Vacant land rental ruled legal despite owners' plea

PUBLISHED : Wednesday, 31 March, 1999, 12:00am
UPDATED : Wednesday, 31 March, 1999, 12:00am


Rent laws empower the Government to put a 'rateable value' on vacant land, Hong Kong's leading property developers were told yesterday.

However, when considering the rateable value, the Government must make assumptions based on the land as 'a vacant building site in its actual existing state', a tribunal ruled.

In the case of sites eyed for redevelopment, it would be violating the Basic Law to calculate the rateable value based on the aggregate 'last ascertained value' of the building just before its demolition.

A total of 58 companies - subsidiaries or associates of eight big developers - had banded together at the Lands Tribunal to challenge the Government's practice of charging rent on vacant land.

The mass action focused on sites pending development, or those at different stages of development or redevelopment, where rent would be charged at 3 per cent of the rateable value of the sites.

Companies taking part include subsidiaries or associates of Cheung Kong Group, Chinachem Group, Hang Lung Group, Henderson Group, Nan Fung Group, Sino Group, Sun Hung Kai Properties Group and Wheelock Group.

Demand notes for government rent on their land had been sent out in July 1997 following the introduction of the Government Rent Regulation, which stipulated that this rent would be charged.

The provisions of this law 'clarify beyond doubt that development sites would be liable for assessment for rent whether the rent would be nil or nominal,' the tribunal ruled.

Moreover, 'rent being what it is should not be made dependent on occupation.' The companies had claimed that if land is not capable of being occupied and deriving income, the proper rateable value is nil or nominal.

They claimed that changing the basis of rateable value, breached the Basic Law.

The Government's act itself of charging rent based on rateable value of vacant sites does not violate the Basic Law, the tribunal ruled.

The basis of valuation, however, must take into account the actual physical state of the site.

'There is no good reason not to adopt what is urged upon the tribunal on behalf of the appellants, namely, as a vacant building site in its actual existing state,' the tribunal ruled.

When calculating the 'hypothetical tenancy' of the land, the Government must follow existing systems of calculating rates.

'If the Commissioner wants to ascribe a value to the site above that indicated by the existing mode, he can adduce evidence, direct or indirect.' The tribunal, with Deputy Judge Yung Yiu-wing presiding, made the above rulings as preliminary points in the legal action. Disputes over the correct method of assessment concerning these points of law had to be determined before valuation evidence is called.