Lease Control

Lease Control

Contents
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1. Background
2. Change in Use
3. Permanent Modification
4. Temporary Variation

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3 1. Background
A. Lease Control
B. Lands Department
C. Certificate of Compliance
D. Sample of Land Lease
E. Breach of Lease Condition

A. Lease Control (1) (Development

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Control Mechanism in Hong Kong)
 All land in Hong Kong, with the exception of the St.
John’s Cathedral, is leased from the Government by
way of Leases or Conditions of Sale by auction or
tender, Grant, Regrant, Extension, Exchange etc.
 Non-statutory control on the nature and intensity of
development. Why consider as non-statutory control?
Because lessor and lessees are bound by the lease
conditions in the contractual document between the
private owners and the Government, not an
ordinance.

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A. Lease Control (2)

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 In drawing up lease conditions, whether for sale by

auction, tender, private treaty grant, or through lease
modification, the Government as the lessor can
stipulate development restrictions such as user, site
coverage, plot ratio, building height, non-building
areas, design and disposition, car parking
requirements, environmental protection requirements
and sometimes even the provisions of G/IC facilities
in accordance with the town planning provisions.

B. Lands Department
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 Responsible for the disposal of government land.

 In charge of land management which covers control
of government land to prevent illegal occupation,
and enforcement of the lease provisions should there
be non-compliance with the lease conditions for the
private land.
 Carries out valuation for government land
transactions and variation of lease conditions.

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C. Certificate of Compliance
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(Letter of Compliance)
 A certification of letter issued by the District Lands
Officer on behalf of the Director of Lands certifying
that all the relevant covenants in the Conditions of
Grant have been complied with.
 All relevant government departments with jurisdiction
of the relevant covenants will be consulted by the
District Lands Officer for confirmation of compliance
prior to the issue of the certificate.

C. Certificate of Partial Compliance

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 For large sites, where the development will be divided

into phases and the completion time of various phases will
take years, or where the lot is so big that it is anticipated
that it will be sub-divided into different sections,
Certificate of Partial Compliance may be issued by the
District Lands Officer.
 The positive covenants related to the phase of the
development and the lot of land shall be observed and
complied with prior to the issue of the Certificate of
Partial Compliance.

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D. Sample of Land Lease Lease Conditions

Particulars (date, lot no. etc.) Location map

E. Breach of Lease Condition (1)

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 If a breach of lease conditions is suspected, the Lands

Department will respond to complaints.
 In case of unauthorized change of users in premises,
owners (lessees) are normally given a period of time
to remedy the breach, usually 3 months. During this
period, the breacher (lessees) will be required to pay
forbearance fee in return for the government to
withhold action in the interim period whilst he is
remedying the breach.

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E. Breach of Lease Condition (2)

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 Further periods may be granted with justification but

subject to payment of heavier forbearance fees.
 In serious breaches of lease conditions or the lessees
repeatedly breach the conditions, the Government as
the land owner has the authority to re-enter the
property as a last resort according to the provisions
of the Government Rights (Re-entry and Vesting
Remedies) Ordinance (Cap.126).

12 2. Change in Use
A. Development Control
B. Common Restrictions

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A. Development Control
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 Make optimum use of land as well as control

development so as not to adversely affect the
environment or overload the provision of
infrastructure or communities facilities.
 All development and redevelopment have to be in
accordance with the conditions stipulated in the
leases. Otherwise, modification of lease conditions
is required.

B. Common Restrictions
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In a land lease, the common restrictions include: -

 Usage (Residential, industrial, etc.)
 Plot ratio (or in the form of maximum permissible
Gross Floor Area GFA)
 Site coverage (% Total GFA/Site Area)
 Height of building
 Non-building area
 Car parking arrangement etc.

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15 3. Permanent Modification
A. Lease Modification
B. Procedures – Lease Modification
C. Timeframe

A. Lease Modification (1)

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Permanent modification or a temporary variation of

the condition will be required in two situations:
 The lessee wishes to use or develop a lot differently
from that permitted by the existing conditions.
 The Government policy in certain areas, to modify
old lease conditions which severely restrict the
development permitted on a lot, in order to allow
redevelopment complying with the applicable town
planning requirements.

