Provisional Legislative Council

PLC Paper No. CB(1)1358
(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 Thursday, 26 February 1998, at 8:30 am in Conference Room B of the Legislative Council Building



Members present :

Hon Ronald ARCULLI, JP (Chairman)
Hon WONG Siu-yee
Dr Hon Raymond HO Chung-tai, JP
Hon Howard YOUNG, JP
Hon IP Kwok-him
Hon KAN Fook-yee
Hon NGAN Kam-chuen

Members absent :

Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Prof Hon NG Ching-fai
Hon Mrs Peggy LAM, JP
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
Dr Hon LAW Cheung-kwok
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

Application of proceeds of sale

The Chairman drew members' attention to the arrangement relating to the application of proceeds of sale where the successful purchaser at the auction was the majority owner. He pointed out that under the present provisions of the Bill, the successful purchaser would have to pay the full sum of the bid to the trustees who would in turn arrange for the discharge of liabilities and incumbrances in accordance with clause 10 of the Bill. He was concerned that where the successful purchaser was the majority owner, it would be unfair to require him to pay the full sum to the trustees since he had acquired only the remaining 10% of the undivided shares from the minority owners. Requiring the majority owner to pay the full purchase price of the lot would discourage him from bidding, particularly when there were other expenses such as stamp duty that had to be taken into account. Members concurred that an alternative financial arrangement should apply in cases where the successful purchaser was the majority owner and that this should be stipulated in the Bill.

2. The Senior Assistant Law Draftsman (SALD) explained that the Administration believed that the amount of the bid should be paid to the trustees in full such that they could discharge their duties concerning apportionment of proceeds under clause 10 without having to revert back to the purchaser on every occasion that a payment had to be made. This financial arrangement was merely a paper transaction as most of the proceeds after deduction would go back to the majority owner if he was the purchaser of the lot. In view of members' concern, SALD suggested that the trustees during the three to six months before the holding of an auction might work out the financial commitment of the majority owner should he become the successful purchaser. These would include the purchase price that was necessary to purchase all the undivided shares owned by the minority owners, his share of the liabilities due to the government and incumbrances affecting the lot plus any lis pendens which were registered under the Land Registration Ordinance, Cap. 128. In the event that the majority owner became the purchaser, he would only need to settle this amount instead of having to pay the full sum. The Chairman added that the liabilities and incumbrances affecting the lot should be listed out in the conditions of sale, irrespective of whether the successful purchaser was the majority owner, the minority owner, or a third party. These should be worked out by the trustees who might revert back at any time to the Lands Tribunal for instructions in case of doubt.

3. SALD agreed to introduce Committee stage amendments (CSAs) to address members' concern. Admin

Clause by clause examination

4. Members proceeded to examining the Bill clause by clause in accordance with the list of concerns raised by members and deputations which was tabled at the meeting.

Clause 2 Interpretation

5. The Administration agreed that the Chinese rendition for "property" should be .

6. Members referred to the Law Society's (LS) suggestion of revising the definition of "minority owner" to include any one "having or claiming to have" a proprietary interest on the lot. SALD was of the view that the present definition in the Bill, which provided that the minority owner referred to in clause 3(1) should be a person or persons who "owned" undivided shares, was appropriate. Under this definition, minority owners should be those holding undivided shares unless proven to the contrary by the Court of First Instance. He added that those persons "having or claiming" to have an interest should register their interest as a lis pendens under the Land Registration Ordinance. The Lands Tribunal would set aside part of the sale proceeds for payment upon determination of the claim by the Court of First Instance. In the case of adverse title claims, these would also have to be dealt with through normal proceedings in the Court. The said arrangement would allow the application to go ahead despite title claims as all such claims would be overreached to the proceeds of sale. A new provision would be added to clause 10 to the effect that a person claiming to have an interest in the lot would not be prevented from taking any action or commencing any proceeding in relation to any proceeds of sale arising from the sale of the lot to which the interest related.

7. SALD further added that LS's suggested definition of minority owners was undesirable as it would run the risk of allowing claimants to request the Lands Tribunal rather than the Court of First Instance to settle title disputes. Members in general agreed that the definition suggested by LS was too wide and that the present definition in the Bill was acceptable.

8. Referring to the definition of 'redevelopment', a member enquired whether the Administration intended to set out the conditions governing the scope of redevelopment. These conditions might include the minimum size of redevelopment and the need to obtain the approval of the Town Planning Board. He added that these conditions would mitigate the thriving of "pencil" redevelopment and encourage comprehensive redevelopment for the overall improvement of the urban environment.

