conveyancing law and hong kong law PDF

Preview

Summary

hi Tort Law in Hong KongTort Law in Hong KongTort Law in Hong KongTort Law in Hong KongTort Law in Hong KongTort Law in Hong KongTort Law in Hong KongTort Law in Hong KongTort Law in Hong KongTort Law in Hong KongTort Law in Hong KongTort Law in Hong Kong...

Description

Chapter Title: Conveyancing Book Title: Hong Kong Legal Principles Book Subtitle: Important Topics for Students and Professionals Book Author(s): Stephen D. Mau Published by: Hong Kong University Press Stable URL: https://www.jstor.org/stable/j.ctt2jc5nn.12 JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at https://about.jstor.org/terms

Hong Kong University Press is collaborating with JSTOR to digitize, preserve and extend access to Hong Kong Legal Principles

This content downloaded from ฀฀฀฀฀฀฀฀฀฀฀฀฀147.8.204.164 on Mon, 06 Dec 2021 03:21:07 UTC฀฀฀฀฀฀฀฀฀฀฀฀฀ All use subject to https://about.jstor.org/terms

5 Conveyancing

In this chapter, matters relating to Hong Kong conveyancing are presented in the general order in which the typical conveyancing process1 proceeds: sale and purchase agreement, nature of title, proof of title, assignment, completion and post-completion activities, remedies in the event of breach, mortgages and charges, and landlord-tenant. Readers will recognize the overlap with some of the earlier chapters, in particular Property. However, before proceeding to conveyancing matters, two related subjects, Government leases and the use of deeds of mutual covenants for multi-storey building management, will be reviewed to provide some background information to the material in this chapter.

1.

As noted in 16 H ALSBURY’S LAWS OF HONG KONG para. 230.0133 (2001): The types of contract for the sale of land in Hong Kong include: (1) sales by conditions of sale; most alienation of land by the Government is effected by a public auction, and the contract is called conditions of sale under which the purchaser receives a leasehold estate; (2) secondary sales where the Government lessee sells his land, or more correctly assigns his leasehold, to a purchaser where no estate agent is involved, in most cases the parties will instruct a solicitor to act prior to being bound; (3) secondary sales where the Government lessee sells his land, or more correctly assigns his leasehold, to a purchaser but where neither party instructs a solicitor initially, but both sign a contract drafted by an estate agent who is agent for both vendor and purchaser, and who also signs the contract; (4) sales of uncompleted units in multi-storey developments, which are regulated by the Land Office under the Consent Scheme; and (5) sales by mortgagees on the mortgagor’s default. (citations omitted) See also id. at para. 230.0004, where the main Hong Kong Ordinances relating to land are presented.

This content downloaded from ฀฀฀฀฀฀฀฀฀฀฀฀฀147.8.204.164 on Mon, 06 Dec 2021 03:21:07 UTC฀฀฀฀฀฀฀฀฀฀฀฀฀ All use subject to https://about.jstor.org/terms

378

I.

HONG KONG LE G A L P RINCIP LE S

LEASEHOLD OWNERSHIP IN HONG KONG

In Hong Kong, the Government disposes of land by granting long leases. These were known as Crown leases prior to 1997 and as Government leases after 1997. Therefore, with one exception,2 all lands held by private persons in Hong Kong in essence are leasehold. Under a Crown or Government lease, the Hong Kong Government is the landlord. For the purposes of this chapter, leasehold estates are treated as realty.3 Although a tender system is used occasionally,4 Government land is usually sold by auction, in which the highest bidder becomes the lessee. 2.

3.

4.

