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Land Tenure System and Land Policy in Hong Kong

(I) Land Tenure System and Land Policy in Hong Kong

Virtually all land in Hong Kong is leased or otherwise held from the Government of the HKSAR. In the early days, leases were for terms of 75, 99 or 999 years, subsequently standardised in the urban areas of Hong Kong Island and Kowloon to a term of 75 years, renewable at a re-assessed annual rent under the provisions of the old Crown Leases Ordinance. Leases for land in the New Territories and New Kowloon were normally sold for the residue of a term of 99 years less three days from 1 July, 1898.

From 27 May, 1985 (the date of entry into the Joint Declaration) to 30 June, 1997, the policy with regard to land grants and leases accorded with the provisions of Annex III to the Joint Declaration. In general, land grants throughout the whole of the territory were made for terms expiring not later than 30 June, 2047. They were granted at a premium and nominal government rent until 30 June, 1997, after which date an annual government rent equivalent to three percent of rateable value of the property would be charged. Leases expiring before 30 June 1997, with the exception of short term tenancies and leases for special purposes, might also be extended to 2047 under the provisions of the Joint Declaration.

On 15th July 1997, the Chief Executive in Council endorsed various provisions covering land leases and related matters under the Hong Kong Special Administrative Region Government (HKSARG).

The general land grant policy as endorsed by the Chief Executive in Council is set out as follows :-

    1. New leases of land shall be granted for a term of 50 years from the date of grant (except new special purpose leases for recreational purposes and petrol filling stations, new special purpose leases covered by franchises or operating licences and short term tenancies) at premium, and subject to payment from the date of grant of an annual government rent equivalent to 3% of the rateable value of the property at that date, adjusted in step with any changes in the rateable value thereafter. Certain rural land holdings such as small house grants are exempted from the obligation to pay government rent.

    2. New special purpose leases for recreational purposes and petrol filling station will be granted for a term of 21 years from the date of grant. New special purpose leases covered by franchises or operating licences will normally be for a term commensurate with that of the associated franchise or licence. Short term tenancies shall continue to be granted for a term not exceeding 7 years.

    3. Modifications, whether by modification letter or conditions of exchange, shall continue to be granted at premium reflecting the difference between the "before" and "after" land value. For modifications not involving boundary adjustments and thus conducted by modification letter, the existing lease term and provisions for annual government rent will remain unchanged. For modifications conducted by conditions of exchange, the new lease term and government rent shall be 50 years from the date of regrant and 3% rateable value as provided for new leases in (i) above.

    4. Non-renewable leases (i.e. those leases containing no right of renewal and except short term tenancies and special purpose leases), may, upon expiry, be extended for a term of 50 years without payment of an additional premium but subject to payment of an annual government rent from the date of extension at 3% rateable value as for new leases in (i) above. The extension of such leases is at the sole discretion of the HKSARG.

    5. Special purpose leases may, upon expiry and at the sole discretion of the HKSARG, be extended for a term of 50 years without payment of a premium but subject to payment of an annual government rent of 3% of rateable value as in the case of new leases. Exceptions to this arrangement are as follows :-
      1. leases for recreational purposes may not be extended beyond a term of 15 years;

      2. leases of land covered by franchises or operating licences will normally be extended co-terminous with the franchise or licence;

      3. leases for petrol filling stations will not be extended upon expiry of existing lease, and the concerned petrol filling station sites will be re-tendered on the open market;

      4. leases for kerosene stores will not be extended; however, short term tenancies at full market rental may be offered to existing lessees for an initial term of three years; and

      5. other exceptions approved by the Chief Executive in Council.

(II) Constitutional authority of the HKSAR Government for grant of land leases beyond 30 June 2047

The Government has affirmed that under the Basic Law, it is within the constitutional competence of the HKSARG to grant land with a term beyond 30 June 2047. The Government’s position is as follows –

    1. Under Basic Law Article 7, the HKSARG is entrusted with the constitutional power and function to manage and grant land within the HKSAR in accordance with its land policies. The period for which this authorization may have effect is unqualified in terms of time and is not limited to a duration of 50 years (i.e. up to 2047).

    2. Under Basic Law Article 120, all leases granted or renewed before 1997 which extend beyond 1997, and all rights in relation to such leases (including the right to renew the lease for another term that would extend beyond 2047), shall continue to be recognized and protected under the law of the HKSAR.

    3. Particularly on the expiry of leases after 1997 without a right of renewal, Basic Law Article 123 stipulates that these leases shall be dealt with in accordance with laws and policies formulated by the HKSAR on its own. This is a blanket authorisation without imposing any restriction on the HKSAR’s power to grant leases beyond 2047.

    4. There is no provision in the Basic Law to restrict the otherwise unlimited power of the HKSARG to grant land beyond 2047.

The policy promulgated in 1997 essentially stipulates the arrangements for the HKSARG to deal with land leases and related matters in exercise of its authority under Articles 7 and 123 of the Basic Law.