Aspects of Land Economics in Hong Kong–Prior to 1997 Chapter 7


Part A–

Exchanges, Modifications, Renewal of Crown Leases, Special Purposes Leases etc.

Part B—Ex-Gratia Payment for Resumption and Clearance

 

LAND ADMINISTRATION

LAND EXCHANGES

We have learnt that the land tenure in Hong Kong is a leasehold system save the St. John’s Cathedral site; all land grants are land leases which are contracts executed between the lessees and the lessor–the latter is the Hong Kong Government. We have also learnt that hitherto the permitted   property development on all land leases are being controlled mainly through lease enforcement, that is, by administering and enforcing the various lease conditions and covenants contained in the lease of the property. Until new legislations or amendment to existing ordinances are promulgated, the current development control mainly by way of lease enforcement would prevail.

The global economy never stands still. Hong Kong has gone through considerable changes, economically and politically, after World War II and during the past two decades prior to 1997. The pressure brought to bear by buoyant financial and property activities in the construction of modern infrastructure has rendered most of the early urban developments obsolete–physically, functionally and, or economically. Many sites within the town centre and those by the edge of the transitional zones were or being developed. Some of these developments are comprehensive, for example, Taikoo Shing Plaza and some are ‘piece meal’ projects, such as redevelopment of the same lots to high-rise commercial or commercial/residential developments as the statutory town plans may permit. The existing conditions or covenants of leases such as those restricting the height of the building and user have become obsolete. Since the relationship between the land owners and the Government is contractual–under the control of the lease document, it would be opportune for the Government (landlord) to rectify the situation by negotiations, and by way of exchanges to incorporate a modern and new set of conditions into the new contract or lease to permit new and economically viable developments. The new set of conditions will set the standard of development and planning requirements of the day at the time when Government approval is given.

Principles Governing Exchanges

 In urban area , no exchanges are allowed for  agricultural land,

  • Generally, exchanges are on foot-for-foot basis. But at the Government’s initiative, additional land which otherwise would be sterilized or not capable of separate alienation could be re-granted subject to not exceeding 25% of the site area of the surrendered lot or lots.
  • Premium payable is assessed on the ‘before and after’ valuation basis.
  • The user and configuration of the lot to be granted by way of exchange must conform to the zoning and layout on the statutory town plan.
  • Exchange of lots lying within areas zoned for public uses, for example, Government/Institutional/Community, Open Space and District Open Space will not be permitted. Lots straddling the boundary of a public use zone may be considered for an in-situ exchange where the portion outside the public use zoning is capable of separate alienation and reasonable development having regard to the general density and character of development in the area.
  • In the New Territories (except in Tsuen Wan, Sha Tin and Tuen Mun) in areas with layout plans, agricultural land may be exchanged for building land at a ratio of five square feet for two square feet and any difference in site value will be the amount of premium payable. Exchanges of agricultural land may be considered in cases where an owner is deprived of his or her livelihood by the resumption for a public purpose of the whole of a major portion of the land.
  • Foot-for-foot in-situ exchanges are not normally permitted. But building land exchanges as long as they are in line with the general development policy in the area of layout plans are permitted on foot-for-foot basis. The difference in site value is payable as premium or refundable as compensation.

 In-situ Exchanges

Exchanges of land by way of surrender and re-grant of the leasehold simultaneously on the same or more or less the same land. It may cover the following circumstances:

  • Minor adjustments to lot boundaries to meet street widening scheme or to conform to the statutory or non-statutory town plan layouts.
  • Regularize titles.
  • Modification of lease by way of exchange so that a new set of modern conditions will apply.

Non-in-situ Exchanges

Exchanges of land by way of surrender and grant of the land not necessarily simultaneously on different locations. It may cover the following circumstances:

  • Institutional uses such as school, old people’s home etc. in conflict with the town plan zoning and it is considered appropriate from a planning point of view to relocate to a more desirable location.
  • Where a building lot lies wholly or mainly within a road reserve or otherwise conflicts with the layout of a non-statutory outline development plan, no implementation of resumption under the Resumption Ordinance will possibly be contemplated. Negotiations for a non-in-situ exchange may be possible and surrender of fragmented lots within the non-statutory plan may be accepted in exchange for a new lot by way of surrender and re-grant.

 Special Acquisition Areas (New Territories)

The Regional Secretary, New Territories, personally and the Secretary for the Environment, or the Deputy Secretary for the Environment personally will approve by consensus Special Acquisition Areas (SAA). SAA plans after signing by the Regional Secretary, New Territories, will be available for public inspection in the relevant District Offices and in the New Territories Administration Headquarters.

The policy objectives for exchanges within the SAA are:

  • Land title offered for exchanges must be clear and unencumbered.
  • Land must be surrendered with vacant possession.
  • Land granted shall not exceed the area surrendered on either foot-for-foot or value-for-value basis.
  • Land to be granted in exchanges must be approved by the Regional Secretary, New Territories, but it must not be within an area covered by a draft or statutory Outline Zoning Plan, or likely to be designed as a SAA.
  • The application will be required to stipulate the land he or she wishes to be granted in exchange.
  • The applicant can apply for a new grant lot in either agricultural land or building land status.
  • The values of the land will be assessed on ‘before and after ’basis having regard to the lease conditions of the respective lots and a premium will be payable for the enhancement in value (if any) of the lot.
  • The new lot will be granted subject to a new set of lease conditions which will permit appropriate development for the locality.

Zone 4 Area

The Regional Secretary, New Territories, may from time to time  approve plans of certain Zone 3 and, or Zone 4 areas within layouts where for many years Government may not require or resume land for public and development purposes. Plans of such designated areas signed by the Regional Secretary, New Territories, will be on display for public notice.

Land owners in the designated areas may apply to the Government for in-situ exchanges on payment of appropriate amount of premium subject to certain conditions described as follows:

  •  Concerned land to be surrendered must be within a Zone 3 or Zone 4 layout in an existing zoning plan and Government has no plan for development in the foreseeable future.
  • The applicant must submit a proposed layout for the required area to the satisfaction of the Government from both engineering and planning viewpoints.
  • Appropriate access to the site to be granted must be provided to the satisfaction of the Government.
  • The applicant or developer must be responsible for all costs: such as infrastructure works, road access, drainage, sewage treatment and clearance and crop compensation and so on, Government will be responsible for the supply or potable water.
  • No specific ratio in surrender/re-grant of land applies in this case, but the normal rules for surrender of land within layout areas will apply.
  •  If additional Crown land is granted in the exchange for the purpose of good estate management, Land Exchange Entitlements (Letter A/B) must be submitted for the exchange.

MODIFICATION OF LEASES

As previously explained under Land Exchanges, all land uses and property development on various lots granted by the Government are land leases which contain conditions and restrictive covenants. These conditions and some of them concerning planning requirements such as height and density restrictions incorporated in the grant of land were considered most appropriate at the time. However, in the course of time due to changes, social, demographic, economic and more recently political, the effect on demands for different land uses and developments in a laissez faire economic environment like Hong Kong has caused the transfer of land from the lower to the higher uses. For example, four-storey pre-war buildings and less efficient medium rise buildings are bought for re-development to high-rise commercial or commercial cum residential buildings with high standard of amenity. Change of zoning plan may permit the change of use from industrial to office and shops. All these developments and, or re-development of sites are results of the interaction of supply and demand for land uses in the real estate market through the price mechanism. Within the existing legal framework, and economic and political framework, the universal rule is that land will be transferred to the highest and best use—land as a commodity will be sold and purchased at the highest price in a competitive market..

