PLC Paper No. CB(1)10/97-98
(These minutes have been
seen by the Administration and
cleared with the Chairman)
Ref: CB1/BC/8/96

Bills Committee on Government Rent (Assessment and Collection) Bill

Minutes of meeting held on Thursday, 6 March 1997, at 8:30 am in Conference Room B of the Legislative Council Building

Members present :

    Hon Albert CHAN Wai-yip (Chairman)
    Hon Ronald ARCULLI, OBE, JP
    Hon Howard YOUNG, JP
    Hon Ambrose LAU Hon-chuen, JP
    Hon Margaret NG
    Hon NGAN Kam-chuen

Members absent :

    Hon James TO Kun-sun
    Hon CHEUNG Hon-chung
    Dr Hon LAW Cheung-kwok

Public officers attending :

    Mr Trevor KEEN
    Principal Assistant Secretary for Planning, Environment and Lands
    Mr Esmond LEE
    Assistant Secretary for Planning, Environment and Lands
    Mr C S WONG, JP
    Deputy Commissioner of Rating and Valuation
    Mr F G HEATH
    Assistant Commissioner of Rating and Valuation
    Mr R C BARAM
    Government Land Agent/Estate Management Lands Department
    Mr A N WATSON-BROWN
    Senior Assistant Law Draftsman
    Legal Department
    Mr James O’NEIL
    Deputy Crown Solicitor
    Legal Department
    Mr Tony ROBERTSON
    Deputy Principal Solicitor/Legal Advisory and Conveyancing Office
    Lands Department

Clerk in attendance :

    Miss Odelia LEUNG
    Chief Assistant Secretary (1)1

Staff in attendance :

    Ms Bernice WONG
    Assistant Legal Adviser 1
    Mr Kenneth KWOK
    Senior Assistant Secretary (1)2

I. Confirmation of minutes of meeting

(LegCo Paper No. CB(1)951/96-97)

1. The minutes of the meeting held on 23 January 1997 were confirmed.

II. Matters arising

(LegCo Paper No. CB(1)992/96-97)

2. The Chairman informed members the withdrawal of Hon LO Suk-ching from the Bills Committee.

3. Members discussed the Administration’s response to the concerns raised by members at the previous meeting.

Exclusion of short term tenancies and leases for special purposes from block extension

4. Principal Assistant Secretary for Planning, Environment and Lands (PAS/PEL) explained that short term tenancies (STT) and leases for special purposes were specifically excluded from Annex III to the Joint Declaration(JD) so that their extension might be considered on a case-by-case basis. STT, which were granted for not more than seven years, would be dealt with on their individual merits when they were due for extension. No premium was required for the grant of STT but an annual rent would be charged. Special purpose leases on the other hand were characterised by a permanent prohibition against assignment. Under the New Territories Leases (Extension) Ordinance (Cap. 150), leases for special purposes included leases which contained a permanent prohibition against assignment and 28 other leases which were granted for special purposes without a permanent prohibition against assignment. Examples of such leases included those for churches, cemeteries, public utilities and petrol filling stations. Like STT, leases for special purposes might be extended based on individual merits. PAS/PEL added that the vast majority of such leases had been granted extension.

5. In response to a member, the Deputy Commissioner of Rating & Valuation (DCRV) said that a non-assignment clause and the term of the lease normally would have no impact on the rateable value since rateable value was assessed on a year to year basis. Except for the special leases for petrol filling stations (which were not extended but were replaced by new leases at a premium), payment of a premium for lease extension was not required. Similar to newly granted leases, a provision had been included in special purpose leases for payment of Government rent at 3% of rateable value of the land leased from time to time. The Assistant Commissioner of Rating and Valuation (ACRV) supplemented that charging of Government rent at 3% of the rateable value of the land leased from time to time was not a new arrangement. Furthermore, annual rent at 3% of the rateable value was also payable for leases renewed under the Crown Leases Ordinance, Cap. 40.

6. Some members were of the view that since some special purpose leases were granted on concessionary terms, it would be tantamount to a change in policy if the Administration treated them on a par with other leases by charging Government rent at 3% of the rateable values. Moreover, as paragraph 2 of the JD did not apply to STT and special purpose leases, members had great doubt on whether the obligation to pay Government rent should apply to those leases. In reply, PAS/PEL said that Annex III to the JD only excluded STT and special purpose leases from block extension but not payment of Government rent. Members were unconvinced of the Administration’s explanations and pointed out that Annex III did not expressly provide for charging of Government rent on STT and special purpose leases. Deputy Crown Solicitor (DCS) clarified that the Administration was not compelled under Annex III to charge Government rent, at 3% of rateable value of the land leased from time to time, on special purpose leases. PAS/PEL said that notwithstanding that, the Administration considered that disparity would be created if Government rent, at 3% of rateable value of the land leased from time to time, was charged on some leases but not on others. The arrangement for charging Government rent at 3% of the rateable value for all extended leases including special purpose leases had been discussed and agreed by the Sino-British Land Commission. Moreover, churches were not necessarily located on land subject to a special purpose lease and most special purpose leases including churches, with a provision for payment of Government rent at 3% of rateable value, had already been executed.