The only freehold land in Hong Kong is St John’s Cathedral which was granted on the condition that the land be used as a church. For a detailed history, see JUDITH S IHOMBING & MICHAEL WILKINSON, Hong Kong Conveyancing: Cases and Materials, vol. 1, chapters I and II (2004) [hereinafter SIHOMBING, Cases and Materials]. This work will follow Hong Kong local practice. “… the Government lessee is referred to … as the ‘owner’ of the land, despite the fact that he merely holds a leasehold estate. Where that ‘owner’ grants a sub-lease, local practice usually refers to that sub-lease as a ‘lease’.” 16 H ALSBURY’S, supra note 1, at para. 230.0002 (citations omitted). See also SIHOMBING, Cases and Materials, supra note 2, at vol. 2, chapter II at para. 52; JUDITH SIHOMBING & MICHAEL WILKINSON, A STUDENT’S GUIDE TO H ONG KONG CONVEYANCING, chapters 8–10 (4th ed. 2002) [hereinafter SIHOMBING, STUDENT’S GUIDE]. SARAH NIELD, H ONG K ONG LAND LAW 303–304 (2nd ed. 1997): Occasionally Government leases are granted otherwise than by auction. Privately negotiated Conditions of Grant may be made for public purposes, for instance, for a school. Where land is exchanged for other land, which is quite common where an old site is being redeveloped, it may be convenient for the lessee to surrender his old Government lease and obtain a new grant where, for instance, he wishes to change slightly the boundaries of the site or where evidence of his title is rather fragmented. In this case, Conditions of Exchange are issued. Conditions of Exchange will also be issued where the premium for a site has been settled by the tender of land exchange entitlements, commonly known as ‘letters A and B’, which were issued by government to compensate land owners in the New Territories for the compulsory resumption of their land. These entitlements give the holder a right to a grant of land in the territory that he may submit in satisfaction of premium at certain specifically organized tenders of Government land. The Conditions of Extension may be issued where an additional area of land is granted as an extension to, and on the same terms as, an existing site. These other types of agreement for a Crown lease are also governed by [the Conveyancing and Property Ordinance (Cap 219) section 14] … 16 H ALSBURY’S, supra note 1, at para. 230.0131: Letters A and Letters B, also called Land Exchange Entitlements, were issued on the resumption of New Territories land, between 1960 and 1983, to entitle the holder to a grant of land in an urban New Territories development area at some future time. Both forms of Letters could be used to offset the price of land purchased from the Government by auction or tender. The New Territories Land Exchange Entitlements (Redemption) Ordinance … provides for the conversion of the Letters A and B into money payments … and for the extinguishment of their use for payment of land. (citations omitted)

This content downloaded from ฀฀฀฀฀฀฀฀฀฀฀฀฀147.8.204.164 on Mon, 06 Dec 2021 03:21:07 UTC฀฀฀฀฀฀฀฀฀฀฀฀฀ All use subject to https://about.jstor.org/terms

CONVE YA NCING

379

The agreement between the Government and the lessee sets out the provisions of the lease5 and is known as the Conditions of Sale.6 The amount of the premium payable is the auction bid price. A certificate of compliance7 is issued by the Government if it is satisfied that the obligations under the Conditions of Sale are fulfilled. To encourage performance of these obligations, the Government usually does not allow the lessee to dispose of the property until compliance with the conditions occurs. The purpose of executing the Conditions of Sale, rather than the Government lease itself, is to provide the Government with a method to regulate land development and to avoid unnecessary expense and delay. In fact, despite the terms of the Conditions, which require the lessee to enter into the lease, it is the Government’s policy not to issue a lease unless specifically requested.8 Section 14(1)(a) of the Conveyancing and 5.

A tenant’s rights and obligations are usually set out in the Government lease or by implication of law, for example: • • •

6.

See, e.g., infra section VII. There are five kinds of conditions: • • • • •

7.

8.

quiet enjoyment; exclusive possession; and assignment or sub-lease.

Conditions of Sale, under which land is sold; Conditions of Exchange, under which the granted land is exchanged for other land; Conditions of Grant, under which land is granted for a particular purpose; Conditions of Regrant, under which a grantee applies for a new grant upon the expiration of the lease; and Conditions of Extension, under which additional land is granted by the Government.

For a detailed discussion of these conditions, see 16 H ALSBURY’S, supra note 1, at paras. 230.0107–230.0114. See also S IHOMBING, S TUDENT ’S G UIDE, supra note 3, at 76–80; SIHOMBING, Cases and Materials, supra note 2, vol. 1, chapter II at paras. 154–199 and vol. 2, chapter II at paras. 251–311. Various Government authorities may issue the certificate, including: the Director of Public Works and the Registrar of Titles or Director of Lands. A certificate of exemption is issued in the New Territories for buildings which do not need to comply with the Building Ordinance (Cap 123). A certificate of exemption has the same effect as a certificate of compliance. See 16 H ALSBURY’S, supra note 1, at para. 230.0108 n.3 (citing Chung Mui Teck v Hang Tak Buddhist Hall Association Ltd, unreported, CACV No 20/01). 16 H ALSBURY’S, supra note 1, at para. 230.0420 n.7 comments: Since the early 1980’s no Government lease has issued on the completion of the building covenant in the conditions of sale, and consequently only the conditions of sale now represent the Government lease. The equitable interest of the purchaser becomes legal on the issue of a certificate of compliance from the government indicating that the purchaser has observed the covenants in the conditions; there are usually two such covenants, namely the payment of the premium and the building covenant … (citations omitted)

