Provisional Legislative Council

PLC Paper No. CB(1)1355
(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, 19 February 1998, at 8:30 am in Conference Room A of the Legislative Council Building

Members present :

Hon Ronald ARCULLI, JP (Chairman)
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

Members absent :

Hon WONG Siu-yee
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
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

Attendance by invitation :

The Real Estate Developers Association of Hong Kong

Mr Kevin MAK

Representative

Mr Roger NISSIM

Representative

Mr Augustine WONG

Representative

Mr S Y WAI

Representative

The Law Society of Hong Kong

Mr LIANG Wan-sang, Vincent

Vice President

Mr HODGSON John Lyndon

Member of the Property Committee

Ms CHU Wing-shuet, Christine

Assistant Director of Practitioners Affairs

Hong Kong Institute of Planners

Mr Andrew LAM Siu-lo

Vice President

Mr Ian BROWNLEE

Council Member

Hong Kong Institute of Surveyors

Mr Francis LAU Tak

Council Member, General Practice Division

Mr Francis LAM Ka-fai

Hon. Secretary, General Practice Division

Mr LAU Chun-kong

Hon. Treasurer, General Practice Division

Land Development Corporation

Mr Abraham RAZACK

Chief Executive

Mr Canice MAK

Deputy Chief Executive

Mr Trevor KEEN

Senior Assistant Director (Property)

Ms Holly LAU

Senior Assistant Director (Community Affairs)

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 deputations

The Real Estate Developers Association (REDA)

The representatives of REDA said that the Association welcomed the introduction of the Bill which sought to facilitate the urban renewal process. They were however concerned about some practical difficulties in the implementation of the Bill. It would be difficult to attain the minimum threshold of acquiring over 80% of undivided shares in a lot falling within the classes of lots specified by the Chief Executive in Council, let alone the 90%. They envisaged that amongst the redevelopment projects currently undertaken by members of REDA, only about five could meet the proposed minimum threshold. They drew members' attention to the difficulties in attaining the minimum threshold for four-storey-four-unit buildings, commonly found in Wan Chai and Sheung Wan, where an owner of a unit refusing to sell could bring the whole redevelopment project to a halt. They called for more flexibility in imposing the minimum acquisition level.

2 The representatives of REDA were particularly concerned about the restrictive definition of ot'. To facilitate urban renewal and to maximise redevelopment potential, they opined that redevelopment should be considered on a project basis rather than on a ot" basis. They suggested that the Lands Tribunal should be given the discretion to decide whether the scale of redevelopment was justified and the Bill should allow the majority owners holding an average of 90% of aggregate undivided shares in contiguous lots to apply for an order for sale with a view to redeveloping them as a package.

3 Referring to REDA suggestion of providing flexibility to the Lands Tribunal in deciding on the scale of redevelopment, a member expressed concern that the interest of minority owners might be overlooked in large scale comprehensive redevelopment where some buildings might need to be demolished even though their age and state of repair did not justify redevelopment.

4 The representatives of REDA responded that the intention of the Bill was to facilitate urban renewal in public interest. The Bill had already made provisions for the protection of the minority owners. It rest with the Lands Tribunal to ensure that fair and reasonable terms were offered to the affected parties. The representatives concurred that taking away property rights was an emotive issue and REDA considered it necessary to provide sufficient protection to those affected.

5 On REDA concern about the definition of ot' and the foreseeable result of the thriving of encil" redevelopment, the Senior Assistant Law Draftsman (SALD) advised that the application for an order for sale could relate to a number of lots provided that the majority owners had acquired 90%, or the percentage specified by the Chief Executive in Council, of undivided shares in each of the lots.

6 Regarding the redevelopment of a lot within the boundary of a Comprehensive Development Area (CDA), the representatives of REDA stated that redevelopment could not proceed without planning approval. The restriction imposed on CDAs was provided for under section 4A of the Town Planning Ordinance, Cap. 131.