In Hong Kong, all land leases are contracts between the Government (landlord) and the owners (lessees).  The relationship is contractually binding. Therefore, modification of lease covenants and conditions by mutual consent will be required to allow change of use or higher density development or re-development.  Because of the change, the landed property may become more valuable. The enhancement in value, similar to a levy of betterment in the form of premium is payable to Government. (To understand the calculation of premium, etc., please read ‘The Concept of Premium’, etc. in Chapter 2).

TYPES OF MODIFICATION 

Deed of Variation 

Where a lot is held under a Crown lease (i.e., a deed of lease) including those cases of new Crown Leases as defined in the Crown Leases Ordinance (Cap.40), any variation of the lease conditions must be effected by a deed of variation. (Legally only a deed can vary a deed.)

MODIFICATION LETTER

Where no Crown lease has yet been issued and the lot is held under Conditions of Grant, then any modification of the lease conditions can be effected by the signing of Modification Letters relevant to the proposed changes.

MODIFICATION BY WAY OF EXCHANGES

These are circumstances where exchanges by taking a surrender of the original lot or lots for a re-grant of a new lot under a new set of conditions will be appropriate. If no engineering conditions are required to be imposed by the Government in the development or re-development, a new Crown Lease may be issued direct. The following categories are dealt with by way of exchanges:

a)     Re-adjustment of the lot boundaries is necessary. The original lot boundaries are surrendered for the re-grant of a new lot.

b)     Where there is a discrepancy between the registered area of a section of a lot and its actual area exceeding 0.1 per cent.

c)     Two or more sections of a lot or two or more lots in different ownership, but the lot to be re-granted will be re-developed as a whole.

“No Objection” Letter 

This is for co-ownership situation such as a unit of flat (apartment suite) in a multi-owned development, for example, in an estate such as Tai koo Shing or Hang Fa Chuen or in a block of residential building where units of flats (suites) have been sold like strata titles. It would not be practical to modify the entire lot where only one unit or flat (suite) needs changes. To achieve the same effect as provided by Modification Letter, the “No Objection” Letter is issued and it requires only to be signed by the flat (suite) owner concerned, the other co-owners in the development are not involved.

Temporary Waiver 

Under special circumstances, the restricted user of a land lease or lot may be waived      for a period upon the owner’s agreement to pay an annual waiver fee and an administrative fee. For example, allowing the Jockey Club to use the Infield forecourt for membership parking on a temporary basis.  Such use was not permitted according to the Crown lease.

ASSESSMENT OF PREMIUM FOR MODIFICATION 

The general principle of premium assessment and the methods of site valuation have been described in Chapter 2 under THE CONCEPT OF PREMIUM onwards. What follows are further explanations of the general principle with reference to specific example:

a)     After July 1, 1973, no concession of 50 per cent for pre-war lots will be entertained.

b)     Modification premium chargeable for “European type house” cases is assessed by the same method {“Before and After” valuation basis} as other normal cases.

c)     If performance of public works is required, the leaseholder on modification of the lease or conditions of grant may be entitled to a reduction of premium.

d)     Redevelopment of sites granted for social service purpose at nil or concessionary premia will be achieved by lease modification in the following manner:

(i)     Government accepts surrender of the lot for a re-grant of a new lot elsewhere at              nil premium.

. (ii)     Government re-provides the same facilities on another site belonging to the                lessee, thus accepting the surrender of the original site for disposal.

(iii)           Government accepts surrender of the lot for re-development to better use and to re-provide new accommodation with improved facilities for the former lessee.

If GIC (Government/Institution/Community) use will be required in the re-development, it is normally financed by the Government as Public Works Programme. But if the public funds are not available, the site may be put up for open tender with the obligation on the lessee (developer) to build and hand back the social service facilities to the former lessee, free of cost, but offsetting construction cost against payment of premium for the entire development potential for profit-making commercial or residential or commercial cum residential purposes, as the case may be.

e)     On exceptional circumstance, lessee of concessionary grants or grants at nil premium for social service purposes may be allowed by the Government to redevelop its site or on an exchanged site to include a “commercial” element provided that the proposed re-development will satisfy the Government in the following:

(i)              The proposal is within the terms of the lessees Memorandum and Articles of Association or the incorporation ordinance, as the case may be.

(ii)            The lessee can be made accountable for the commercial benefit derived from the share in the development.

(iii)          The income derived is used for purposes acceptable to Government.

(iv)          The proposed project benefits the public by diminishing the need or potential need for direct subventions.

(v)            The inclusion of a “commercial” element must not be detrimental to the provision of GIC facilities which should be maximized in terms of compatibility with the overall commercial viability of the proposed project.

(vi)          Government should be able to seek accommodation in the proposed project for quarters, offices or other public purposes, for example, other voluntary agencies, if appropriate.

(vii)        Joint venture partners are selected on a competitive basis according to procedures approved by the Government.

(viii)      The” commercial” element in the proposed development will be charged a land premium at full market value.

(ix)           All cases must be submitted to the Governor-in-Council for approval.

(f)      Modification of a lease to remove a restrictive covenant that restricts sale of the landed property for twenty years may be permitted at 75 per cent of the premium payable.

(g)     Modification of a lease of a non-profit-making school to permit conversion of part of the school premises of halls partially or exclusively for ecclesiastical purpose. The formula applicable for calculation of premium in Government is:

Area of Church                                     X Area x 2/9 of Full Market Value                                  Gross Floor Area of Building

(h)     Modification of a lease to permit use as petrol filling and, or service station. Standard rates of royalty will be charged in additional to the payment of premium.

(i)      (1) For complete removal of restriction on industrial users, the premium payable is calculated as follows:

Restrictive User                     Premium Calculation

Paints/Electrical                   5% of Full Market Value (FMV)

Garment Manufacture         10% of (FMV)

Cosmetic/Chemicals            15% of (FMV)

The modification premium chargeable has become effective since July 28, 1982.

(2)    For partial de-restriction, the premium payable is calculated as follows:

(Premium payable derived from the formula at (i) (1) above.) X 25%

(j)  Modification of a lease is possible to regularize or legalize unauthorized structure causing an existing breach of lease conditions, for example, unauthorized penthouse, excessive built over areas, carports and amah quarters in single residence and in cases where New Territories. Exempted House has been erected complying with the permitted gross floor area and height, but containing three storeys instead of the permitted two storeys as provided under the editing Conditions of Grant.

The premium payable based on the enhancement in land value is applicable from the date of the breach. If the enhancement in land value cannot be obtained by normal valuation methods, an empirical premium is to be charged. Interest is also payable from the date of the breach.

(k) Modification of a lease to permit the construction of a penthouse on the roof of a multi-storey building exceeding the height limitations as provided under the Lease Conditions may be approved by the Government subject to the following provisions: (All cases must be submitted to District Lands Conference for approval and will be dealt with by “No objection” letters.)

(i)              The subject buildings are in Density Zones 2 and 3 only.

(ii)            No statutory height limit is breached.

(iii)          An appropriate premium is payable in a lump sum.

(iv)          he owner of the top floor flat (suite) must have the ownership and exclusive use of the roof immediately above his/her flat (suite), on which he/she will construct the penthouse.

