Provisional Legislative Council

PLC Paper No. CB(1)1352
(These minutes have been
seen by the Administration)

Ref : CB1/BC/6/97

Bills Committee on
Land (Compulsory Sale for Redevelopment) Bill

Minutes of the meeting held on Tuesday, 10 February 1998, at 8:30 am in Conference Room A of the Legislative Council Building

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Hon WONG Siu-yee
Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Dr Hon Raymond HO Chung-tai, JP
Hon Mrs Peggy LAM, JP
Hon Kennedy WONG Ying-ho
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Hon IP Kwok-him
Hon Ambrose LAU Hon-chuen, JP
Hon KAN Fook-yee
Hon NGAN Kam-chuen
Dr Hon LAW Cheung-kwok

Members absent :

Hon David CHU Yu-lin
Prof Hon NG Ching-fai
Hon MA Fung-kwok
Dr Hon Charles YEUNG Chun-kam
Hon Bruce LIU Sing-lee
Hon CHOY So-yuk

Public officers attending :

Mr Richard LUK
Principal Assistant Secretary for Planning, Environment and Lands

Mr Gordon HO
Assistant Secretary for Planning, Environment and Lands

Mr Geoffrey A FOX
Senior Assistant Law Draftsman

Ms Fanny IP
Senior Assistant Law Draftsman

Deputy Principal Government Counsel

Clerk in attendance:

Miss Odelia LEUNG
Chief Assistant Secretary (1)1

Staff in attendance :

Ms Bernice WONG
Assistant Legal Adviser 1

Mrs Mary TANG
Senior Assistant Secretary (1)2

I Election of Chairman

Hon HO Sai-chu was elected to convene the meeting for the election of Chairman.

2. Hon Ronald ARCULLI was elected Chairman of the Bills Committee.

II Meeting with the Administration

3. At the invitation of the Chairman, the Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) briefly explained the background and the purpose of the Bill. The Bill was intended to enable persons who held a specified majority of the undivided shares in a lot to make an application to the Lands Tribunal for an order to sell the lot by public auction for the purposes of redevelopment. The Bill would provide a solution to the problem of property acquisition for redevelopment due to defective titles, untraceable owners, owners who had died intestate or owners demanding unreasonably high prices. PAS/PEL stressed that the Bill was introduced with a view to facilitating private sector participation in expediting urban renewal. Should the property be a subject of a sale order, it would be sold by a public auction with a reserve price which would take into account its redevelopment potential.

Application of the Bill

4. Members were concerned about the conditions under which owners would be forced to sell their properties as a result of the implementation of the Bill. In this connection, they requested the Administration to advise on the situations in which the threshold limit for making an application to the Lands Tribunal for an order for sale would be reduced from having 90% of the undivided shares in a lot to a percentage not lower than 80%. The Senior Assistant Law Draftsman (SALD) advised that in considering reducing the threshold limit for making an application, the Chief Executive in Council would have to be satisfied that redevelopment was justified. The exercise of the power of the Chief Executive-in-Council was intended to deal with the acquisition of a class of lots and was not meant for individual cases. The Chief Executive in Council might specify, by notice in the Gazette, a percentage lower than 90%, but such percentage could not be less than 80%. The notice would be in the form of subsidiary legislation, subject to the negative approval procedure by the legislature.

5. PAS/PEL confirmed in response to a member's enquiry that currently there were no provisions to enable majority owners to apply for a court order for sale of a lot for private redevelopment. At present, all owners had to agree to the sale of their properties before the lot could be redeveloped. Resumption of land could only be undertaken under the Crown Lands Resumption Ordinance for public projects or projects of the Land Development Corporation (LDC).

6. Members raised concern about the propriety of using the percentage of undivided shares as the criterion for making an application for a sale order, since the percentage of undivided shares might be disproportionate to the value of the properties. They pointed out that different criteria for allocation of undivided shares might be adopted for different buildings. For example, the undivided shares in respect of carparks varied greatly. Meanwhile, the Strata Title of pre-1950 buildings might not even have provisions for undivided shares. A member considered it more appropriate to use rateable values as the criterion as these would more accurately reflect the value of the property. The Chairman said that he would envisage massive problems concerning undivided shares, particularly in respect of the commercial podium vis-a-vis the residential podium.

7. In response, PAS/PEL explained that although the percentage of undivided shares was adopted as the criterion for making an application, proceeds of sale would be apportioned to the owners on a pro rata basis in accordance with the values of their respective properties, irrespective of the percentage of undivided shares they held.