7 As regards compensation payable to tenants and owners, the representatives of REDA said that it would be up to the Lands Tribunal to decide whether an order for sale should be granted and if so the amount of compensation payable, taking into account the possible hardship of affected owners. Unlike the redevelopment projects undertaken by the Land Development Corporation (LDC), in situ rehousing could not be provided in private redevelopment projects.

8 The Chairman concurred that there were practical difficulties in evicting residents and government assistance might be needed in some cases. He thanked the representatives for giving their views and welcomed their further comments on the Bill, if any.

The Law Society of Hong Kong (LS)
(PLC Paper No. CB(1)974(01))

9 The Chairman referred members to LS detailed submission on the Bill. The representatives of LS stated that LS recognized the need for enactment of legislation to facilitate urban renewal as being in the wider public interest and was generally supportive of the Bill. They agreed that the Bill was sensitive as it would take away the proprietary interest of individuals. LS considered it necessary to strengthen provisions in the Bill to protect the rights of parties who had a claim to an interest in the lot, in particular the rights of tenants, mortgagees and squatters claiming an interest by way of adverse possession. In LS view, the best way to protect the interest of individuals was to allow them to be represented and heard before the Lands Tribunal.

10 At the invitation of the Chairman, Mr John HODGSON took members through the submission, highlighting the salient points. Members noted that one of the major concerns of LS lay with the minimum acquisition percentage for making an application for an order for sale. LS submitted that the requirement for applications to be made by owners holding not less than 90% of undivided shares, or a percentage specified by the Chief Executive in Council which should not be less than 80%, was too restrictive and would unnecessarily tie government hands. Whilst agreeing on the need to fix a minimum acquisition percentage, LS considered that the power to lower the percentage should rest with the Lands Tribunal instead of the Chief Executive in Council. The Lands Tribunal should have the discretion to accept or refuse an application for an order for sale through balanced consideration of the interests of both the majority owners and the minority owners based on a set of clear guidelines/criteria stipulated in the Bill. In deciding whether an order for sale should be made, the Lands Tribunal would need to apply a 弎alance of hardship test". Mr贌ODGSON also opined that if the threshold was set at a higher percentage, professional speculators would only need to purchase a small number of units in order to hold the majority owners to ransom. Conversely, a lower threshold would make it more difficult for speculators to acquire a controlling interest in the lot as they had to buy more units, thereby incurring higher costs.

11 The Chairman sought LS views on cases where the majority owners had no intention of redeveloping the lot but simply wished to realize profits by forcing the minority owners to sell their properties. Mr HODGSON said that LS took the view that the purpose of the majority owners for selling the lot was irrelevant and should not be considered by the Lands Tribunal. The intention of owners might be to maximise the consideration they received for their properties. Since the redevelopment conditions would form part of the order, the Tribunal should not take into account the majority owners' motive for making an application. SALD added that the majority owners would only need to satisfy the Lands Tribunal that redevelopment of the lot was justified due to the age and state of repair of the building. It would be the purchaser, not the majority owners, who would redevelop the lot.

12 The Chairman enquired whether LS would consider it advisable to allow the Lands Tribunal to have extended jurisdiction over claims for adverse possession. Mr HODGSON responded that LS did not suggest removing the jurisdiction of the Court of First Instance in determining claims for adverse possession. However, LS considered that the Lands Tribunal should have the power to withhold proceeds of sale and to apportion them to the affected parties upon determination of their claims.

13 As regards the priority in providing protection to affected persons, Mr贌ODGSON said that resident owners should be accorded a higher priority than non-resident owners or tenants, unless the building was fully occupied by long-term residents who had been living there for several decades.

14 Members and the representatives of LS deliberated on the effect of clause 8(1) which sought to extinguish the rights of any prior owners of the lot upon its sale. LS saw no reason why the lot should not be sold subject to subsisting easements or rights of way created by prior owners. SALD suggested that these easements or rights of way could be registered as a lis pendens under the Land Registration Ordinance, Cap. 128, such that the Lands Tribunal and the prospective owners could be made aware of these conditions, and consideration could be given to setting aside a proportion of proceeds of sale pending the decision of the claim. Mr HODGSON however pointed out that some easements or rights of way by prescription could not be quantified in monetary terms.