(v)            The penthouse is not separately alienated from the top floor flat (suite) immediately beneath it.

(vi)          The penthouse is occupied and used jointly with the flat (suite) immediately beneath it by one family only.

(vii)        The penthouse is only accessible from the flat (suite) immediately beneath it.

(viii)      The concerned owner who will obtain approval for the lease modification must covenant with the  Government in an instrument to be registered in the Land Office that he/she will not  use, dispose of, or otherwise deal with the penthouse separately from the flat (suite) immediately beneath, or vise versa.

(l) Modification of a lease to permit caretakers’(watchmen’s) office and , or quarter in residential lots in Zones 2 and 3 in excess of what has been provided in the Conditions of Sale.

In the case of office accommodation, the premium of the site payable for the increased accommodation is assessed in accordance with the accommodation value of the residential development of the lot plus the normal administrative fee. (Accommodation value is defined as value of site divided by plot ratio of site.)

In case of living accommodation, the premium is in accordance with the accommodation value of caretakers’ quarters and not the full accommodation value of residential development of the lot. The normal Conditions of Sale in Zones 2 and 3   under the Government Policy at the time do permit some caretakers’ office accommodation and quarters. The conditions are written like this:

“(a) Watchmen’s or caretakers’ office accommodation may be provided within the lot provided that:-

(i)  such accommodation is in the opinion of the Director essential to the safety, security and good management of the building or buildings erected or to be  erected on the lot;  (Director means Director of Buildings and Lands.) and

(ii)            Such accommodation shall not be used for any purpose other than office accommodation of watchmen or caretakers employed on the lot.

Such accommodation, if the gross floor area thereof does not exceed five square metres for every flat (suite) or part thereof erected or the be erected on the lot or five square metres for every residential block erected or to be erected on the lot, whichever calculation provides the greater amount of such accommodation, shall not be taken into account for the purpose of calculating the total gross floor area and the total site coverage stipulated in Special Conditions No. (          ) hereof.

(b) such watchmen’s or caretakers’ quarter may be provided in the buildings/house or houses erected or to be erected on the lot provided that:-

(i)              such quarter is situated within a main residential building or a house for a house style development;

(ii)            in addition to living accommodation, toilet, washing and kitchen services shall be provided in such quarters; and

(iii)          Such quarter shall not be used for any purpose other than the residential accommodation for watchmen or caretakers employed on the lot.

Such quarter, if the gross floor area thereof does not exceed 25 square metres, will not be taken into account for the purpose of calculating the total gross floor area and the total site coverage stipulated in Special Condition No. (        ) hereof.”

(m) Modification of a petrol filling station lease to permit the `installation of automatic teller machines or payment of appropriate rent.

(n) Modification of Sales Conditions to allow smaller flat (suite) size. In some cases where large flats (suites) of exceeding 200 square metres each have been allowed to be reduced in size owing to change of demand,. Approval was given by the Executive Council on the recommendation of the Development Progress Committee that the small size flats (suites) would not have affected the overall high class development concept. Such concession may be given to lots sold before June 28, 1983 but such application will be considered in its own merits to ensure planning requirements are met.

(o) Modification of older urban leases granted to public utility companies such as the China Light and Power Company Limited, etc. to allow redevelopment of the sites for higher and better use provided that the concerned utility company undertakes not to seek a further grant by private treaty to the area serviced by the individual sites. The premium payable is equivalent to the difference between the present full market value of the site in the existing zoning and the present site value subject to restriction of existing building volume or the premium previously paid for the site, if the latter amount is higher.

(p) Modification of leases already granted to employers for workers’ housing schemes to permit redevelopment may be approved by the Government on the following bases:

  • The grantees should include in the redevelopment Government accommodation;
  • The grantee must be responsible for the re-housing arrangements for existing tenants to the satisfaction of the Director of Buildings and Lands and the Commissioner for Labour;
  • The premium payable for the lease modification is the difference between the fair market value of the site (i.e., “after value”) and the “before value”, the latter being one third of the updated value of the site for residential development purposes’ and
  • An appropriate building covenant will be imposed by the Government having regard to the likely time required to obtain vacant possession of the lot for the proposed redevelopment.

(q) Modification of leases already granted for civil servants cooperative housing schemes. The cooperative housing schemes were introduced in 1952. Sites were granted by private treaty to civil servants cooperative housing societies to provide housing accommodation to their members at premium of one third market value. The housing society members hold a certain share with the right to occupy a particular flat (suite), but it cannot be sublet or sold to any one other than to another civil servant subject to certain restricted conditions. However, since 1985, transfer of legal titles to the existing flat (suite) occupiers have been approved by the Government by way of modification to remove the restriction on alienation. And a premium equating to two-third of the “existing value” is payable. If all the co-owners agree to redevelop the site to its full development potential, a modification premium of site value representing the full difference in value between the new gross floor area and the existing gross floor area is charged.

(r) Modification of leases to reduced car parking requirements in Zone 2 residential areas where more parking facilities have been provided. In cases where payment of premium cannot be justified and the development is a large one, an empirical fee of $250,000 is charged.

(s) Modification of leases at nil premium. Apart from cases where after the modification of the leases, there are no enhancements in land value, therefore no premium will be chargeable, there are other cases of modification of technical nature, i.e., no premium will be payable, but administrative fee is chargeable, for example:

(i) Modify the user clause from “industrial” to “industrial and, or godown”.

(ii) Under Section 16 of the Town Planning Ordinance, the Town Planning Board may approve development in accordance with Column 2 of the Explanatory Statement of the Outline Zoning Plan if the land owners submit to the Government, for example, to permit commercial user in residential zone or at Government’s initiative to make a lease more restrictive, such as introducing non-industrial user into an unrestricted lease. However, if the modification of the lease has enhanced the land value, for instance, the lease has been made less restrictive from industrial user to non-industrial, than the full enhancement in the form of premium must be charged.

(iii) Some Crown leases granted before 1931 for lots in Repulse Bay were subject to non-assignment and non-mortgaging clauses.

Removal of these restrictive covenants was allowed at a premium calculated as follows:

a – b = c

a = Upset price of unrestricted lot put up at auction

b = Premium actually paid for the lot

c = Premium

But since December 9, 1974 modification of the lease would be allowed on payment of a standard administrative fee only.

(iv) For auction lots, alienation before the full payment of all the premium installments will not be allowed. However, modification of the Conditions of Sale to allow such alienation to a wholly-owned subsidiary may be allowed on payment of an administrative fee only provided that the present company and the wholly-owned subsidiary jointly and severally undertake in favour of Government to pay the outstanding instalments of premium as they fall due.

(v) It has been the Government’s policy in the New Territories to issue a building licence or modify an agricultural lease for the purpose of building a village type house (now know as Exempted House) of standard height and area at nil premium on traditionally recognized criteria (Note: The current policy is to allowed building height up to 27 feet or 8.18 metres),

  •  Not more than 3-storey and 25 feet (17.62 metres) high domestic house;
  • Not exceeding 700 sq. ft. (65.03 sq. m.) site area;
  • The District Lands Officer must have been satisfied that the applicant is an indigenous villager over the age of 18 and is not adequately homed in accordance with the village custom;
  • The site of the new house is within the village or in the natural extension area, and has no “fung shui” (the Chinese art of geomancy) and planning objections.
  • There are no requirements to submit architectural building plans in this regard.