9. The Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) responded that the Bill would enable owners holding not less than 90% of the undivided shares in a lot to make an application to the Lands Tribunal for an order for sale of the lot for redevelopment. The Chief Executive in Council might specify by notice in the Gazette a percentage not lower than 80%. There were no provisions governing the size of the redevelopment. The Administration noted that there were inherent difficulties in acquiring large pieces of land for private comprehensive redevelopment. Nevertheless, the Bill would facilitate redevelopment, albeit on a smaller scale. Developers could apply to redevelop contiguous lots in a package provided that they had acquired 90% of the undivided shares in each of the lots.

10. The Chairman added that the Bills Committee had discussed the viability of allowing majority owners holding an average of 90% of aggregate undivided shares in contiguous lots to make an application for compulsory sale of the lots. As it was probable that the majority owners might not acquire any interest in one of the lots, in these circumstances it was considered not justified to compel owners to dispose of their properties. After careful consideration, the Bills Committee was of the view that the proposal was not justified and should not be pursued.

11. The Bills Committee noted the view of LS that the definition of redevelopment as provided for in the Bill was too restrictive. LS suggested that the definition should be rephrased in more general terms, such as "redevelopment means the redevelopment of the lot by replacement of the building on the lot".

12. Members deliberated on the meaning of "replacement of a new building on the lot". A member pointed out that it was a common practice in overseas countries to demolish just the interior but retain the outer walls of a building. Both members and the Administration agreed that this form of rejuvenation or restoration of buildings should not be considered as redevelopment. New buildings referred to in the Bill should involve demolition of a building and replacement with a new one. It would be difficult to draw a line on what constituted "new" buildings if buildings which were partly demolished and partly restored were to be included. PAS/PEL added that refurbishment of buildings was dealt with under the Building Management Ordinance, Cap. 344. In response to members, the Administration agreed to redraft the definition of 'redevelopment' to take into account members' views.

13. As regards clause 2(3) which provided that provisions of the Ordinance should not derogate from the provisions of the Government lease of a lot and the Buildings Ordinance, Cap. 123, members considered that this point should be understood as all legal provisions had to be complied with and the express stipulation of certain provisions might create misunderstanding that only these provisions would not be derogated. The Administration agreed to delete clause 2(3) from the Bill. Admin

Clause 3 Application to Tribunal for Compulsory sale of lot

14. The Administration agreed to redraft subclause (1) to include a mortgagee in possession as owners for the purpose of the Bill. Admin

15. Referring to subclause (1)(a), members enquired about the conditions to be specified in Part 1 of Schedule 1. SALD said in response that Schedule 1 was left blank at this stage as the Administration did not know in practice the conditions to be required by the Lands Tribunal with which an application should comply. The Administration had yet to discuss with the Judiciary on the form of and the rules for the application. After these details had been finalised, the Schedules to the Bill could be amended by the Chief Executive in Council by notice in the Gazette under clause 14, or the rules could be made by virtue of the Chief Justice's power. In either way, the rules would be introduced in the form of subsidiary legislation subject to the negative approval procedure. SALD added that this arrangement would enable additional requirements to be made where necessary and was intended to be a safety valve which was common in introducing new procedures. As members had reservations in accepting a blank Schedule, the Administration agreed to delete subclause (1)(a) and Part 1 of Schedule 1. Admin

16. Referring to Part 2 of Schedule 1, members pointed out the need to set a validity date for the valuation report since the values of properties fluctuated with changing market conditions. Members suggested and the Administration agreed to specify that the valuation report should be prepared not earlier than three months before the date on which the application was made. In this connection, a member considered it inappropriate to set out in a valuation report "the assessed market value of each property on the lot on a vacant possession and existing use basis". If the valuation report stated the respective assessed values of each property on a vacant possession and existing use basis, difficulties would arise as to which values should be used in the apportionment of proceeds which was calculated on a pro-rata basis of the assessed value of the property. Admin

17. Members deliberated on the appropriateness of assessing the market values of the property on an existing use basis. Members noticed that an existing use might be unauthorized e.g. operation of a restaurant within domestic premises. Members concurred that the existing use should not be taken into account as this would encourage owners to let out their premises for unlawful uses. Members agreed that the assessed market value should be based on vacant possession.

18. PAS/PEL explained that the intent of assessing the value of the property on an existing use basis was meant to disregard its redevelopment potential. In response to members, the Administration agreed to delete the words "and existing use basis" from Part 2 of Schedule 1. An explicit provision would be added to provide that the assessed market value should not take into account the redevelopment of the property or the lot. Admin

19. On whether the undivided shares solely attributed to the common parts of a building should be disregarded for the purpose of calculating the percentage acquisition in an application for an order for sale, members suggested and the Administration agreed that these shares, which were usually owned by owners' corporation, should not be counted for the purpose. However, for the purposes of sale, all undivided shares including shares attributed to common parts would be sold to the successful bidder at the auction. The Administration agreed to move CSAs to this effect. Admin



Admin

20. Members agreed to continue the discussion at the meeting on 28 February 1998. The meeting closed at 10:05 am.


Provisional Legislative Council Secretariat
25 June 1998