Land leases in Hong Kong

By Jeff Chan

As one of the most expensive cities in the world, it can come as a shock to many home owners in Hong Kong that there is no guarantee that they will own their flat forever.

All land in Hong Kong is practically leased or otherwise held by the Government of the HKSAR. During the time when Hong Kong was under the ruling of the colonial British government, leases were for terms of 75, 99 or 999 years.

Under the provisions of the original Crown Leases Ordinance, the urban areas of Hong Kong Island and Kowloon were renewable at a re-assessed annual rent to a term of 7 years. In 1898, land leases of 99 years less three days were granted when the New Territories and New Kowloon at the north of the Boundary Street were leased to the British Government for 99 years, which later applied to other parts of Hong Kong as well. For lease terms of 999 years, it is an exception that were made during 1849-1898 upon application of landowners which was ceased by the former colonial government as it undermined their control of land in the long run.

In 1973, the Government Leases Ordinance was enacted where a re-assessed annual rent equivalent to 3% of rateable value of the land was required for all renewable land leases in Hong Kong.

In December 1984, the Sino-British Joint Declaration was signed signifying the whole of Hong Kong would be returned to China on 1 July 1997 while guaranteeing Hong Kong’s social and economic system would remain untouched for 50 years after the 1997 handover. The Declaration also cleared concerns over the uneasiness over land leases in New Territories as they were approaching expiration in 1997, stating that land leases in Hong Kong would be handled according to the provisions of Annex III under the following principles:

(a) all leases, including rights of renewal extending beyond 30 June 1997 are allowed to continue;

(b) all leases in the New Territories that expired before 30 June 1997 may be extended for a further fifty years until 30 June 2047;

(c) all leases on Hong Kong Island and in Kowloon that expired before 30 June 1997 without an option to renew could be renewed by the Crown at an annual rent equivalent to 3% of the rateable value without additional premium; and

(d) new leases of land may be granted for terms expiring not later than 30 June 2047.

With the current political unrest and the global pandemic, concerns have been raised regarding the future of the legality of land leases in Hong Kong. Under Article 123 of the Basic Law, a national law of China that serves as the de facto constitution of the HKSAR, it states “where leases of land without a right of renewal expire after the establishment of the Hong Kong Special Administrative Region, they shall be dealt with in accordance with laws and policies formulated by the Region on its own.”

“where leases of land without a right of renewal expire after the establishment of the Hong Kong Special Administrative Region, they shall be dealt with in accordance with laws and policies formulated by the Region on its own.”

Article 7 of the Basic Law also imposes that “[t]he land and natural resources within the Hong Kong Special Administrative Region shall be State property.” This means that from 2047, when the Basic Law expires, the extension of land leases will solely depend on government discretion.

In response to the public concerns over land leases after 2047, the Government has repeatedly stated that they have clear policy plans for handling the matter related to the extension of land leases upon expiry and arrangements will be made to deal with the lease extension work. No details of the mentioned plans have been released yet by the government. The HKSAR government has also stated that there is no provision in the Basic Law to restrict the power of the HKSAR government to grant land beyond 2047, hence the claim for equating 2047 as a “limit” for land leases is “simply unfounded”.

As we approach 2047, it is critical for the HKSAR government to put out clear protocols and guidelines for owners, investors and stakeholders with expiring leases to maintain the stability and status of Hong Kong as a leading financial hub in the world.