(vi) Modification of agricultural land outside layout areas will be favourably considered at nil premium to encourage the construction of residential homes for the aged to a higher than the usual standard. If additional Government land has to be granted to form an adequate size lot for the development, a concessionary premium related to agricultural land values is charged.

(vii) In industrial buildings where canteen facilities are not permitted in the lease conditions, modification of the lease to permit the facilities may be possible at nil premium provided that:

  • The canteen facilities do not occupy a floor area exceeding 10 per cent of the gross floor area of the factory premises;
  • No vehicular access, parking, loading or unloading is required;
  • The facilities are not at or near ground floor level with exclusive direct access to the street other than for emergency exits.

The lease modification is effected by a modification letter in the case of wholly owner-occupied buildings and by a no objection letter in the case of a multi-owned building. This type of modification is treated as “technical modification” and only an administrative fee is payable.

(viii) Removal of offensive trade clauses in the  Crown lease is not normally allowed. But the following categories may be approved: oil man, tavern keeper, victualler, butcher and sugar baker, etc. The Lands Administration Meeting may decide on doubtful cases.

(ix) Modification of a lease for “garden use” may be allowed at payment of a standard administrative fee only for the construction of a swimming pool entirely within the garden area.

(x)  In either Government or grant-in-aid or subsidized schools where the school halls are also to be used for religious related activities and provided such change of the education facilities, the Director of Education may have no objection to the application for modification.

Building Covenants (B.C.)

A building covenant is a Special Condition contained in the Conditions of Grant/Sale requiring the grantee/purchaser to develop the lot by the erection thereon of a building or buildings complying in all respects with the stipulated Conditions and all Ordinances, By-laws and Regulations relating to the building or buildings and sanitation work. Development or the size of the anticipated development and the duration of the B.C. are fixed, for example, it must be completed within 48 months from the date on which possession of the lot is given. Since the purpose of imposing a B.C. is to ensure adequate development, it is not applicable in exchange or modification cases unless the concerned site intended for development happens to be vacant.  The old practice of imposing a B.C. in dollar value has ceased after March 1984.

At the end of the B.C. period when the required development has not been commenced or building plans have not been approved, the Government has the right to re-enter the lot as provided under the Conditions of Sale/Grant. The purchaser/grantee may apply after the re-entry to the Governor-in-Council within six months for the cancellation of the re-entry. If sufficient reasons were provided the Governor-in-Council would normally approved such application for cancellation.

Very often, the required development under the B.C. has not been completed due to valid reasons and a grant for extension by way of modification of the B.C. will be approved for three or six months or up to a year dependent on the nature of the application and a modification premium will normally be imposed.

However, if the Authorized Person confirms to the Government that the building has been completed subject to the issue of an Occupation Permit shortly and the current B.C. period or its extension is still valid, a free extension of B.C. for three months may be approved.

Apart from special cases as may be approved through the Lands Administration Meeting (namely delay is due to Government’s decision or unrealistic B.C. period), free extension of B.C. period may also be granted in the following cases:

(i)              In the case of a private treaty grant to a non-profit-making body, the acid test is if the delay in complying with the B.C. is beyond the grantee’s control; and

(ii)            Additional time is required to comply with additional work requested by the Buildings Authority and such additional work was not contemplated at the time of fixing the original B.C. period.

B.C. Premium Calculation

Normally, the premium is calculated as a percentage of the current land value of the lot as if the cleared site value is in the same physical state as it was when granted or sold.

In cases where free extension of the B.C. periods have been granted, the percentage calculation should be made with reference to the land value pertaining at the date of expiry of the last free extension.

For concessionary private treaty grants cases, the B.C. premium should be calculated on the same basis of assessment for the concessionary grant of land. In other words, if no premium is payable for the land grant, no B.C. premium is applicable for the extension of B.C.

Since February 2, 1983, the Government has adopted a concessionary formula of calculation of B.C. premium in large development projects having regard to the portion of the in-completed gross floor area of the project.

.                                                  Site Value                     Appropriate % of B.C.

Site Value   x      UPGFA     = (Uncompleted Portion) x % of B.C. Rate                         .     .                        Total GFA

Note: UPGFA means uncompleted portion of gross floor area;

.          GFA means gross floor area.

From July 1, 1985 until further changes, the B.C. rates applicable to calculation of B.C. premium are as follows:

Years                              B.C.Rates %

_________________________

 1st                               2

2nd                              4

3rd                               8

4th                              14                                                                                                                                                            .

5th                              22

6th                             32

__________________________

RENEWAL OF CROWN LEASES 

We have noted in Chapter 1 that all land leases in Hong Kong have been granted separately by the Government for 999 years, 99 years, 75 years and 21 years renewable and so on, and the policy after the Joint Declaration on the future of Hong Kong is to grant leases up to June 30, 2047 without payment of additional premium, but an annual rent equivalent to three per cent of the of the rateable value of the property current at the time will be charged after June 30, 1997.

Renewal of Crown leases have been effected en bloc in the past for cases falling due on the same date. For example, the New Territories (Renewal Crown Leases) Ordinance (Cap. 152) in 1969 gave a statutory renewal to every Crown Lease existing immediately before the expiration of the 30th day of June, 1973 under which land in the New Territories was demised for a term of 75 years from the first day of July. 1898 and which contained a right of renewal for a further term of 24 years less three days, other than leases of land  exempted from Part II of the New Territories Ordinance under Subsection (2) or (3) of Section 7 thereof. From the 1st of July, 1973 each lease holder was deemed to have been given a Crown lease for a term of 24 years less three days.

The New Territories Leases (Extension) Ordinance (Cap.150) in 1988 further extended the leases in the New Territories to June 30, 2047.

The Crown Leases Ordinance (Cap. 40) in 1973 does not apply to any lease to which the New Territories (Renewable Crown Leases) Ordinance applies, but to Crown leases which expired before the commencement of this Ordinance:

(i)              Every such Crown lease under which land in New Kowloon or in any other part of the New Territories was demised for a term of 75 years, renewal for a further term; and

(ii)            The Crown lease of each lot specified in Schedule contained in the Ordinance; and Crown leases which expired after the commencement of this Ordinance—

(iii)          Every such Crown lease under which land in Hong Kong (other than the New Territories) was demised for a term of 99 or 75 years, renewable for a further term; and

(iv)          Every such Crown lease under which land in New Kowloon or in any other part of the New Territories was demised for a term of 21 years, renewable for a further term.

REGRANT/EXTENSION OF NON-RENEWABLE CROWN LEASES

Before the signing (May 27, 1985) of the Sino-British Joint Declaration, all non-renewable leases might be considered for renewal or extension under circumstances described as follows: The grantee of the renewed lease could elect to pay the assessed premium by twenty-one instalments with interest compounded at 10 % per annum.  But if the land was required for public purpose on the expiry of the non-renewable lease, which would therefore not be renewed, The Government would normally consider payment of ex-gratia compensation to the occupiers of the building for repossession of the land.

There following criteria were important considerations taken by the Government in its decision to renewal or extension of a non-renewable Crown lease, such as:

(i)              Whether the subject land was not required for public purpose?

(ii)            If the land was vacant, should a building covenant be incorporated?

(iii)          Should the opportunity be used to negotiate with the former lessee with a view to incorporating modern lease conditions?

(iv)          Should provision be made in the new lease for public requirements such as street widening, service lane widening, etc.?