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A. Lease Modification (2)

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 Modifications of lease conditions are permissible

subject to the submission of a valid application
 The proposed use of the land conforming to land
policy and a premium being payable where the
modification enhances the value of the lot
 A premium, equivalent to the difference in land value
between the development permitted under the
existing lease and that permissible under the new
lease terms. In addition to the premium, an
administrative fee will also be charged

B. Procedures - Lease Modifications (1)

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1. Only registered owner(s) of the land or formally

appointed agents can apply
2. Usually, the General Practice Surveyor in charge
would check the land zoning first, if the application
can be entertained. If not, the GP Surveyor will
advise the applicant to proceed s.16 application
under the TPO
3. District Lands Office (DLO) acts as a clearing house
for all other departments for comments (circulation
for comments)

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B. Procedures - Lease Modifications (2)

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4. DLO prepare a submission for DLC (District Lands

Conference)
5. Terms and conditions agreed and finalized
6. Offer subject to premium assessment (to be
approved by Valuation Conference)
7. All accepted including the premium
8. Legal documentation

C. Timeframe
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Procedures for
Processing a Lease
Modification

1. Checklist for Lease

Modification (PN
Issue 4-2007)

2. Premium Assessment
Procedure for Lease
Modification (PN
Issue 1-2006)

Extracted from Li, L.H.

(2006), Cap 2, Fig 10

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21 4. Temporary Variation
A. Waiver
B. Procedures – Waiver
C. Nature of Waivers

A. Waiver (1)
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 Wavier is the temporary relaxation of the whole or

part of the use of the building, or substituting for
forbearance to re-entry due to the breach of lease
conditions
 Waivers will normally be reviewed annually and
waiver fee be re-assessed triennially to reflect
market conditions
 The addition and alteration project (not for
permanent) is generally to apply waiver for the
change in use.

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A. Waiver (2)
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 Short term waiver is for waiving Governments right of

re-entry for a limited period during which the lessee
(land owner) may construct a building on the land for
use other than agricultural use
 Short term waiver is subject to renew with renewal
fee
 In addition to the wavier fee, an administrative fee
will also be charged

A. Waiver (3)
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 To expedite the processing of applications for waivers

from owners of existing industrial premises, for purposes
other than exclusively for information technology and
telecommunication ('IT&T') industries, a simplified
procedure outlined in Practice Note Issue No. 2/2003 of
the Lands Department.
 The streamlined processing procedure for waivers
exclusively for IT & T industries is covered in Practice Note
Issue No. 5/2001 and Practice Note Issue No. 5/2001A

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B. Procedures – Waiver
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1. Waiver applications must be submitted by the registered

owner(s) of the property concerned or his/their authorized
persons.
2. Upon receipt of a waiver application, the LD will consult
relevant Government departments. Such consultation will
normally take around 3 weeks.
3. If the property concerned falls within the environs or the
extension area of a recognized village, notices will be posted
in the village and given to the Rural Committee to establish
whether there are any local objections.
4. If the application is approved, the LD will assess the waiver
fee.

B. Procedures – Waiver (2)

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5. A basic terms offer letter setting-out the period of the waiver,

the amount of waiver fee, the administrative fee and the
deposit payable etc., will be issued to the applicant.
6. The applicant will be required to indicate acceptance of the
basic terms within the period stated in the letter before a
formal waiver letter is issued.
7. Once an offer is accepted and payment made, the LD will
issue the waiver letter to the applicant for execution.
8. A certified copy of the executed waiver letter will be
registered by memorial at the Lands Registry.

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C. Nature of Waivers
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Waivers can be categorized into two types: -

1) Those directly affecting land (e.g. to permit relaxation of the
user restriction or the erection of structures in respect of
agricultural land)
2) Those concerning buildings (e.g. to allow commercial activities
in industrial buildings)
Waivers are normally granted for a term of 1 year and
thereafter quarterly until terminated by either Government
or the leaseholder by giving 3 months notice. Occasionally,
waivers may be granted up to a maximum of 3 years with
further extension subject to approval.

References
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1. Li, L.H. (2006) Development appraisal of land in Hong Kong (Rev. Ed.), Chinese
University Press, HK.
2. Poon, T. and Chan, E. (1998) Real Estate Development in Hong Kong, Hong
Kong: Pace Pub.
3. Lai, L. (2004) Change in use of land: a practical guide to development in Hong
Kong, Hong Kong: Hong Kong University Press.
4. Practice Notes, the Lands Department
a) Practice Note Issue 4-2007 “Checklist for lease modification”,
b) Practice Note Issue 1-2006 “Premium assessment procedure for lease
modification”
c) Practice Note Issue 2-2003 “Temporary waiver for industrial building”
d) Practice Note Issue No. 1/2015 “Standard rate for waiver”

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