Provisional Legislative Council

PLC Paper No. CB(1)1359
(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 Saturday, 28 February 1998, at 8:30 am in Conference Room B of the Legislative Council Building

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Hon Mrs Peggy LAM, JP
Hon Howard YOUNG, JP
Dr Hon Charles YEUNG Chun-kam
Hon YEUNG Yiu-chung
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
Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Dr Hon Raymond HO Chung-tai, JP
Prof Hon NG Ching-fai
Hon MA Fung-kwok
Hon Kennedy WONG Ying-ho
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

Clause by clause examination of the Bill

Members agreed to examine the Bill clause-by-clause in accordance with the list of concerns raised by members and deputations which was tabled at the meeting.

Clause 3 Application to Tribunal for compulsory sale of lot

2. On the Law Society's (LS) suggestion that a copy of the application should be served on the Secretary for Justice (SJ), the Assistant Legal Adviser 1 (ALA1) advised that this requirement was based on sections 3A and 3B of the Partition Ordinance, Cap. 352, which provided for SJ to be joined in an application to consider and where necessary, make representations on matters of public interest.

3. The Chairman was concerned about the implications of serving SJ with a copy of each application for an order for sale. The fact that SJ did not make representations on a particular application might be interpreted to mean that the application did not involve public interest. This would put the minority owners who disputed the application on grounds of public interest in an disadvantaged position.

4. The Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) opined that SJ would not normally intervene in disputes between two parties, particularly when these could be resolved through negotiation with the help of the Lands Tribunal. He therefore failed to see the need to serve SJ with a copy of an application in each and every case.

5. To obtain further elucidation on this point, the Chairman requested ALA1 to provide information on whether the Lands Tribunal had the power to appoint an amicus curiae, i.e. a friend of the court to advise on matters of law if no express provision was made in the Bill. ALA1

6. As regards the manner of service of notice of applications for orders for sale, the Administration agreed to introduce Committee stage amendments (CSAs) requiring the majority owners to serve a copy of the order for sale to each minority owner; to publish a notice in at least one English newspaper and one Chinese newspaper; and to affix the notice in the prescribed form in the English and Chinese languages upon a conspicuous part of the lot (or if the application related to two or more lots, upon a conspicuous part of each lot). Admin

Clause 4 Determination of application

7. Members noted that the Administration would move CSAs to provide for the right of the minority owners to dispute the valuation of any property as assessed in the application. The Administration would also delete subclause (2)(a) as the Bills Committee agreed that the motive of the majority owners for selling the lot was irrelevant to the consideration of the application.

8. Members expressed concern about the regulation making power of the Secretary for Planning, Environment and Lands (SPEL) under clause 12, which enabled SPEL to specify additional grounds for redevelopment. They were particularly concerned about the retrospectivity of the regulations. They sought clarification on whether applications under processing by the Lands Tribunal would be affected by any new regulations which came into operation after the application had been filed. Unlike criminal law, civil law might have retrospective effects depending on the commencement date of the application. Moreover, there would inevitably be a time lapse between the making of the application and the actual hearing of the application during which new regulations might come into operation.

9. In response to members' concern, representatives of the Administration made the following points -

  1. The regulation making power of SPEL under clause 12 was meant to give residual powers to SPEL to specify under clause 4(2)(b)(ii) other grounds apart from the age or state of repair of a building which would justify redevelopment. These might include re-zoning needs, increase in plot ratio etc. These additional grounds would be specified, if appropriate, in the light of experience after the operation of the Bill for some time;

  2. Where the redevelopment of the lot was justified due to the age or state of repair of the building under clause 4(2)(b)(i), the application would not be affected by additional grounds specified by SPEL under clause 4(2)(b)(ii) because the grounds stipulated in either subclause would suffice for the purpose of redevelopment;

  3. Regulations to be introduced by SPEL might facilitate or frustrate applications, depending on the nature of the case; and

  4. It would be a matter of judgement for the majority owners who were in the process of acquiring properties with a view to redeveloping them to consider whether to continue should new grounds for redevelopment be introduced by SPEL.