The premium payable for the re-grant of the lease is based on enhancement of the site value calculated by the “Before and After” valuation method. The full market value of the vacant land is assessed, subject to the new set of lease conditions on the date of expiry of the original lease or the date (or deemed date) of the application for a re-grant (if the latter is earlier). From the “after value” the “before value” will be deducted to derive the enhancement in value. If the site in question has pre-war buildings with tenancies subject to the provisions of the Landlord and Tenant (Consideration) Ordinance, Part 1, allowance has to be made for tenants compensation payable for obtaining vacant possession.

Normally, the lessees could apply to the Government for an early consideration of a re-grant even as early as twenty-one years before the date of the expiry of the lease. In this circumstance, the calculation of the premium payable is discounted to the present value at an appropriate rate of interest to the date of early payment of the premium.

In multi-owned buildings, units of flats (suites) or property were separately owned by individual owners who were also co-owners of the common areas, and who were, therefore, owners of the undivided shares of the interest in land, re-grant of land leases would be effected by either one of the two approaches:

(i)              Every property owner collectively agreed and subscribes to a joint written application to the Government and subsequently collectively agreed to the premium payable. Under this circumstance, the premium installments contributed by the individual owners would be apportioned in accordance with the provisions of the Crown Rent and Premium (Apportionment) Ordinance.

(ii)            In circumstances where the individual owners could not jointly and collectively agree to submission of an application to the Government for a re-grant of the land before the expiry of its lease, and, or the renewal terms could not be collectively agreed upon, then the Government would grant the land lease to the Financial Secretary Incorporated (FSI). On being granted the new lease, FSI would be able to assign the undivided shares to the respective owners who had to pay their respective apportioned premium instalments, plus the administrative fee in each case. If the term offered were not accepted by the individual owner, FSI would gain possession of the unit concerned and made arrangement either to sell the property or collect rent from the occupier(s).

Provisions for renewal or extension of non-renewable leases after the date of the Sino-British Joint Declaration on May 27, 1985 have been made in Article 121 of the Basic Law of Hong Kong Special Administrative Region. (Refer to Chapter on Land Administration.) The administrative process and criteria for considering applications for re-grants are the same as those applications made before May 27, 1985 described above. According to Article 121 all leases for re-grant are for a maximum period up to June 30, 2047.

Churches and Temple Non-renewable Leases 

Non-renewable leases previously granted for a term of 75 years by private treaty on concessionary terms are normally re-granted free of premium for another term of 75 years and the user is restricted to religious and charitable purposes. Of course, this re-grant may only be possible if the land concerned will not be required for public purposes, such as, road widening scheme, etc. There have been cases where the Government regularized the land status tentatively by an annual tenancy pending maturity of future development.

In the case of non-renewable leases acquired previously in the open market for church or temple purpose, a premium equivalent to two-third of full market value of the land as at the date of expiry of the original lease would be chargeable. The lessee may apply to the Government for payment of the premium by 21 annual installments calculated at 10 % per annum compound interest. But such approval would normally be given subject to the lessee agreeing to certain conditions, including a user restriction to religious and charitable purposes and the standard private treaty grant special conditions.

Special Purposes Leases (SPL) 

Special purposes leases are those leases granted by private treaty for specific purposes namely, public utilities, recreational clubs, piers, churches, etc. These leases contain the standard set of General and Special Conditions and usually including the restrictive covenant against assignment. But, there are 28 leases for specific purposes which do not contain the non-assignment covenant for various reasons as listed in Part 1 of the Schedule to the New Territories Leases (Extension) Ordinance (Cap.150) for extension by statute.

On the contrary, the Ordinance also excluded certain categories of leases from the definition of special purposes leases and they have been extended by statute. They are:

(i)              Leases of lots specified in part II of the schedule”

.                                       ShaTinTown Lot No. 143,

.                                       Tuen MunTown Lot No. 238, and

.                                       Lot No. 758 in Demarcation District 379; and

(ii)            Leases granted to the :

.                                             Hong Kong Housing Authority,

.                                             Mass Transit Railway Corporation, and

.                                           Hong Kong Housing Society.

The Government would consider all SPL separately on their own merits before any extension would be granted. The necessary lease documentation is completed on individual basis—not by statute. Generally, the lease would be extended up to June 30, 2047, unless the land in question will be required for public purpose before that date. No premium is payable, but an annual rent equivalent to three per cent of the rateable value will be charged from the date the original lease term expires and will be adjusted in step with any changes in the rateable value thereafter.

The Government policies in dealing with each category of re-grant are described below:

a)     SPL normally extended to June 30, 2047:

(i)              Public utility companies leases not subject to a franchise or licence, such as, China Light and Power Company Limited, Hong Kong Electric Company Limited and Hong Kong China Gas Company Limited.

(ii)            Special industries leases, such as: leases granted to the Hong Kong Industrial Estates Corporation.

(iii)          Leases granted by private treaty for education, welfare and religious purposes on concessionary terms.

(iv)          Leases granted at concessionary premium to co-operative building societies (Civil servants formed co-operative building societies for the purpose of obtaining land on which flats (suites) were constructed for members of the society.). And those leases granted to the Financial Secretary Incorporated in the case of government build housing schemes.

b)     SPL considered n individual basis:

(i)              Public utility companies leases subject to a franchise or licence, such as: Kowloon Motor Bus Company (1933) Limited and Hong Kong Telecom International (Formally Hong Kong Telephone Company Limited and Cable and Wireless.) would be extended for the duration of the franchise or licence.

(ii)            Recreational leases would be reviewed by the Government one or two years before they expire or earlier, if necessary. Normally, the lease extension is up to 15 years. In some cases, if the recreation facilities are open to public and involve heavy capital investment, longer extension of lease up to 21 years may be granted.

(iii)          Pier leases may be extended for a term not exceeding ten years, if no reclamation anticipated or development plans of the area permit.

(iv)          Leases granted to Asia Television Limited, Television Broadcasts Limited, Hong Kong Commercial Broadcasting Company Limited, the Fish Marketing Organization and the Kwai Chung Containers Port may be extended to June 30, 2047 or to the end of the franchise in the case of the television stations.

c)     SPL not normally extended on their expiry:

(i)              Petrol filing station leases would not be considered for extension. But if there is a need to allow the station to continue operation in the same location, a new 21-year lease will be granted on payment of a full premium for the site. Such a  new lease falls within the control of 50 hectares limit provided under Annex III of the Joint Sino-British Declaration.(The eight petrol filling station leases listed in Part 1 of the Schedule to the New Territories Leases (Extension) Ordinance(Cap. 150) would be required to pay a nominal premium $19,000 only for their extension.)

(ii)            Kerosene stores leases are located mainly in the older public housing estates which are due to be redeveloped. The leases would not normally be extended. If there is a continuing demand for kerosene store service in the dame location, the existing lessee may be offered a short-term tenancy of the land at a full market rental for an initial term of three years.

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Aspects of Land Economics in Hong Kong –Prior to 1997     Chapter 7 Part B—Ex-Gratia Payment for Resumption and Clearance

 

EX=GRATIA ALLOWANCE PAYABLE BY GOVERNMENT ON RESUMPTION AND CLEARANCE 

There had been a well established Government policy to give assistance or allowance to the occupiers of land in legal occupation or under any expired non-renewable leases, or in illegal occupation in the event that the land in use or occupation would be resumed or compulsorily cleared to give way to public and planned development. The philosophy behind this ex-gratia payment policy is obvious. It aims to provide material and, or financial assistance to the affected occupiers and families to help re-establish themselves elsewhere. The basis of assessment for ex-gratia allowance varied in each case and the rates of payment as approved by the Executive Council were updated every six months.