Appointment of trustees

8. On the Chairman's enquiry about the formalities for sale and purchase of the lot by auction, SALD advised that the majority owners would be responsible for applying to the Lands Tribunal for the order of sale. They would have to arrange for the auction in accordance with the conditions for sale as stipulated in Schedule 2 of the Bill. Noting the complications involved should there be more than one majority owner, SALD agreed to consider advancing the appointment of trustees such that they could step in at an early stage by order of the Court, through a power of attorney executed by the owners. Similar to the proposal under the Land Titles Bill, the trustees had to register under the Land Registration Ordinance, Cap. 128, as trustees of the property.

9. SALD further advised that upon the sale of the lot at the auction, the trustees would complete the assignment with the successful purchaser. The proceeds of the sale should be paid to the trustees who would apply them in payment to the owners on a pro rata basis in accordance with the values of their respective properties, irrespective of the number of undivided shares they held. Where the property was not sold at the auction, the sale order would be deemed to be cancelled and the majority owners would have to remove it from registration, including the registration of trustees. To this end, a provision could be added to clause 7. At members' request, the Administration agreed to provide information on the appointment of trustees under the Partition Ordinance, Cap. 352, including persons/entities being appointed as trustees, terms of appointment, remuneration to trustees etc. Admin

Application of proceeds of sale

10. On the application of proceeds of sale, SALD advised that the proceeds of the sale would be paid to trustees who would then apply them firstly in the discharge of any liability due to the Government; secondly in the discharge of any incumbrance affecting the lot; and then in payment of the residue to be split between the majority owners and minority owners.

11. Members questioned the propriety of clause 10(3) which provided that trustees might continue to hold by trust any residue of proceeds of sale in respect of which the majority owners or minority owners could not be found. They requested the Administration to examine the merits of reverting after a specified time the residue of proceeds of sale held in trust by trustees to the Government, subject to future claims by owners of the lot. The Administration agreed. Admin

Basic Law implications

12. Referring to paragraph 15 of the Provisional Legislative Council Brief which stated that "to compel private owners to sell their interests in land for private redevelopment purpose may be viewed as an encroachment on private property rights" and "..... the judicial body would probably be reluctant to interfere with the legislature power .......", a member queried the use of the words "may" and "probably" which implied that the Administration was not absolutely certain about the implications of the Bill on the protection of private property rights as provided under the Basic Law.

13. In response, the Deputy Principal Government Counsel (DPGC) explained that the Administration took a cautious approach when dealing with Basic Law implications, since the laws enacted by the Hong Kong Special Administrative Region (HKSAR) should not contravene the Basic Law. Article 6 of the Basic Law provided for the protection of the rights of private ownership of property; Article 105 provided inter alia that property owners should be rightfully compensated against lawful deprivation of their property. The Bill should be seen in the wider public interest to expedite urban renewal. As it provided that proper and fair compensation had to be paid to owners, the judicial body would be reluctant to interfere with the legislature's power to make the law as proposed. However, since there were no precedent court cases concerning the interpretation of Articles 6 and 105 on the encroachment of private property rights for private redevelopment purposes, the Administration was prudent in the choice of words in interpreting the Basic Law. Any disputes over the interpretation of the law would be settled in court.

Bill of Rights implications

14. As regards the Bill of Rights implications, DPGC said that the Administration was certain that the application of the Bill would not constitute an arbitrary interference with property rights since the acquisition of property under the Bill was intended to facilitate urban redevelopment which was in the public interest. She made reference to a recent ruling by the Privy Council on the FOK Lai-ying case where the resumption of land was deemed not to have constituted an arbitrary interference with property rights and had not contravened the Bill of Rights Ordinance.

Consultation with National People's Congress

15. In response to a member's enquiry on whether the Bill had the approval of the National People's Congress (NPC), DPGC advised that NPC would not interfere with the making of laws in the HKSAR. She referred members to Article 17 of the Basic Law which stated that the HKSAR should be vested with legislative power. She explained that laws enacted by the legislature of the HKSAR must be reported to the Standing Committee of the NPC for the record, but the reporting for record should not affect the entry into force of such laws. If the Standing Committee of the NPC considered that any law enacted by the HKSAR was not in conformity with the Basic Law regarding the relationship between the Central Authorities and the Region, the Standing Committee might return the law in question but would not amend it. Any law returned by the Standing Committee would immediately be invalidated.

"Real value" of property

16. Referring to paragraph 14 of the Provisional Legislative Council Brief, a member sought clarification on the meaning of the term "real value" which was not a commonly used term in the determination of compensation. DPGC said that this term was adopted for consistency with the terminology in Article 105 of the Basic Law. She concurred that the determination of the "real value" of a property was subject to interpretation and might be contested in court. The value of a property was usually determined by the market and the market value formed the basis for assessment of compensation. SALD added that under the provisions of the Bill, if an order for sale was made, the property would be sold subject to a reserve price approved by the Lands Tribunal which would take into account the redevelopment potential of the lot. Minority owners would have their share of the redevelopment value of the lot which should be higher than its existing value.

