Following is a question by the Hon Wu Chi-wai and a reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (June 1):
Question:
The Hong Kong Housing Authority (HA) divested in 2005 certain retail and car parking facilities of its public housing estates to a trust, which has been renamed as Link Real Estate Investment Trust (the Link). Under the land leases for the relevant car parks, the parking spaces may only be let to the residents, occupiers and their bona fide visitors. However, the Link may apply to the Lands Department (LandsD) for waivers of the relevant land lease conditions to change the number of parking spaces or let some of the parking spaces to non-residents, and in doing so, it has to pay waiver fees and comply with the conditions set out by LandsD in the short term waivers. On the other hand, it has been reported that an owner who purchased a car park from the Link two years ago is recently planning to sell the parking spaces in the car park owned by him one by one. In this connection, will the Government inform this Council:
(1) as it was uncovered in September 2009 that the Link had breached the land lease conditions by letting the parking spaces in its car parks to non-residents, whether the authorities have imposed penalties on the Link in addition to requiring it to pay the outstanding waiver fees retrospectively; if they have, of the details; whether there are channels for the residents who have suffered losses due to the breach of the land lease conditions by the Link to seek compensation from the Link; whether the regulators concerned have investigated if the breach of the land lease conditions and sale of assets by the Link have contravened the relevant securities legislation and codes;
(2) of the annual number of short term waiver applications received by LandsD from the Link for changing the number of parking spaces since the listing of the Link, the number of parking spaces involved, as well as the waiver fees involved in the approved applications; how LandsD calculates the amount of waiver fees; the mechanism in place to ensure that the Link and new owners comply with the land lease conditions, and the respective numbers of short term wavier applications made by them which are awaiting vetting and approval; and
(3) given that the Link changed the monthly fixed parking spaces of some 50 car parks to floating ones a few months ago, which may render the relevant tenants unable to park their vehicles right away and need to await parking spaces when the car parks are fully occupied, whether the authorities have studied if this practice of the Link has breached the relevant land lease conditions and contravened the provision under section 4(1) of the Housing Ordinance, which stipulates that HA shall exercise its powers and discharge its duties under the Ordinance so as to secure the provision of housing and such amenities ancillary thereto as HA thinks fit for such kinds or classes of persons as HA may, subject to the approval of the Chief Executive, determine?
Reply:
President,
The Hon Wu's question concerns the management of the car parks that were divested by the Hong Kong Housing Authority (HA) to The Link Real Estate Investment Trust (now known as Link) then. The question involves matters related to enforcement of land leases, the requirements of the Housing Ordinance and the relevant securities legislation and regulatory codes.
Having consolidated the inputs from the Transport and Housing Bureau and the Financial Services and the Treasury Bureau, my reply is as follows:
(1) In respect of lease enforcement, the Lands Department (LandsD), in the capacity of the landlord, handles the leased land under the conditions of the land leases. As with other private properties, LandsD mainly acts on complaints and referrals about breaches of the leases by conducting inspections and taking follow-up actions in accordance with the existing procedures. Depending on the circumstances, LandsD will also consult the relevant policy bureaux/government departments and seek legal advice. If breaches of the lease conditions are confirmed, LandsD will take appropriate lease enforcement and resolute action.
Generally speaking, land leases do not contain provisions requiring the owners in breach of lease conditions to pay punitive damages. If breaches of the lease conditions are established, LandsD will handle the cases based on individual circumstances. Normally, LandsD will demand the owners to rectify the breaches or process the applications made by owners for regularisation based on actual circumstances. Where the breaches have not been rectified or regularised, LandsD will consider taking further actions, including registering the warning letters at the Land Registry (commonly known as "imposing an encumbrance"), and re-entry of land or vesting the relevant interests in The Financial Secretary Incorporated pursuant to the provisions of the Government Rights (Re-entry and Vesting Remedies) Ordinance (Cap. 126).
From the perspective of the management of trusts, under the Code on Real Estate Investment Trusts (REIT) (REIT Code), it is the duty of the management company of a REIT to ensure that the REIT is professionally managed in the sole interest of its unitholders. This includes ensuring compliance with any applicable laws or rules regarding the activities of the REIT or its administration. Subject to compliance with such overarching obligation and any specific requirements in the REIT Code, the Securities and Futures Commission does not generally interfere with the commercial decisions and activities of the REIT management company in managing the REIT. Further, under the REIT Code, disposal of assets of a REIT is permissible subject to compliance with relevant regulatory requirements including, for example, disclosure and unitholders' approval where applicable.