The following situations cover cases where ex-gratia allowance would normally be considered:

  • Rehabilitation Allowance

In the New Territories when families living in squatter areas were cleared for development purposes and no resettlement accommodation was available, the Government used to re-site them and assisted the affected families with building materials and rice to re-establish themselves. Then the ex-gratia allowance was a cash payment which was based on the estimated cost of constructing a part-built structure with necessary services, such as water and electricity supply, etc. plus the domestic removal allowance, i.e., the estimated costs of fitting-out and removal for a family of four into a single storey temporary housing area.

  • Allowance to occupiers of Post-war Buildings

After May 18, 1976, ex-gratia allowance was allowed by the Executive Council

On the same basis as in the case of pre-war buildings under resumption or clearance. In addition to an offer of housing and the cash allowance, owner occupiers would receive a compensation for their properties assessed on market value basis.

Roof-top occupiers of post-war buildings were also compensated on production of rental evidence. If the occupiers could prove that they had been in residence since before the 1982 squatter survey conducted by the government, and had ten years domicile in Hong Kong, they wee eligible for permanent housing. Otherwise, the occupiers were only eligible for temporary housing.

There had been various amendments to improve the ex-gratia package to owner occupiers of post-war tenement buildings cleared by resumption. The aim was to provide incentive to help clearance. Before 1992, the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) Section 53A (4) (a) provided that the compensation to the legal occupiers should be the sum of:

(i)              An amount equal to twice the reteable value of the premises;

(ii)            An amount equal to the expenditure actually  and reasonably incurred or to be reasonably incurred by the tenant and any sub-tenant in respect of the packing, removal and transportation within Hong Kong of the furniture and movable property kept in the premises; and

(iii)          An amount equal to the loss actually incurred and reasonably incurred or to be reasonably incurred by the tenant and any sub-tenant in respect of carpets, curtains and fittings.

  • Domestic Removal Allowance (DRA)

DRA was an ex-gratia payment to families who were compulsorily cleared by Government from surveyed structures. The amount payable was based on rates approved from time to time by the Financial Committee, and according to the type of accommodation offered and family size. Dependent on availability of accommodation, families cleared from surveyed structures, in the past, had been re-housed in temporary housing areas, Housing Authority Estates and resettlement blocks scheduled for redevelopment in accordance with the Government policy and procedures. DRA was periodically revised by the Government to reflect the necessary decorating costs and removal expenses. What is more important is that the approved rtes for calculating the ex-gratia DRA should be reasonably sufficient to assist the compulsorily cleared squatters without causing unnecessary hardship.

  • Allowance for Village Removal in the New Territories

The policy for village removal was initially approved by the Executive Council as early as 1959 for the resit of villages in Tuen Wan, New Territories. The villagers were sometimes given land exchange cash compensation for legal buildings and a credit balance for the reconstruction of a new village for resettlement. In 1965 for the re-site of old villagers in Tsuen Wan, the pre-war owners or post-owners by succession were given village re-site areas and cash grant to enable them to build a new house of an approved standard design. In 1969, the Government built new village houses and grant them to villagers at nil premium in exchange for the surrender of the old village houses. In 1975, ex-gratia removal and decoration allowance were approved for each house to be re-sited.  The allowance included costs for removal, installation of gas supply, electricity, telephone and water connections and the basic decoration of the resite house. In 1978, an ex-gratia rental allowance of up to $1,000 a month for a maximum of eighteen months was granted to each family to help villagers to rent temporary accommodation until their re-site houses were complete.

In 1979, the policy was further revised and the Finance Committee approved the following types of allowance:

a)     Housing allowance based on the current building cost as advised by the Principal Government Architect;

b)     Temporary removal allowance to families moving into temporary accommodation pending the availability of permanent resite houses;

c)     Partitioning allowance based on current cost as advised by the Principal Government Architect for each resite house where the villager opted to  provide the partitioning himself;

In 1984, the Finance Committee revised the basis of the rental allowance assessment, which is described as follows:

a)     A flat rate is payable for each entitlement of a house re-site. It is

assessed in accordance with the prevailing rental value of a flat (suite)

of 46.5 square metres gross floor area in the urban area of the

concerned district. (The rate is subject to half-yearly reviews for

future clearance cases);

b)     Only 50 per cent  of the flat rate is applicable in cases where the cleared village houses are unoccupied or the lots have not been developed;

c)     The Director of Lands would  increase the flat rate by 20 per cent to reflect better quality of the cleared houses;

d)     If the re-site houses are to be constructed by the  Government, the rental allowance will be payable until the houses are ready for occupation;

e)     If the villagers are permitted to rebuild their houses on new sites to be found by themselves, the rental allowance will cover the period between removal and completion of the re-site houses, or up to a maximum period of eighteen months, whichever is the shorter;

f)      If the villagers are permitted to rebuild their houses on new sites provided by the Government, the rental allowances will cover the period between removal and completion of the re-site houses, or up to twelve months after the possession of the building sites are given to the concerned villagers.

  •  Allowance for Squatter Shops, Workshops, Schools and Godowns.

a)     Squatter shops

Before 1969, owners of surveyed squatter shops on clearance were re-provided with shop spaces in the resettlement estates to continue their business operation. In October 1969, an ex-gratia allowance of $6,000 was approved for each claim in lieu of resettling into the shop unit in a resettlement estate. In 1970, the Government decided that the amount of allowance should directly reflect the size of the squatter shop, and hence the two-tier system of rates was used. For example:

.              (i)  $120 per square foot for the first 50 square feet (i.e., $6,000); and

.             (ii) $30 per square foot in excess of the first 50 square feet (subject to a                 .                   maximum allowance of $20,000.)

Subsequently in 1977, 1980 and 1981, shop area qualified for the first tier rate has been revised respectively to 75 square feet, 90 square feet and 100 square feet. The rate for allowance remains unchanged (i.e., $120 per square foot). But in 1977, the three tier system of allowance was introduced by the addition of the third tier subject to a maximum of allowance of $50,000. However, on July 28, 1982, the Finance Committee re-established the two tier system. The highest rate was applicable to the first 100 square feet subject to no maximum limit. The approved rate of allowance after the first 100 square feet was fixed at $48 per square foot. Ex-gratia allowance was also payable to owners (i.e., operators) for open retail space of not less than 100 square feet, but at a reduced rate of one-sixth of the full rate and this allowance was subject to a maximum of $50,000.

b)     Workshops

The Government used to permit industrial undertakings operating in surveyed squatter huts to take out leases of flatted factory purposely built by the Housing Authority for relocation purpose. After October 16, 1973 the Executive Council approved an ex-gratia allowance for squatter industries being cleared instead of re-provision in flatted factories.

The cash allowance was calculated on the basis of capitalizing the difference of rent between the Housing Authority flatted factories and the market rent of flatted factories in the private sector. Put simply, the formula is as follows:

(Private Sector         (Housing Authority                                                                       Rental Rate    )     –     Rental Rate)            x       Capitalization Factor

In around 1992, payment was still based on the Government policy approved by the Financial Committee on July 27, 1983. (Note: Change of policies, if any, up to 1997 is not recorded herein.)

