On 15th July 1997, Executive Council endorsed various provisions covering land leases and related matters under the Hong Kong Special Administrative Region Government.
For general land grant policy on lease extension endorsed by ExCo please click
Land Tenure System and Land Policy in Hong Kong.
The Government has a clear policy for dealing with land leases and related matters, including the extension of land leases. The policy is premised on the basic guiding principles of continuity in the arrangements, simplicity in procedures and certainty in the tenure of leases. It seeks to provide clarity, consistency and certainty in the land lease terms.
Under the policy, leases (excluding short term tenancies and special purpose leases) not containing a right of renewal (“non-renewable leases”) may, upon expiry and at the sole discretion of the HKSAR Government, be extended for a term of 50 years without payment of an additional premium. The extended leases are subject to a payment of an annual rent at 3% rateable value of the property at the date of extension. The annual rent will be adjusted in step with any changes in rateable value thereafter.
The policy applies to all leases not containing a right of renewal (excluding short term tenancies and special purpose leases). No limit on the number of times that a land lease can be extended by the arrangements stipulated has been set out under the policy. For the avoidance of doubt, the policy applies to renewable leases which have already been renewed pursuant to the right of renewal contained in the lease with no further right of renewal upon expiry of the renewal term.
Renewable leases of which the right of renewal has not yet been exercised are outside the scope of the policy, and will be renewed for the renewal term stated in the leases at an annual rent equivalent to 3% of the rateable value of the land in accordance with the provisions of the Government Leases Ordinance (Cap. 40).
Since the establishment of the HKSAR, the Lands Department has been dealing with matters related to the extension of expiring land leases in accordance with the policy promulgated in 1997. For example, when the lease for Pokfulam Gardens expired in 2006, it was extended for 50 years up to 2056 at no additional premium and subject to payment of annual rent at 3% of rateable value, with the annual rent adjusted in step with any changes in rateable value thereafter.
While the extension of non-renewable leases is not automatic, the Government follows due process in exercising its “sole discretion” prudently. Various factors will be considered on lease extension, e.g. whether serious lease breaches are found under the original lease; if the lease was granted on policy considerations for promoting certain objectives such as individual industries, whether the policy consideration is still valid. As a matter of fact, the Lands Department has extended most non-renewable leases since the policy was first promulgated in July 1997.
Reference Materials On Practice and Procedures for Lease Extension
To help property owners understand the established practice and procedures for extension of expiring land leases, the Lands Department will, in the light of its past experience in dealing with lease extensions, compile specific reference materials on the procedures and factors of consideration with regard to lease extensions.
Arrangements For Land Lease Expiring On Or After 1 July 2047
From an operational and logistical perspective, the Government is fully aware of the challenge of coping with a large number of leases that will expire in 2047. In the past, the Government had extended land leases en masse by way of legislation, namely, legislation of the New Territories Extension (Leases) Ordinance (Cap. 150) for extension of most leases in the New Territories (including New Kowloon) expiring before 30 June 1997 to a term expiring on 30 June 2047. The legislation was enacted in 1988, which was nine years prior to the expiry of the leases in 1997. The Government will make reference to past experience in legislation and work out suitable arrangements to cater for the significant volume of lease extension cases at an appropriate juncture.