10. To address members' concern, the Administration agreed to the following-

  1. To delete "subject to section 12" under clause 4(2) and the reference to clause 4(2)(b)(i) under clause 12 (a). In this way, the regulations to be made by SPEL would not affect the redevelopment of the lot if it was justified due to the age or state of repair of the existing development; and

  2. To add a provision under clause 12 to put it beyond doubt that regulations made by SPEL should not apply to any proceeding arising out of an application made before the commencement of the regulation. This would address members' concern about the restrospectivity of the regulations.

11. As to the mode of service of the order for sale, the Bills Committee agreed that this should be served in the same manner as the application for an order for sale, i.e. by mail, by publishing a notice in one English newspaper and one Chinese newspaper and by posting a notice in a conspicuous part of the lot. Both the application for a sale order and the order itself should be registered under the Land Registration Ordinance, Cap. 128, so that prospective purchasers of the lot would be aware of the status of the lot.

Clause 5 Lot to be sold by auction

12. Members deliberated on the mode of sale of the lot and the need to restrict it to auctions. Whilst noting the Administration's explanation that the sale of the lot by public auction would ensure transparency and the securing of the highest price, members considered that sale by way of tender or other means might fetch a better price in a bearish property market. In this connection, they suggested that the mode of sale of the lot should be by public auction unless agreed in writing by each majority owner and minority owner that the sale should proceed by other means, subject to the approval of and any conditions specified by the Lands Tribunal. In other words, if there was a missing owner, or if any one owner did not sign the agreement, the only means of sale would be by way of auction. This would ensure that the interests of missing owners would be protected. The Administration accepted members' suggestion and agreed to move CSAs to this effect. Admin

13. Referring to LS's suggestion that the reserve price should take into account the redevelopment potential of the lot "on its own", members considered this suggestion fair as it would be difficult to assess the reserve price if other factors such as the potential of adjacent sites acquired by the majority owners were taken into account. Moreover, even if the majority owners owned a number of adjacent lots, they might not be the successful purchaser of the lot at the auction. The Administration agreed to introduce CSAs to Schedule 2 to specify that the reserve price should take into account the redevelopment potential of the lot "on its own" (or, where two or more lots were the subject of the auction, on their own). Admin

14. Members noted the Administration's acceptance of the proposal to empower the Lands Tribunal to extend on application the period from three to six months within which the auction for the sale of the lot had to be held. They were however concerned about the existing provisions of the Bill which deemed the order for sale to be of no effect if no bid was made at the auction. Since substantial time and resources would be incurred in preparing for an auction, members felt that the order should not be automatically cancelled if there was no bid at the auction. Instead, the number of auctions to be held should not be limited as long as the reserve price remained unchanged and the auction was held within the specified time frame. As it would normally take about three months to arrange an auction, the number of auctions which could be held within a period of six months could be very limited. In any case, the expenses of the auction were to be borne by the majority owners.

15. SALD explained that to deem an order for sale of no effect if no bid was made at the auction was meant to avoid any manipulation of the reserve price on the part of the majority owners and prevent them from picking and choosing the most opportune time to cast their bid. He believed that the majority owners, who were keen in acquiring the remaining shares, would try their best to buy such shares at the auction.

16. Members pointed out that the majority owners who considered the reserve price too high might choose not to bid at the auction. This was because the reserve price, which was determined by the Lands Tribunal, took into account the redevelopment potential of the lot and could be higher than that expected by the majority owners. In such a case, the majority owners might choose not to bid or would only bid if there were other purchasers bidding at the auction.