This content downloaded from ฀฀฀฀฀฀฀฀฀฀฀฀฀147.8.204.164 on Mon, 06 Dec 2021 03:21:07 UTC฀฀฀฀฀฀฀฀฀฀฀฀฀ All use subject to https://about.jstor.org/terms

380

HONG KONG LE G A L P RINCIP LE S

Property Ordinance (Cap 219) deems the Conditions of Sale with the Certificate of Compliance to be the equivalent of a formal Government lease.9 Most Crown or Government leases in Kowloon and on Hong Kong Island are granted for seventy-five years, with a right of renewal for a further seventy-five years, save for the early 999-year leases granted between 1849 and 1898. The Crown lease with an option to renew can be renewed without payment of a further premium and at a rent which is fixed by reference to the land’s rental value. The Government Leases Ordinance (Cap 40) sections 3–5 automatically extend all renewable seventy-five year or ninety-nine year Crown or Government leases in Hong Kong. Articles 121–122 of the Basic Law now provides for the grant of leases for fifty-year terms.10 Leases in the New Territories were formerly granted for a seventyfive year term from 1 July 1898, renewable for another term of twenty-four years, less three days. From 1959, New Territories leases ran for ninetynine years from 1 July 1898, meaning that they expired on 1 July 1997.

9.

The relevant provision states: (1) Where a person has a right to a Government lease of any land upon compliance with any conditions precedent, then, upon compliance with those conditions(a) the equitable interest under that right shall become a legal estate in that land as if held under a Government lease issued in accordance with that right; …

Conveyancing and Property Ordinance (Cap 219) section 14(1)(a). 10. Article 121 of the Basic Law provides: As regards all leases of land granted or renewed where the original leases contain no right of renewal, during the period from 27 May 1985 to 30 June 1997, which extend beyond 30 June 1997 and expire not later than 30 June 2047, the lessee is not required to pay an additional premium as from 1 July 1997, but an annual rent equivalent to 3 per cent of the rateable value of the property at that date, adjusted in step with any changes in the rateable value thereafter, shall be charged. Article 122 of the Basic Law states: In the case of old schedule lots, village lots, small houses and similar rural holdings, where the property was on 30 June 1984 held by, or, in the case of small houses granted after that date, where the property is granted to, a lessee descended through the male line from a person who was in 1898 a resident of an established village in Hong Kong, the previous rent shall remain unchanged so long as the property is held by that lessee or by one of his lawful successors in the male line.

This content downloaded from ฀฀฀฀฀฀฀฀฀฀฀฀฀147.8.204.164 on Mon, 06 Dec 2021 03:21:07 UTC฀฀฀฀฀฀฀฀฀฀฀฀฀ All use subject to https://about.jstor.org/terms

CONVE YA NCING

381

Section 6 of the New Territories Leases (Extension) Ordinance (Cap 150)11 extended all the leases in the New Territories to 30 June 2047, unless the lessee opted otherwise under section 5 of this Ordinance.12 Some Crown leases do not include an option to renew. Upon expiry of these leases, one of the following may occur: • • • •

the the the the

land reverts back to the Crown, now the HKSAR Government Government resells the land by auction to the highest bidder Government resells the land to the last lessee at market price Government grants a new lease or the lessee renews the lease13

Non-renewable Government leases due to expire before 1997 may be extended without the payment of any premiums until 30 June 2047 at an annual rental of 3% of the land’s rateable value.14 As previously stated, pursuant to either section 4 or section 5 of the Government Leases Ordinance, the right of renewal contained in the lease shall be deemed to have been exercised for renewable Government leases,

11. Section 6 states: The term of a lease to which this Ordinance applies is extended, from the date on which it would, apart from this Ordinance, expire, until the expiry of 30 June 2047, without payment of any additional premium. New Territories Leases (Extension) Ordinance (Cap 150). 12. Section 5(1) provides: A lessee may exclude from the application of this Ordinance his interest under a lease, other than an undivided share in the land to which the lease relates, by registering in the Land Office register, before the appointed day, a memorandum in a form specified by the Land Officer. New Territories Leases (Extension) Ordinance, supra note 11. 13. This is the most common situation. For further discussion, see, e.g., 16 HALSBURY’S, supra note 1, at paras. 230.0102–230.0104, 230.0116; SIHOMBING, STUDENT’S GUIDE, supra note 3, at 49–58. See generally SIHOMBING, Cases and Materials, supra note 2, vol. 1, chapter II at paras. 48–78 and vol. 2, chapter II at paras. 52–231, 355–527. 14. As summarized by one authority: All leases of land granted, decided upon or renewed before the establishment of the Hong Kong Special Administrative Region which extend beyond 30 June 1997 and all rights in relation to such leases are recognised and protected under the law of the Hong Kong Special Adminsitrative Region. As to the leases of land granted or renewed where the original leases contain no right of renewal, during the period from 27 May 1985 to 30 June 1997, which extend beyond 30 June 1997 and expire not later than 30 June 2047, the lessee is not required to pay an additional premium as from 1 July 1997, but an annual rent equivalent to 3 per cent of the rateable value after that date, is to be charged. (citations omitted) 17 H ALSBURY’S LAWS OF HONG K ONG, para. 235.019 (2000).

