Provisional Legislative Council

PLC Paper No. CB(1)1357
(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 Wednesday, 25 February 1998, at 8:30 am in Conference Room B of the Legislative Council Building

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Hon Mrs Peggy LAM, JP
Hon Howard YOUNG, JP
Hon IP Kwok-him
Hon KAN Fook-yee
Hon NGAN Kam-chuen
Dr Hon LAW Cheung-kwok

Members absent :

Hon WONG Siu-yee
Hon David CHU Yu-lin
Dr Hon Raymond HO Chung-tai, JP
Prof Hon NG Ching-fai
Hon MA Fung-kwok
Hon Kennedy WONG Ying-ho
Dr Hon Charles YEUNG Chun-kam
Hon YEUNG Yiu-chung
Hon Bruce LIU Sing-lee
Hon Ambrose LAU Hon-chuen, JP
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

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

Meeting with the Administration

Termination of tenancies and compensation to tenants

The Senior Assistant Law Draftsman (SALD) explained that the Bill had provided for three permutations under clause 8(2), (3) and (4) in respect of which the Lands Tribunal might specify payment of tenants' compensation. These included compensation payable by the purchaser to the tenant; compensation payable by the majority owners to their tenants; and compensation payable by the minority owners to their tenants. In the light of earlier discussions, the Administration was prepared to introduce Committee stage amendments (CSAs) to the effect that the majority owners and the minority owners should be responsible for compensating their own tenants but the Lands Tribunal could order the majority owners to pay compensation to the tenants of the minority owners if it was satisfied that the leases granted by the minority owners were in good faith and that requiring the minority owners to pay would cause undue hardship. The intention of this CSA was to provide greater protection to minority owners who were forced to sell their property and whose proceeds of sale might be insufficient to cover the compensation payable to tenants. The Administration considered it necessary to confer such a discretion on the Lands Tribunal to ensure that the minority owners would not suffer undue hardship as a result of the order for sale.

2. Members were unconvinced of the need for introducing a provision to empower the Lands Tribunal to order compensation payable by the majority owners to tenants of the minority owners. Their views were summarised as follows -

  1. Clause 4(2)(c) provided that the Lands Tribunal should not make an order for sale unless it was satisfied that all reasonable steps to acquire the shares had been taken, including negotiating on terms that were fair and reasonable. In other words, if the terms of compensation payable would cause undue hardship to the minority owners, these terms should not have been accepted by the Lands Tribunal as fair and reasonable and an order for sale would not be made;

  2. Tenants displaced by private redevelopment were entitled to compensation under the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. Tenants' compensation was based on a multiplier of the rateable value of the premises ordered by the Lands Tribunal. The system had been working well and there was no need to introduce a new arrangement in the Bill requiring the majority owners to compensate tenants of the minority owners. Furthermore, if tenancies were entered in good faith, there was no reason why the proceeds of sale would be inadequate to cover tenants' compensation;

  3. Under normal circumstances, disputes in tenants' compensation were settled by arbitration. The Lands Tribunal acted as an arbitrator in the negotiations between tenants and owners. There was no need for an express provision empowering the Lands Tribunal to order compensation payable by the majority owners to tenants of the minority owners;

  4. Such an express provision in the Bill would give rise to uncertainty and run the risk of letting tenants control the entire situation. It would possibly lead to a proliferation of spurious tenancies by some professional speculators. Unlike redevelopment projects undertaken by the Land Development Corporation (LDC) which conducted freezing surveys on the number of affected tenants, it was not feasible to introduce a freezing period for private redevelopment projects as it might take years to acquire the 90% interests. Once the intention of redevelopment was publicly known, professional speculators might capitalize on it by entering long-term leases with professional tenants in a bid to reap the most profits; and

  5. The possibility of requiring the majority owners to compensate tenants of the minority owners would have serious financial implications on the majority owners who might not be prepared to make such payment.

3. In response, SALD reiterated that under normal circumstances, the Lands Tribunal would order compensation payable by the majority owners and the minority owners to their own tenants. Only in exceptional circumstances where undue hardship might be caused to the minority owners would the Lands Tribunal exercise its discretion of requiring the majority owners to compensate tenants of the minority owners. This discretion would provide an alternative arrangement without which the Lands Tribunal would have no other choice but to refuse the application. In exercising this discretion, the Lands Tribunal had to be satisfied that the tenancies entered were in good faith. It would need to examine the duration and conditions of the lease and how it compared with leases of similar properties. Furthermore, no compensation would be payable to leases entered into after the order for sale had been made. In determining an application for an order for sale, the Lands Tribunal would take into account the objection raised, and where necessary, would arrange for representations of the tenants to be heard before deciding on whether compensation should be payable and if so, the amount of compensation. In deciding on matters of compensation, the Lands Tribunal would need to ensure that the terms offered to the minority owners were fair and reasonable. The Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) added that reference would also be made to the provisions of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, in assessing the compensation payable, and tenants could not hold their owners to ransom by demanding excessive compensation. The amount of compensation payable would be determined by the Lands Tribunal upon the making of the order for sale such that both owners and tenants would be aware of their obligations and entitlement. The majority owners could withdraw their application if they did not wish to proceed.

4. Noting members' reservations about the proposed provision, SALD suggested introducing a mechanism whereby the Secretary for Planning, Environment and Lands might make regulations specifying the circumstances under which the majority owners should compensate tenants of the minority owners. Members disagreed with this suggestion as it would further politicise the issue. They pointed out that the Lands Tribunal should ensure that the terms offered were fair and reasonable prior to making an order for sale. If the Lands Tribunal considered that the situation warranted exceptional consideration, it would make its own judgement.

5. In view of members' unanimous stance, the Administration agreed to drop the proposal of allowing the Lands Tribunal to require the majority owners to compensate tenants of the minority owners.

Apportionment of proceeds of sale

6. Members noted that the basis of apportionment of proceeds of sale was provided for under Part 3 of Schedule 1. Apportionment of proceeds would be on a pro rata basis of the values of respective properties of the majority owners and the minority owners. They also noted the Administration's proposal to introduce a CSA to clause 4(1)(a) to allow the minority owners to dispute the assessed value of the property of the majority owners. SALD advised that where there were disputes in the assessed values, the Lands Tribunal would hear and determine these disputes. If a variation of the values was made by the Tribunal, the proceeds would be apportioned in accordance with the values so varied.

7. Members deliberated on the way to deal with an application for an order for sale if one or more of the parties to the application withdrew. Members agreed that where an application was made by majority owners consisting of two or more persons and one or more of these persons informed the Lands Tribunal at any time before an order for sale was made that he or they no longer wished to be a party or parties to the application, then the application should be deemed to be withdrawn irrespective of the percentage of undivided shares owned by the other persons. A CSA to this effect would be moved by the Administration. Admin

8. The Administration agreed to provide members with the draft CSAs by 28 February 1998. SALD informed that the Administration was awaiting the Judiciary's comments on the new provisions in the Bill which would affect the Lands Tribunal.

9. Members agreed to proceed with the clause by clause examination of the Bill at the next meeting on 26 February 1998.

10. The meeting closed at 10:10 am.

Provisional Legislative Council Secretariat
11 June 1998