(i)              Covered workshop

The allowance is calculated by capitalizing one year’s assessed rent for the           Housing Authority flatted factory unit. There is no maximum payment. If re-provision is possible in the Housing Authority Temporary Area, the allowance paid will be reduced by fifty per cent of the full rate, subject to a maximum of 300 square metres or $67,500.

(ii)            Workshops open working areas

The allowance is based on one-sixth of the rate for covered workshops,                  subject to a minimum qualifying area of twenty square metres and a maximum                  allowance of $75.000.

(iii)          Slipways

The rate of allowance is fixed at half the rate for covered workshops without                    limit on the maximum amount payable.

c)     Schools

The allowance for both covered and open areas of a school are lower than those of the rates payable to the covered and open areas of a shop respectively. Two-thirds of the rates are used in each case, and the qualifying open space is not less than an area of 20 square metres and a maximum payment of $80,000.

d)     Godowns

Allowance for godowns is fixed at half the rate of covered workshops with no ceiling in the amount payable but subject to a minimum qualifying area of 20 square metres. (Note: In the event of natural disasters involving squatter shops, workshops and other workshops, the rates of allowance calculated in (a) to (d) above will be adopted for payment of ex-gratia allowance.)

  •  Disturbance Allowance for Cultivations on Clearance

Before 1954, cultivators who were cleared from Crown land were granted statutory compensation only without ex-gratia allowance or disturbance. On November 17, 1954, the Government decided that cultivators cleared from Crown land in urban areas would be paid a crop compensation for the value of the standing crops with a disturbance allowance at one cent per square foot of land under cultivation.

In 1957, the package of compensation was improved. An ex-gratia allowance was then payable to tenants who were cultivators on Crown land (i.e., land leased from the Crown.) or on private land. The tenant cultivators would not receive any disturbance allowance. On the contrary, owner cultivators were not eligible for receiving ex-gratia allowance but they would receive a disturbance allowance in addition to the normal compensation for the resumption of their land.

In 1961, the allowance scheme was extended to the NewTerritories. Cultivators in Tsuen wan  and Kwai Chung layout areas were eligible for allowance at the same rate as those payable in the urban areas, while cultivators in the remainder of the New Territories were paid at a lower rate/ This distinction of differential rates were abolished in 1975.

In July 1977, the Finance Committee approved the same rate of allowance for both pre-war and post-war cultivators. The calculation of allowance included:

(i)  Average loss of farm income during a three-month re-established period; and

(ii)  Estimated land preparation cost including part of the cost for the provision of irrigation system such as wells, sumps and water pumps.

In July 1986, the re-established period was extended to twelve months and the rates of allowance were further enhanced.

  • Allowance for crops and Fruit Trees

The purpose of this allowance is to compensate farmers for the loss of crops clearance of land. The Director of agriculture and Fisheries is charged with the duty to identify the crop and determine the unit rates of compensation.

The ex-gratia allowance is calculated on the basis of the area of land under cultivation. The vegetable crops are graded and compensated at rates based on daily average wholesale prices. Vegetable farmers also receive a disturbance allowance of $2 per square foot of land under cultivation irrespective of whether the crop has just been harvested or not. (No disturbance allowance will be payable for areas where fruit trees are grown.)

Fruit trees are compensated at assessed unit values with reference to the market value of the trees, cost of labour and material, the amenity value of the trees and rate of inflation, etc.

  •  Allowance for Pine Trees

The purpose of this allowance is to compensate villagers for the loss of fire wood, dried and dying or fallen trees, traditionally collected by villagers in forested area. The tree were classified by diameter sizes, such as “under 3 inches”, “between 3 and 6 inches” and “over 6 inches” and the rates adopted by the Director of Agriculture and fisheries were based on local market price for pine wood sold mainly for use as firewood and chopping boards.

  •  Allowance for Pig and Poultry Farmers               

(a)   Pig BreedersI

In 1965, the ex-gratia allowance was introduced to replace the previously policy of re-providing shops in resettlement estates for pig breeders who were cleared from land required for development. This allowance was extended to the New Territories in 1972. The calculation was based on the loss of profit over a period of time in relating to the farm’s production cycle and the time required for re-establishment plus half the average replacement cost of fixtures.

(b)  Poultry Farmers

In 1959, ex-gratia allowance for poultry farmers affected by clearance was introduced. The calculation (similar to pig breeders’ allowance) was also based on loss of profit during the re-establishment period plus half of the averaged replacement cost of fixtures.

Since May 13, 1981, two methods of assessment have been used in calculating ex-gratia allowances:

(i)              The ‘per capita’ basis of calculation, i.e., the rate of assessment multiplied by the number of birds (a minimum number of 30 birds) is applicable to free-range poultry farms with low capital investment and where birds are capable of being counted. (Sometimes free-range farms are referred to as ‘backyard’ farms.)  ;

(ii)            The composite rates based on the area of the farm are applicable to large and sophisticated poultry farms with high capital investments.

  •  Allowance for the Resumption of Land in the New Territories (Outside New            Town Development Areas)

Unlike resumption of land within layout areas, land exchange entitlements (i.e            Letters A/B) would not be offered to owners for land to be resumed, although if the circumstances justified a direct exchange might be possible.

Since land values in different parts of the New Territories are different, there is  not a uniform rate of allowance applicable across the board. A zoning system was introduced in 1978. All land outside the layout areas were classified into seven zones (A, B.C, D, E, F and G) and zone A being the layout areas represented the basic rate. with effect from October 1, 1985, the numbers of  zones have been rationalized and reduced to four (i.e., zones A, B, C and D). Zone A remains the New Town Development Areas.

  • The basic rate area                                                                                                           The zoning is classified according to proximity to layout areas and their development potential. It is obvious that a zone B area will have more development potential than zone  C area and so on. The rates of assessment for agricultural land adopted for different zones are adjusted to 75%, 50% and 30% of the agricultural basic rate respectively. For building land assessment, the basic rate in zone A is increased by 20 per cent. (Note: On February 8, 1983, the Executive Council approved the abolition of the Letter B System and the enhancement rate of ex-gratia allowance was introduced. The 20 per cent enhancement was intended to compensate for the removal of the Letter B option.) The basic rate consists of two elements, namely, valuation of the building land plus a percentage of the building land basic rate. For zones B, C, and D, the percentage is 75%, 50% and 30% respectively.

At six monthly and annual intervals, the Government reviews the zoning boundaries, varies the basic rates and makes adjustment if necessary.

  •  Allowance for Fish Ponds

The first ex-gratia allowance was paid by the Government as early as 1962 for clearance of fish ponds. The operators were basically given an allowance to compensate for, the loss of profit, working capital and tenant’s rights. The Government reviews the approved rates of allowance annually with reference to market survey conducted by the Director of Agriculture and Fisheries (DAF).

(a) Edible Fish

The rearing of edible fish is divided into  monoculture and poly-culture.  Mono-culture is the  intensive cultivation of a single species of edible fish in a pond.  Poly-culture is longer term rearing of several species of edible fish together in larger ponds formed by excavation and compacting of banks.

(i) Loss of working capital and net income that is,–that is, loss before the harvest and loss of net income ranging  from one to three years depending on the security of tenure;

(ii) Loss of capital investment—that is, the costs of forming the pond and its periodic maintenance;

(iii)Permanent improvements on the land, such as drainage facilities, sluice gates, et., as assessed by the DAF,

(iv) Severance or disturbance compensation as assessed by DAF.