15 The Chairman agreed that it should not be the intention of the Bill to wipe out all the easements or rights of way, whether registered or prescribed. He welcomed suggestions from LS on amendments to clause 8 to preserve these rights.	LS

(Post-meeting note: A supplementary submission from LS suggesting amendments to clause 8 was circulated to members of the Bills Committee vide PLC Paper No. CB(1)1012.)

Hong Kong Institute of Planners (HKIP)
(PLC Paper No. CB(1)974(02)

16 The representatives of HKIP supported the mechanism proposed in the Bill to expedite urban renewal. HKIP however considered that safety, rather than the age of buildings, should be the prime consideration in determining whether a building should be redeveloped. HKIP was of the view that urban renewal did not invariably necessitate demolition of buildings, since a lot of buildings could be renewed by proper maintenance.

17 The representatives of HKIP emphasized that the social implications of the Bill would need to be carefully considered. Unlike comprehensive redevelopment projects identified by the Government or the LDC which were governed by a clear set of selection criteria, piecemeal redevelopment might eye on the potential of the site rather than the need to redevelop. The sole emphasis of the Bill on acquisition of a certain percentage of undivided shares in a lot might depart from the objective of urban renewal as the mechanism proposed would facilitate the redevelopment of both new and old buildings with good potential.

18 The protection of the interests of the minority owners and tenants was also of concern to HKIP. The representatives stressed that the interests of these parties could not be compensated solely by cash, since their rights to cheap and affordable housing might be lost as a result of compulsory sale of the lot. On technical aspects, the representatives pointed out that the valuation report referred to in clause 3 should be prepared by registered professional valuers. In addition, a time limit should be set on hearing and determination of disputes by the Lands Tribunal under clause 4(1) and the way disputes would be dealt with should also be stipulated in the Bill.

Hong Kong Institute of Surveyors (HKIS)
PLC Paper No. CB(1)985

19 The representatives of HKIS highlighted the major concerns which were set out in their submission. They indicated that HKIS generally agreed on the spirit of the Bill. Of particular concern to HKIS was the scope of application of the Bill. Instead of applying the minimum acquisition level to a single lot as proposed in the Bill, HKIS proposed to widen the scope to cover schemes comprising several contiguous lots. They stressed that for urban renewal, it was more cost-effective and economical to redevelop a larger site than a single lot. Consideration should therefore be given to selling several lots together as if they were a single lot/property. This would enhance the value of the lots to the benefits of all owners.

20 On the Chairman enquiry on the latest redevelopment trend, the representatives indicated that they did not have the statistics at hand but were aware that most developers were interested in acquiring and amalgamating several contiguous lots of low-rise buildings for redevelopment. However, the recent revision of the rate of compensation for tenants under the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 had increased the cost of redevelopment and had deterred developers from embarking on redevelopment projects. Furthermore, developers did not consider it cost-effective to redevelop buildings over ten storeys because the cost of compensation might exceed the potential value of redevelopment. As far as the Bill was concerned, setting the minimum acquisition level at 90% of undivided shares would make it difficult to redevelop buildings of less than six storeys since failure to acquire one storey would fall below the requisite level. In this connection, HKIP suggested that provisions be included in the Bill to enable owners of clear majority shares, i.e. owners who owned all but the undivided shares in one unit, to make an application under the Bill for redevelopment of the lot.

21 To ensure the standard of valuation, HKIS considered that the valuation report must be certified by a General Practice Surveyor who should be a Registered Professional Surveyor under the Surveyors Registration Ordinance, Cap. 417. HKIS also suggested that the minority owners should be encouraged to employ valuers to make an independent valuation. Where there were disputes in the valuation of their properties, these could be settled by a third independent valuer who would determine on an agreed valuation, rather than leaving the matter to the Lands Tribunal for adjudication. Members had reservations in accepting this arrangement, particularly in view of the suggestion that all professional fees would be borne by the majority owners.