This content downloaded from ฀฀฀฀฀฀฀฀฀฀฀฀฀147.8.204.164 on Mon, 06 Dec 2021 03:21:07 UTC฀฀฀฀฀฀฀฀฀฀฀฀฀ All use subject to https://about.jstor.org/terms

382

HONG KONG LE G A L P RINCIP LE S

and under section 915 at an annual rate of 3% of the rateable value of the land. The Government of the Hong Kong Special Administrative Region has stated that it will grant new leases for a term of fifty years without any premium, but at the annual rental of 3% of the land’s rateable value. A Crown or Government lease is different from the usual landlordtenant leases in that the former: • • • •

is longer in duration has lower rent which is compensated by a large premium contains terms giving the Crown or Government greater control over the development and/or use of the land allows the Crown or Government to take back or resume land if required for public purposes16

15. Section 9 states: (1) Subject to subsection (9) the new Government rent payable under a new Government lease shall be an amount equal to 3 per cent of the rateable value of the lot or section held under new Government lease. (2) Subject to the provisions of this section, the rateable value for the purposes of this section of a lot or section held under a new Government lease is the rateable value or interim valuation as set out on the relevant day in the list declared under section 13 of the Rating Ordinance (Cap 116), of the tenement, or, if there is more than one tenement, the aggregate of the rateable values and interim valuations as so set out of all the tenements comprised wholly or partly in the lot or section held under the new Government lease. … (9) Where the person or all of the persons, if more than one, entitled to exercise the right of renewal contained in a renewable Government lease paid or agreed in writing with the Director to pay the new Government rent of a lot or section in an amount exceeding that which is specified in subsection (1) the new Government rent of the lot or section shall be(a) for the period from the expiration of the renewable Government lease to the 30 June 1973 the amount so paid or agreed to be paid; and (b) for the period from the 1 July 1973 to the expiration of the term of the new Government lease the amount specified in subsection (1). Government Leases Ordinance (Cap 40). 16. One authority notes: “the Government lease invariably has a clause entitling the Government to resume land for public purposes.” 16 H ALSBURY’S, supra note 1, at para. 230.0968. For analysis concerning Government resumption of land, see 16 HALSBURY’S, supra note 1, at paras. 230.0038, 230.0968–230.1013. Paragraph 230.0038 provides a brief overview of this topic, stating in part: … there is no compulsory acquisition of land … in the sense of the Government buying land from the owner under a compulsory order of sale. … acquisition, by the Government of the land held under a Government lease prior to the termination of that lease, is … resumption except in the case of land being compulsorily acquired or purchased under the Land Acquisition

This content downloaded from ฀฀฀฀฀฀฀฀฀฀฀฀฀147.8.204.164 on Mon, 06 Dec 2021 03:21:07 UTC฀฀฀฀฀฀฀฀฀฀฀฀฀ All use subject to https://about.jstor.org/terms

CONVE YA NCING

383

Crown or Government leases usually contain provisions regulating assignments and sub-letting. If a tenant enters into an agreement to sublet or under-lease all of the remaining interest in the tenancy, the transaction is referred to as an assignment. In an assignment of a lease, only the parties to the lease have changed; there remains only one lease on the estate. In effect, the party receiving the assignment, the assignee, from the original tenant, the assignor, is substituted for the original tenant. A lessee who makes an assignment transfers the remainder of the term he might enjoy to the purchaser, the assignee. Land sold in Hong Kong is actually the residue or balance of the term of the Crown or Government lease that is being assigned by the lessee to the purchaser. For instance, an owner who holds a Crown or Government lease of land for seventyfive years, of which there are sixty-five years still to run, sells that land by assigning the sixty-five year residue of his lease to the purchaser. The owner then has no further interest in the land. The assignm...