17. After discussions, the Administration agreed that as long as there was no change in the reserve price and the conditions of the order, no limit should be set on the number of auctions held within the specified or any extended time which in any case would be a maximum period of six months from the date of the application. CSAs to these effects would be moved by the Administration. Admin

Clause 7 Registration of order for sale

18. Referring to LS's suggestion of dispensing with the need for registration of Schedule 3 under the Land Registration Ordinance against the lot to which the order related, SALD explained that registration of both the order and Schedule 3 was considered necessary as this would enable any interested party to know about the status of the lot and what it was subject to. Where there were any variations in the order or an extension of time in the completion of redevelopment under Schedule 3, these would also need to be registered. Members agreed with the Administration on the need for registration of Schedule 3 as the time of completion of redevelopment was binding and enforceable against the purchaser of the lot and the purchaser's successors in title.

Clause 8 Protection of purchaser of lot

19. The Administration proposed to make amendments to this clause to provide for the following -

  1. Automatic termination of tenancies upon the day on which the purchaser became the owner of the lot;

  2. Within ten days after the purchaser became the owner of the lot, the purchaser would cause a notice to be affixed on a conspicuous part of the lot notifying the tenants concerned about the termination of tenancies;

  3. Tenants would be required to deliver up vacant possession of the property upon the expiration of six months following the day when the purchaser became the owner of the lot; and

  4. The Lands Tribunal would determine compensation payable to tenants by making reference to the provisions of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, and might take into account the representations, if any, of the tenants relating to claims for compensation.

20. Members enquired whether rents should be payable by the tenants upon termination of tenancies and who should be held responsible for other outgoings such as maintenance fees, utility charges and rates in respect of the premises concerned during the six months pending vacant possession of the property.

21. SALD advised that once tenancies were terminated, the tenants would cease to be tenants. The existing arrangement which applied to tenants who remained in the premises after termination of tenancies would apply in these cases. The Chairman indicated that in such cases, the tenant would be regarded as a trespasser and the landlord could take actions against him for mesne profits.

22. Some members considered that all normal outgoings in the form of rates, management fees and utility charges should be borne by the occupier. Others felt that the matter should be left to the Lands Tribunal to decide in determinating the compensation payable.

23. The Administration took on board members' views and agreed to introduce CSAs to provide that the Lands Tribunal might take into account any benefit afforded to the tenant by virtue of the provision that he was not required to deliver up vacant possession to the purchaser until six months after the termination of tenancy. It was also agreed that the trustees should not pay the full compensation to the tenants until they had delivered up vacant possession of the property. Admin

Clause 9 Breach of conditions

24. The provisions of clause 9 were agreed.

Clause 10 Application of proceeds of sale

25. Members suggested and the Administration agreed that the expenses of the auction and the remuneration of trustees should be borne by the majority owners who initiated the application. The minority owners who were compelled to dispose of their properties should not be required to share out these expenses, particularly when the auction might not be successful. Members also agreed that apart from setting aside part of the proceeds of sale to cover any lis pendens, the proceeds of sale which were due to missing owners should be paid into the court by the trustees. These proceeds would then be kept in an interest bearing account by the Registrar of the High Court and would be paid into the general revenue after a specified period of time if no claim was made.

26. In response to members, the Administration agreed to include in the Bill the meaning of 'incumbrance'. Admin

27. As regards the appointment of trustees, members noted that they would be nominated by the majority owners for appointment by the Lands Tribunal and that trustees so appointed should not have any conflict of interest since the legal interest of both the majority owners and the minority owners were vested on the trustees.

Schedule 2

28. ALA1 was requested to liaise with the Law Society of Hong Kong regarding the conditions of sale which should be annexed to the Schedule. ALA1

(Post-meeting note: A set of conditions of sale was provided by the Law Society and circulated to the Bills Committee vide PLC Paper No. CB(1)1115(01))

29. The Administration would provide updated draft CSAs to the Bills Committee in the following week.

30. Members agreed to the following schedule of meetings -

  1. Monday, 9 March 1998 at 10:45 am;

  2. Wednesday, 11 March 1998 at 8:30 am; and

  3. Thursday, 12 March 1998 at 8:00 am.

31. The meeting closed at 12:30 pm.

Provisional Legislative Council Secretariat
25 June 1998