Land Development Corporation (LDC)

22 The LDC submission was tabled at the meeting and circulated to members vide PLC Paper No. CB(1)985.

23 Mr Abraham RAZACK stated that LDC supported the overall intention and objects of the Bill to expedite urban renewal. He related to members the many obstacles experienced by LDC over the past ten years in undertaking redevelopment projects including title problems, resistance from individual owners, rehousing problem and costs of compensation. The difficulties in settling disputes over valuation which was subjective to a certain extent warranted particular attention. He pointed out that the mechanism proposed in the Bill was quite different from the way in which LDC operated. The Government Home Purchase Allowance applied in LDC projects. The allowance was designed to enable owners of a residential property to buy a flat of a similar size in the same area. Affected tenants could opt for rehousing or ex-gratis compensation. In recent projects, LDC provided owners with an opportunity to take part in redeveloping the site. This option was not available under the Bill which proposed to rely on sale of the lot by auction to ensure the receipt of the best possible price by the minority owners. LDC projects aimed at achieving comprehensive development, whereas the Bill was intended to facilitate ad hoc redevelopment of smaller lots. Mr RAZACK said that LDC had compiled an assessment of the need for urban renewal in the metropolitan area and the findings had been included in the District Urban Renewal Strategies which could be made available to members if they so wished. The findings showed that about 500 urban sites needed to be redeveloped which would affect about 150,000 persons.

(Post-meeting note: A copy of the District Urban Renewal Strategies was deposited at the PLC Library and an extract from the book was circulated to members vide PLC Paper No. CB(1)1013.)

24 A member enquired whether LDC would consider resorting to the Bill to facilitate its redevelopment projects. Mr RAZACK confirmed that there was no intention on the part of LDC of invoking the provisions of the Bill for its projects. LDC operated under a statutory framework governed by the LDC Ordinance, Cap. 15. There was a high degree of transparency in the operation of LDC and any changes to the LDC Ordinance would need to undergo the normal legislative procedures.

25 On members' concern about the arrangements for compensating rooftop dwellers, Mr RAZACK conceded that this was one of the most difficult tasks. Some of these dwellers were owners holding a small percentage of undivided shares. Protracted negotiations were always needed before an agreement could be reached. Mr RAZACK opined that the implementation of the Bill would no doubt facilitate urban renewal, but it would have social implications that needed to be addressed.

Meeting with the Administration

26 Members were concerned about the disparity between LDC projects and private redevelopment projects under the Bill as far as compensation to affected owners and tenants was concerned. Under the former a wider range of options were provided including cash compensation, rehousing and participation in redevelopment projects. The Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) compared the differences in compensation arrangements in private redevelopment projects and redevelopment projects undertaken by LDC. He said that it was a principle upheld by LDC that no one would be rendered homeless as a result of its redevelopment projects. However, compensation to tenants displaced by private redevelopment projects was mainly governed by the provisions of the Landlord and Tenant (Consolidation) Ordinance. A domestic tenant would be entitled to a cash compensation based on a multiplier of rateable values of the premises. The amount of compensation would be sufficient to rent a newer flat of comparable size for about six or seven years.

27 Members agreed to discuss the following major issues at the next few meetings -

1. the minimum threshold (% of undivided shares) for making an application to the Lands Tribunal for an order for sale;

2. the scope of the Bill (application to a single lot or contiguous lots);

3. the grounds for redevelopment (to be specified in the Bill or regulation);

4. the time limit for completion of redevelopment;

5. extinguishment by a sale order of third party interests including by way of adverse possession;

6. termination of tenancies by a sale order and compensation to tenants; and

7. the order of apportionment of sale proceeds.

28 Members agreed on the following schedule of meetings -

1. 24 February 1998 at 10:45 am;

2. 25 February 1998 at 8:30 am;

3. 26 February 1998 at 8:30 am; and

4. 28 February 1998 at 8:30 am.

29 There being no other business, the meeting closed at 12:25 pm.

Provisional Legislative Council Secretariat
11 June 1998