For consideration on 25 June 1996




To brief Members on the proposals in the New Territories Land Exchange Entitlements (Redemption) Bill (copy at the Annex).


2. New Territories land exchange entitlements, commonly known as Letters A/B1 , were issued between 1960 and 1983 to landowners in the New Territories whose land was required for development. Letter A/B holders were entitled to exchange, as an alternative to cash compensation, for building land at the ratios of one square foot of building land for one square foot of building land and two square feet of building land for five square feet of agricultural land. The land surrendered or resumed was credited with a face value assessed with reference to the level of land value at the time the land was surrendered or resumed.

3. The issue of Letters A/B was stopped in 1983 because of increasing difficulties in meeting the commitment which then stood at about 138 hectares of equivalent building land. Since 1 April 1984, Letter A/B holders have had another option of surrendering their documents for cash in accordance with a schedule of monetized values, which are gazetted and revised twice a year. These monetized values are determined having regard to the movements of property prices in the New Territories.

4. In practice, very few Letter A/B holders have accepted cash redemption because Letters A/B are being traded at prices much higher than the monetized values. This is because owners can secure, through the Letter A/B tender programme, land in the new towns in a less competitive manner and at premium considerably less than prices that they may otherwise have to pay at public auction. Over the years, much of the outstanding commitment has been bought up by major property developers and today the bulk is held by four of them.

The Present Situation

5. The Director of Lands (the Director) estimates that a total of about 6.75 hectares of entitlements are outstanding. Out of this, 4.68 hectares of equivalent building land, representing about 70% of the total outstanding commitments, are held by four developers. The ownership of the remaining 2.07 hectares of building land is likely to be untraceable, e.g. where Letters A/B belonged to persons who have died intestate and the estates remain unclaimed or where persons have emigrated.

6. It has been the Government’s intention to redeem all the outstanding Letters A/B as soon as possible. Sufficient land will be made available in the 1996-97 Land Disposal Programme to cover the outstanding commitments. However, we have no way of knowing when the “untraceable” Letters A/B may surface and when their owners seek to redeem them. Moreover, it was not feasible for the Government to continue to provide land to redeem the residual untraceable commitments which were likely to be held in small packets.

7. The best way to deal with this situation is by fixing through legislation the value of the remaining Letters A/B at a given date and ensuring that sufficient funds are set aside to enable that value plus interest to be payable on redemption. Apart from crystallizing future commitments in respect of the untraceable entitlements, the proposed legislation will also help persuade holders of the other remaining Letters A/B to exchange their entitlements for land as soon as possible if they are not interested in the cash redemption.


8. We propose to provide for the payment of redemption money in respect of land exchange entitlements to the owners thereof and for the extinguishment of all other rights against the Government. Under the proposal, a person who claims as an entitlement owner of a land exchange entitlement should lodge his claim with the Director in a specified form. He shall furnish the Director with any required particulars or evidence in support of his claim. The Director shall notify the claimant of his decision on the claim within three months of the receipt of the notice or of the further particulars from the claimant, whichever is later.

9. Redemption money shall be payable by the Director to the owners in proportion to their respective shares in the legal ownership of the land exchange entitlement. It will be the claimants’ responsibility to prove the proportion of their shares. If no evidence is available, equal shares will be presumed.

10. The redemption money will be payable at the rates set out in the Schedule to the proposed legislation. The scheduled rates are based on the latest ones published in the Gazette in respect of land exchange entitlements. To ensure that the most up-to-date published rates are shown in the Schedule before enactment of the Bill, we intend that the scheduled rates may be updated by committee stage amendments during the committee stage of the Bill in the Legislative Council if the published rates are further revised before enactment of the Bill.

11. We propose that any redemption money payable shall bear interest from the commencement date of the proposed legislation until the date of payment thereof. The rate of interest payable shall be at the lowest rate payable from time to time by note-issuing banks on deposits at 24 hours’ call.

12. The Director may, as a condition of making payment of redemption money and interests thereon to a claimant, require the latter to surrender all or some of the documents furnished to the Director in support of his claim. The Director may also require the claimant to execute an indemnity in favour of the Director in respect of any payment made and of all liabilities, losses, costs, charges and expenses incurred by the Director by reason of or in respect of the payment. This is to enable the Government to seek refund and to recover losses from the claimant in case of wrongful payment.

0113. A person who furnishes any information or produces any deed, instrument or record which he knows to be false or misleading, or does not believe to be true, in a material particular in connection with a claim commits an offence, and will be liable to a fine at level 5 and of imprisonment for three months.

14. We propose that except as provided in the legislation, all rights against the Government under a land exchange entitlement shall be extinguished. The legislation shall come into operation on a day to be appointed by the Secretary for Planning, Environment and Lands.

15. Under Order 15 rule 16 of the Rules of the Supreme Court, a person may obtain a declaration that he is the owner or a declaration of his share in the land exchange entitlement. In view of this, we consider that it is not necessary to provide a right of appeal in the Bill.

Legislative Timetable

16. The Legislative timetable is -

Publication in the Gazette 24 May 1996
First Reading and commencement of Second Reading debate 5 June 1996
Resumption of Second Reading debate, committee stage and Third Reading to be notified

Bill of Rights Implications

17. The Attorney General’s Chambers have advised that the provisions of the Bill are not inconsistent with the International Covenant on Civil and Political Rights, as applied to Hong Kong.

Financial and Staffing Implications

18. Sufficient land will be made available during the current financial year to redeem the known outstanding entitlements. The position will be reviewed at the end of this financial year and sufficient funds set aside for the cash redemption of any remaining outstanding entitlements.

19. Following the enactment of the Bill, we would have to seek the approval of the Finance Committee of the Legislative Council for the creation of a new subhead under Head 701 - Land Acquisition of the Capital Works Reserve Fund for the payment of redemption money.

20. There are no staffing implications.

Economic Implications

21. As sufficient land has been included in the 1996/97 Land Disposal Programme for the redemption of outstanding Letters A/B, there should be little effect on the land market. In the longer term, extinguishment of all the remaining outstanding Letters A/B would mean that there will be less complicated demand for Government land.

Public Consultation

22. No formal public consultation has been carried out, as it is believed that about 70% of the total outstanding commitments are held by four major developers. Nevertheless, we have on a number of occasions informed the public of the Government’s intention to fix the value of the remaining Letters A/B at a given date.

JUNE 1996 1 -- Letters A were issued if the land was surrendered to the Government before notices of resumption were issued. Letters B were issued if the land was surrendered to the Government after notices of resumption had been issued. The terms of exchange in both cases were identical.

Last Updated on 21 Aug, 1998