7. Given that Annex III to the JD did not compel the Government to charge Government rent at 3% of rateable value from time to time on STT and special purpose leases and that the Bill was intended to implement the provisions in Annex III to the JD, some members remained of the view that the Administration should not introduce a change to the existing policy by charging at Government rent 3% of rateable value on special purpose leases. Hon NGAN Kam-chuen, on the other hand, expressed reservations in excluding special purpose leases from payment of Government rent.

8. At the request of members, the Administration agreed to advise in writing the justifications for charging Government rent at 3% of the rateable value on leases for special purposes which had been granted on concessionary terms, and whether this represented a change in the existing policy.

Clause 6(7)

9. Members noted the Administration’s intention to amend the wording of clause 6(7) to the effect that clause 6(7) should apply even if a tenancy agreement contained a general prohibition against the setting off of monies owed against the rent payable under the agreement.

Assessment of rateable values for and charging of rates on unoccupied land

10. Regarding the reasons for assessing rateable values to leases which were exempted from assessment to rates, the Administration’s representatives said that a rateable value was required for the purpose of charging Government rent. Section 7(2) of the Rating Ordinance, Cap. 116, did not preclude the Administration from assessing rateable values to such leases. All tenements had rateable values. A tenement had a "rateable value" irrespective of whether or not rates were assessed or paid, or whether the tenement was vacant or occupied.

11. Members expressed doubts on the Administration’s interpretation given that there was no case law about the assessment of rateable values for and charging of rates on unoccupied land. DCS responded that the absence of case law indicated that no one had thought it worth challenging the Administration’s interpretation of section 7(2) of the Rating Ordinance in the courts.

12. Members were not satisfied with the explanations. The Administration was requested to advise the legal basis upon which tenements exempted from assessment to rates under the Rating Ordinance were capable of being so assessed under the Bill and assigned with rateable values for the purpose of charging Government rent, and to provide a breakdown on the estimated revenue generated from collection of Government rent by type of leases such as special purpose leases and leases which had not been subject to the assessment and/or payment of rates under the Rating Ordinance, Cap. 116.

13. As to whether the Administration would charge Government rent for a tenement the rateable value of which was zero at the date of extension, the Administration’s representatives said that Government rent would not be payable under such circumstances. However, if for example, the rateable value of the tenement was above the minimum amount due to redevelopment, the Administration would collect 3% of the rateable value as the Government rent.

Justifications for applying different methods in assessing the rateable values for different categories of land before, during and after development or redevelopment

14. PAS/PEL explained the different methods used to assess the rateable values of different types of land as follows -

  1. undeveloped land : a few such land lots such as container storage sites existed which were not substantially used. Such land would be valued on its actual use;

  2. redevelopment sites : the rateable value would be the sum of the rateable values of the tenements which previously stood on the site (ie. the last ascertained rateable value); and

  3. development sites : 5% of the market value of the sites would be charged as the rateable value.

15. PAS/PEL stressed that whilst the Administration could use method (c) to assess the rateable values of sites under redevelopment, this might create uncertainty to the developer as regards factoring the rateable values into their development plans. Besides, disputes on the actual rateable values might arise. For the majority of cases, the above arrangements would cover only two to three years when the (re)development took place. Hence, in the Administration’s view, it would be better to use the last ascertained rateable value for sites under redevelopment.

16. The Chairman was concerned whether such an arrangement would be unfair to land owners if the redevelopment took a considerable time to complete. PAS/PEL responded that in a few cases where a redevelopment site was left vacant for years, the rateable value would also be the last ascertained value. This was because the Administration did not intend to encourage owners to leave land vacant for a long period of time.

17. A member envisaged practical difficulties in using method (b) should the redevelopment site be a private housing estate previously with numerous owners. He suggested that the Administration should consider better alternatives than using the last ascertained rateable value.

III. Clause by clause examination of the Bill

18. Members continued with a clause-by-clause examination.

Clause 36 Legal affect of demand, etc., on unauthorised structures, etc.

19. Members expressed reservations about this clause. They were of the view that Government rent should not be collected on illegal structures. PAS/PEL explained that this clause was aimed at clarifying beyond doubt that payment of Government rent from an owner/occupier of an unauthorised structure such as a roof-top structure would not legalise the structure. Practically it would be impossible for the Administration to ascertain the legality of a structure before issue of a demand note. Moreover, exemption of unauthorised structures from payment of Government rent would encourage their proliferation. Should members so wish, the Administration might add a note to the demand note stating that the payment of Government rent did not confer legality of the tenement.

20.Members opined that this clause would expressly legitimize the collection of Government rent on illegal structures. For the purpose of the Bill, this clause was not necessary. The Administration was requested to review the need for this clause.

Clause 37 Re-entry

21. In response to a member’s enquiry, PAS/PEL confirmed that in case of a multi-owner lease, the right of re-entry was applicable only to the part of the land whose owner failed to pay the required Government rent.

Clause 38 Lease, etc., over-ridden

22. On the need for this clause, PAS/PEL explained that this over-riding provision was intended to put it beyond doubt that where conflicts arose between the provisions in the Bill and an applicable lease, the former would prevail.

Regulations

23. The Chairman requested Assistant Legal Adviser 1 to examine the draft regulations and to advise members of the legal and drafting aspects.

Date of next meeting

24. The next two meetings would be held on 13 March 1997 at 4:30 pm and 14 March 1997 at 8:30 am respectively.

25. The meeting ended at 10:30 am.

Provisional Legislative Council Secretariat
7 July 1997

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