Mechanism for raising objection

17. In order to protect the interest of minority owners, members stressed the need to provide for the right of objections since it would be difficult to assess if the majority owners concerned had taken all reasonable steps to acquire all the undivided shares in the lot. The Chairman pointed out that the meaning of a "fair and reasonable" offer for acquisition in clause 4(2)(c) could be subject to interpretation and challenge.

18. In response, PAS/PEL pointed out that a similar provision was included in the LDC Ordinance. He opined that it would be difficult to stipulate in the Bill the meaning of a fair and reasonable acquisition but consideration could be given to specifying in regulations to be made under clause 12 the factors to which the Lands Tribunal should have regard.

19. Regarding the mechanism for raising objections, PAS/PEL said that this was provided for under clause 4(2) which required the Tribunal to hear the objections, if any, before considering the making of an order for sale. As regards the adequacy of compensation to tenants, PAS/PEL stated that the terms of compensation payable to tenants would be decided by the Tribunal by reference to the provisions in the Landlord and Tenants (Consolidation) Ordinance, Cap. 7 as provided for under clause 8.

Valuation report

20. SALD drew members' attention to Part 2 of Schedule 1 which set out the contents of a valuation report. Before deciding whether to grant an order for sale, the Lands Tribunal would have to settle any disputes as to the values of the respective properties of the majority owners and minority owners. SALD opined that the majority owners, in order to acquire the remaining undivided shares, would be expected to offer terms that were fair and reasonable to minority owners to avoid the need to make an application for a sale order in the first place and disputes in the valuation of properties, which would be both costly and time consuming. In this way, the interest of the minority owners could be protected.

21. As regards measures to prevent collusion in fixing the price of the lot at the auction, members noted that a reserve price would be determined by the Lands Tribunal which would take into account the redevelopment potential of the lot.

Effect of the Bill on comprehensive development

22. A member noted that the lot referred to in the Bill would cover Demarcation Districts which were common in the New Territories, in particular in Kam Tin where a lot could be divided into sections with undivided shares. He expressed concern about the effect of the Bill on owners of independent properties located in the same lot. He enquired whether these lots should be excluded from the application of the Bill.

23. PAS/PEL assured members that in considering the merits of an application of a sale order, the Lands Tribunal had to be satisfied that certain conditions specified in clause 4(2) had been met. These included among others that the redevelopment of the lot was justified due to the age or state of repair of the existing development on the lot. The Administration considered that the Bill had provided sufficient flexibility to the Lands Tribunal to rule against possible frivolous use of the Bill. It agreed to clarify whether a lot with undivided shares but of a relatively large size and with independent houses constructed thereon was caught by the ambit of the Bill. Admin

24. A member pointed out that for the purposes of comprehensive redevelopment, consideration should be given to allowing a person(s) who owned an average of 90% of undivided shares of contiguous lots to apply for a sale order of the lots with a view to developing them as a package. In response, the Administration advised that, other than those classes of lots specified by the Chief Executive in Council, the Bill was not intended to apply to any lot in which the majority owners owned less than 90% of undivided shares. The member considered such an arrangement inconducive to comprehensive redevelopment. Admin

25. Hon Ambrose LAU declared interest as a member of the LDC. He pointed out that once an area had been designated as a Comprehensive Development Area, the LDC might apply to the Executive Council to resume the land under the Crown Lands Resumption Ordinance. In response to members, the Administration agreed to provide information on some redevelopment projects undertaken by the LDC with regard to the percentage of shares of affected lots acquired by the LDC without resorting to the Crown Lands Resumption Ordinance. The Administration would confirm if there were cases in which the LDC had been unable to acquire any shares in a lot by negotiation and had to apply for resumption of the entire lot.

26. Members agreed on the following schedule of meetings -

  1. 16 February 1998 at 2:30 pm;
  2. 17 February 1998 at 8:30 am;
  3. 19 February 1998 at 8:30 am.

27. Members agreed to invite the Law Society of Hong Kong, Hong Kong Institute of Surveyors, Hong Kong Institute of Planners, Real Estate Developers Association of Hong Kong to the meeting on 19 February 1998, and to issue a press release to invite public views on the Bill. Clerk

28. There being no other business, the meeting closed at 10:30 am.

Provisional Legislative Council Secretariat
11 June 1998