Land Administration and Conversion Framework in Hong Kong

1. Land Administration and Conversion Framework in Hong Kong Tenure, Planning and Development

2. Government Leases in Hong Kong • All land held on Government Lease • Contracts containing the following: • Tenure details • Description of lot with dimensions • Plan of the lot • Government rent • Development conditions • User conditions • Resumption clause • Government reservations e.g. rights of way

3. Government Lease Conditions/New Grants • Contract containing the following: • User clause • Building covenants – e.g. % of GFA to be developed within specified period • Premium • Government Rent • Development clause • Non-assignment clause

4. Land Tenure in Hong Kong 1. Old leases (pre 1 July 1997) • Urban areas of Hong Kong and Kowloon • 999 years, 99+99 years 75+75 years, 75 years • Renewable or non-renewable (b) New Territories - 99 years less last 3 days, 75 years +24 years less last 3 days (i.e. to 3 days before 1 July 1997) - now extended by statute to 30 June 2047 • New leases (since 1 July 1997) - New grants for all areas normally for term of 50 years

5. Tenure in Hong Kong - continued • Renewable leases • new Government rent chargeable on renewal is 3% of Rateable Value • Non-renewable leases granted pre 1997 • May be extended to 2047 at Government Rent of 3% of Rateable Value • Strata title – the sale of an interest in part of a building (apartment, shop, office, floor(s), etc.) permitted and very common • Operating leases generally for 2-3 years only

6. Land/Government Lease Disposal • All new land for development sold by auction or by tender on basis today of 50 year lease • Lump sum up front payment • Historically Government announced sales list and auction dates at beginning of financial year

7. Land sales(continued) • Now moved to Application List and rolling 5 year sales programme • Developer applies for site and underwrites a minimum price • Government then proceeds to offer at auction

8. Modification of Government Leases • Usually to permit more valuable user or greater intensification of use • Premium payable representing the enhancement in land value due to the modification less allowance for risk/developer’s profit • Modification can also be made by the method of Land Exchange

9. Premium Assessments • Important valuation field in Hong Kong • Assessment by “Before and After Value” method – i.e. difference in two values of the LAND on following bases: • Value under the limitations of the existing Government Lease • Value under the provisions of the modified lease • Usually long drawn out process with land owner and Government adopting same standard approach but using very different assumptions

10. Land Conversion Process • Original Government Lease – basic control document • Planning framework • strategic plans • zoning plans • change of use/rezoning • Impact assessments • Lease modification – premium payment • Building regulations – building plans, approvals, consents • Sales pre-consent • Certificate of compliance

11. Land Conversion Process(continued) • Town Planning Ordinance and Building (Planning) Regulations govern planning and development process (1) Town Planning Ordinance - Outline Zoning Plans and attached Notes (Column 1 and Column 2) - need to conform to land use zoning - might control height, site coverage and Plot Ratio - statutory effect - S.16 application to Town Planning Board for Column 2 uses (but no premium if permitted under Government Lease)

12. Land Conversion Process (continued) • Building (Planning) Regulations - Prescribe Plot Ratio computation if not already defined elsewhere - PR = Total GFA/site area • Max. PR for non-domestic – 15 • Max. PR for domestic: 8 class A site, 9 class B site, 10 class C site - Define bonus “opportunities” where GFA dedicated to public use/green features, etc - Where site abuts street less than 4.5m wide or does not abut on a street, height, site coverage and PR determined by Building Authority

13. Administrative Policies • Density Controls • Zone 1 – high density (urban areas) • Zone 2 – medium density (residential) • Zone 3 – low density (residential) • Generally lower density in New Towns and New Territories • No statutory effect but guidelines for lease modification and land exchange

14. Land Resumption • Land Resumption Ordinance contains basis of compensation for compulsory acquisitions by Government • Value of land resumed is defined as: • “the amount which the land if sold by a willing seller in the open market might be expected to realise” but subject to ignoring the following • Compulsory nature of sale • Any adverse planning controls • Uses not permitted under the terms of the Government Lease

15. Land Resumption (continued) • No compensation given in respect of expectancy or probability of the grant or renewal of the Lease • Special compensation zonal rates for resumption of building and agricultural land in the New Territories

16. Title Registration • All capital transactions registered at Land Registry • Also all leases over 5 years • Accessible to public • Very transparent and efficient market • Online access • Move from documentary evidence to title registration