There has been further minor amendments to the basis of calculation since 1986, but the main criteria and method of calculation remain virtually the same.

(b)Fish fry

Ex-gratia allowance for fish fry ponds was first introduced in 1984 when three fish fry ponds were affected in the Tin Shui Wai clearance at Yuen Long in the New Territories.

The items under which allowance would be considered are the same as edible fish ponds, i.e., items (i) to (iv) described above.

(c)  Ornamental fish

The original ex-gratia allowance for ornamental fish ponds clearance was on the basis of allowance for monoculture. But it was realized later that rearing                     of ornamental fish had a higher rate of return for a given area of pond or tank and a different rate of calculation should be adopted. It was decided in 1979 that ornamental fish operators should be treated on the same basis as inadmissible industrial ertakings so that the rate of allowance would follow automatically the revised rate for clearance of inadmissible industrial undertaking.

(d)    Red worm ponds

The capital investment involved for red worm ponds was less than that of the ornamental fish. The allowance rate is therefore lower and the governing factors to be considered by the Government are:

(i)   Loss of net income;

(ii)  Loss of working capital; an

(iii) Loss of capital investment.

  • Miscellaneous Permanent Improvements

Ex-gratia allowance is payable to farmers for clearance of permanent farm installations and fixtures, such as: watering ponds, wells, irritation ditches, bunks, boundary walls, gates, fences and annexures t land used for agricultural purpose. There are no fixed rates for rates of compensation. Each case of allowance is based on the replacement cost new less amortization of the item concerned as approved by the Director of Building and Lands.

  • Allowance for Buildings and FarmBuildings

The ex-gratia allowance is intended to compensate farmers for the loss of their buildings or farm buildings. The director of agricultural and fisheries is responsible for the assessment of arm structures. The rate is based on the replacement cost new less depreciation allowance for the improvement.

  • “Tun Fu” Ceremonies

This is a traditional religious ritual usually performed by villagers in the belief of its ability to pacify evil spirits in the event that the land would be disturbed by clearance. It may be related to the removal or relocation of religious shrines or ancestral graves or cutting of hill slope in borrow areas or falling of tress that m may affect the geomancy (i.e., “fung shui”) of the people living in the village.  A religious ceremony will be performed by the clans in the village and government representatives from the District Lands Office and concerned departments will also be invited to attend.  Roast pigs and wines prepared for the offering are consumed by the attendees on the spot and lucky money put in red packets are distributed to all including the religious headman, usually a Taoist monk, who will certainly obtain a good fee in a red packet for officiating the ceremony. (This old tradition legally recognized by the Colonial Hong Kong Government was a rather unique feature in the Chinese community.)

  • Allowance for Graves and “Kam Taps”(urns) Clearances

Since the beginning of the NewTerritories leases in 1898, the indigenous villagers and locally based fishermen are allowed to bury their ancestors or deceased relatives on the village hillsides, Dependent on the social status of the dead and affordability of the family responsible for the burial, the grave could take different form of structure.  A large formal grave built with granite blocks, bricks and plaster with a shrine of epitaph is a common feature dominantly guarding the village on the lower ground.  The grave would be constructed at the selected “fung shui” location. And the villagers believe that the coming generations would be able to experience prosperity and longevity because of the blessing from the dead.

Memorial graves are also common in the NewTerritories.  They are alternative graves of the main formal graves created for the important people and dignitaries, who had contributed greatly to the welfare of the village community, highly respected by the bona fide villagers as their clan leaders.

After seven years or more, a grave could be exhumed and reconstructed.  The bones would be collected and stored in a “Kam Tap” (urn) which would normally be buried underneath or by the side of the grave tomb.

The poor villagers who could not afford the expenses of building formal graves for the exhumed bones would normally put the “kam Taps” or urns on the hillsides with or without any shelters, as the case may be.

The approved rate of ex-gratia allowance which is based on the cost of exhumation and preparation for re-instatement elsewhere varies according to the types of graves plus allowance for ceremonial costs, geomancer’s fee for each grave with “fung shui” attributes, etc.  In special cases if the grave concerned has great “fung shui” or antiquity value the approved rates of allowance would be increased within the delegated authority of the Secretary for District Administration in the past and now the Director of Buildings and Lands with further increases to be approved by the Deputy Financial Secretary.

  • Allowance for In-shore Boat, Sampan and State-net Fishermen

There is a statutory requirement for paying compensation for the loss of fishing grounds resulting from reclamation or development projects gazette under the provisions of the Public Reclamation and Works Ordinance or the Foreshores and Sea Bed Ordinance.  However, an ex-gratia allowance may be payable to fishermen so displaced to help them find alternative means of livelihood.  The basis of assessment is described as follows:

(i)              Boat or sampan fishermen—The allowance is the notional value of one year’s fish harvest in the area as assessed by the Director of Agriculture and fisheries.

(ii)            State-net Fishermen—The half of the payment derived in (i) above.

  • Rowing Boat Operations

Each case of ex-gratia allowance has to be considered on its own merits and fresh approval to be obtained from the Finance Committee. Precedent cases were Lai            Chi  KokBay reclamation (1976) and Ma Liu Shui Bay reclamation (1981) and the JunkBay reclamation (1986).  The purpose of the allowance is to compensate the rowing boat operation licensees for the termination of business and to assist them to establish alternative means of livelihood elsewhere.  It will be an amount made up of the resale value of the boats plus loss of business profit for a period of five months.

  • Allowance for Marine-culture Operations

The ex-gratia allowance for marine-culturists arises because of the implementation of the provisions of the Marine Fish Culture Ordinance (Cap. 353) enacted in 1980.

(a)   An ex-gratia extinguishment allowance is payable if the marine-culturists decided to terminate their business instead of relocation ii to a fish culture zone. The payment consists of:

(i)              Approve rate per unit cage area for one year loss of net income; and

(ii)            Approval rate per unit raft/cage area for the loss of capital investment (i.e., the depreciated value of the rafts/cages.)

(b)  An ex-gratia transportation allowance for marine-culturist moving into a designed zone to continue their operation.

(i) Approved rate per unit area for refitting of fixtures;

(ii) Approved rate per unit raft area for every 1,000 metres of                                  distance moved, subject to not exceeding twice the  replacement value of the rafts calculated according to (a) (ii)  above; and

(iii) Loss of fish stock caused by the move as assessed by the Director of Agriculture and Fisheries on market value basis.

(c ) An ex-gratia relocation allowance for marine-culturists either  outside or inside the boundaries of a fish culture zone to be  located within the zone. The Director of Agriculture and Fisheries will assess the actual expenses incurred for the        relocation, subject to not exceeding the rate derived from refitting of fixtures under (b) (i) above

(d) A domestic removal allowance to operators under categories (a), (b), and (c) above is payable if clearance of the marine-culturists has rendered the operators and their families homeless.  The rate of allowance follows the scales laid down for land resumptions  and site clearance.

…to be cont’d APPENDICES

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About Francis Loo

I'm a retired landed property professional since 2005 with 57 years working experience, 41 of which related to landed property in Valuation, Property Management, Lease Negotiation etc., in Hong Kong, Toronto and Vancouver. A Guide to Effective Property Management in Hong Kong published in 1991 and translated in 1998 for Chun San University external training courses. Have been contributing biblical articles to Truth Monthly after retirement.
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