat when the premium assessment application is submitted is HK$5.1 million, the initial market value of the HOS flat at the time of purchase was HK$5 million, and the purchase price was HK$3.5 million, then the premium to be paid would be HK$1.53 million.
It is worth noting that owners of the HOS flats are prohibited from mortgaging their flat until they have paid the premium or obtained prior approval from HA. However, they can arrange the signing of mortgage documents on the date when the Certificate for Removal of Alienation Restrictions has come into effect.
5. How does the valuation of HOS flats differ from that of private residences?
The valuation of HOS flats, which is an essential procedure for premium assessment, is conducted by the surveyors employed or appointed by HA whereas that of private residences is conducted by surveyors appointed by the bank to which the mortgage application is submitted. What’s more, the assessed premium for HOS flats is only valid for 2 months, and owners shall submit another premium assessment application and pay an administrative fee again if they have not settled the payment within the stipulated period.
6. Can I object the prevailing market value assessed by HD?
If the HOS flat owner disagrees with the prevailing market value assessed by HD, he could lodge an objection in writing to the Support Services Section (4) of HD or its appointed surveyor within 28 days from the date of the Notice of Premium Assessment. Alternatively, he could also lodge an appeal to the Lands Tribunal within the abovementioned period.
7. Can the HOS flat be sold before the appeal is concluded?
If the owner wishes to sell its HOS flat before the conclusion of the lodged appeal, he could pay the premium stated in the Notice of Premium Assessment first. If the concluded premium is less than the paid premium, then he could receive a refund for the reduced amount. On the other hand, if the concluded premium becomes higher, he will need to cover the increased amount.