(2) As regards the lease requirements, the land leases for the grant of the relevant lots by the Government to HA, and the latter's subsequent divestment of the commercial facilities and car parks to Link, contain restrictions on the number of parking spaces to be provided and the types of vehicles to be parked in the relevant lots. Individual land leases also contain provisions stipulating that some of the parking spaces shall be provided for parking vehicles of the residents or visitors of the nearby housing estates or courts. The relevant lease conditions including requirements on parking spaces are available at the Land Registry for public inspection. As with other private lots, the relevant requirements on parking facilities are included into the leases according to the advice of the relevant policy bureaux/government departments (e.g. the Transport Department, the Planning Department and the Housing Department).
As regards the owner's obligations, as with other private properties, Link must comply with the lease conditions as the owner of the properties. In case of subsequent sale of the properties by Link, the owners at the time also have the same obligations. It is the responsibility of buyers or investors of the properties to understand and comply with the lease conditions.
In respect of waiver applications, as with all land leases, the owners concerned may apply to LandsD for temporary waivers so as to waive some specified provisions of the original leases. LandsD processes temporary waiver applications in relation to car parks from Link or relevant owners in accordance with the established procedures on handling waivers, which include consulting the relevant policy bureaux/government departments such as the District Offices concerned, the Planning Department, the Transport Department and the Housing Department. The policy bureaux/government departments will assess the latest demand and supply situation of parking spaces and consider these temporary waiver applications, so as to make good use of the surplus parking spaces in a flexible and timely manner, and address the prevailing needs of other persons and the demand for parking spaces for other types of vehicles. In general, LandsD will make an offer of terms for a waiver to Link including the waiver fee payable and the waiver term if there are no objections from the relevant policy bureaux/government departments and the local community. The waiver fee is assessed on the basis of the increase in rental value of the relevant properties brought by the waiver of the restrictions.
HA divested its car parks to Link in 2005. LandsD does not have separate figures on temporary waiver applications from Link which involve changing the number of parking spaces specifically. According to existing information of LandsD, Link has made a total of 125 temporary waiver applications to LandsD since 2010 in relation to car parks, which mainly involved changing the number of parking spaces to be provided, the types of vehicles to be parked, and allowing some of the parking spaces to be provided for parking vehicles of non-residents of the respective estates or those not specified in the land leases as from 2011. Link subsequently withdrew or terminated 28 of the applications. As at May 2016, 96 of the applications have been approved by LandsD while the remaining one application is being processed. Some 900 parking spaces are involved in these 97 temporary waiver or applications.
The total sum of waiver fees paid by Link for temporary waivers in relation to car parks since 2011 is shown as follows:
Year Total sum of waiver fees
(approximate figures) (Note)
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2011 $10,450,000
2012 $10,100,000
2013 $10,110,000
2014 $11,680,000
2015 $11,120,000
Note: The waiver fees include the fees payable to the Government for relaxing all the restrictions under the waivers, i.e. changing the number of parking spaces to be provided, the types of vehicles to be parked, and allowing some of the parking spaces to be provided for parking vehicles of non-residents of the respective estates or those not specified in the land leases.
Regarding the car parks sold by Link since 2014, the original waivers have been terminated. The parking spaces should be used in accordance with the land lease conditions. The present owners may submit waiver applications. As at May 2016, LandsD has received four temporary waiver applications from the present owners, which involved changing the spaces for goods vehicles to the parking of other types of vehicles and allowing those not specified in the land leases to use motorcycle parking spaces.
(3) In terms of the daily operation of car parks, land leases generally do not restrict the mode of operation of the car parks, such as letting of the parking spaces on an hourly or monthly basis. It is thus not necessary for Link to apply to LandsD for temporary waivers in order to change the mode of operation from monthly fixed parking spaces to floating ones.
HA exercises its powers and discharge its duties under the Housing Ordinance so as to secure the provision of housing and ancillary facilities which HA thinks fit for the tenants. In planning for public housing projects, HA will make reference to the guidelines under the Hong Kong Planning Standards and Guidelines, take into account views of Government departments and the local communities in planning for suitable facilities in public housing estates, including car parks.
As with all other private property owners, owners of former HA car parks need to comply with relevant legislations (including the Town Planning Ordinance and the Buildings Ordinance), land leases and contracts which they signed with other organisations. The Government cannot interfere with the owners' lawful right to use their properties so long as the relevant legislations and land leases are complied with. Also, so long as the owners do not breach the terms of covenants made with HA, HA cannot and will not interfere with their day-to-day operation and commercial decisions, including the operation and disposal of car parks.
Ends/Wednesday, June 1, 2016
Issued at HKT 17:50
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