Vacant-lot rent clash heads for appeal court
A clash between the Government and Hong Kong's leading property developers over a system of charging rent on vacant land that puts 'many millions' of dollars at stake has advanced to the appeal court.
In an unusual twist, both sides have lodged appeals against features of a Lands Tribunal judgment that deals with the process of charging rent on vacant land.
A total of 59 leases are involved, and the rent issue has united subsidiaries or associates of eight developers in a bid to challenge the Government.
Those taking part include companies within the Cheung Kong Group, Chinachem Group, Hang Lung Group,Henderson Group, Nan Fung Group, Sino Group, Sun Hung Kai Properties Group and Wheelock Group.
The companies protest against the system used to charge rent on vacant land for sites pending development or those at different stages of development, where the rent is calculated at the yearly rate of three per cent of the 'rateable value' of the land.
Although the companies do not dispute the Government can charge the rent, they are concerned over the rateable value. Before July 1, 1997, undeveloped land would not be liable for rates.
The companies say it is unfair to pay rent on the basis of the potential value of the land when the development potential has already been taken into account in determining the premium.
They say rateable value can only be determined by the current physical state of the land, thus any potential value it might have for development is irrelevant.
In that case - if the land is not capable of being occupied and deriving income - the proper rateable value should be nil, they contend.
The Lands Tribunal in March ruled that the Government is empowered to put such a rateable value on vacant land. Moreover, rent should not be dependent on occupation, it ruled.
However, features of the tribunal's ruling give rise to concern as far as the Government is concerned, when it comes to the valuation.
Malcolm Spence, counsel for the Commissioner of Rating and Valuation, moreover told the appeal court yesterday: 'This is an important case with many millions of dollars per annum at stake.' The tribunal made the rulings as preliminary legal points. The next step will be for valuation evidence to be called, when trying to assess the rateable value applicable for the leases.