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The chief executive's policy address introduced a trial scheme to process future land lease modifications or exchanges by arbitration.

Arbitration can lead to significant new housing supply

I refer to Allan Hay's letter ("Arbitration is not the answer to assess value of land premiums", February 20). He condemns the chief executive's policy initiative for processing future land lease modifications or exchanges by arbitration.

I refer to Allan Hay's letter ("Arbitration is not the answer to assess value of land premiums", February 20). He condemns the chief executive's policy initiative for processing future land lease modifications or exchanges by arbitration.

Hay, a former senior Lands Department surveyor, knows the old system well, as do I, a valuation surveyor having processed waivers over the last 30 years.

His first concern is finding impartial arbitrators. The Hong Kong International Arbitration Centre has a panel of over 200 qualified arbitrators, including me, so this is not insurmountable.

His second issue is that reduced transaction volume is due to high values, not a flaw in the system. However developers won't apply if they won't pay market rates; the case backlog is due to Lands Department policy. It acts as judge and jury throughout, and fails to disclose how it assessed its premium, requiring multiple appeals. The system is an obsolete colonial relic.

Hay says premiums should be negotiated between professionals, and this current system should continue, as the first step. Only if the applicant wishes to take a premium to arbitration should the new regime operate. Arbitration should then provide a fast final decision, after both parties have presented their cases, likely at a hearing, with experts called and cross-examined. Beneficially, the arbitrators will issue a detailed reasoned award.

Where current arbitration proposals fail is in the composition of the arbitral panel. Current ideas are that the department and applicant each appoint their own arbitrator. A clash of valuers on the three-person panel could result. It is better to have one legal chairman, one valuer/arbitrator, and the third arbitrator from a professional discipline chosen by the applicant which relates to the heart of the appeal - an engineer, a quantity surveyor, a foundations specialist or the like. Many details like this require careful analysis to make the new system effective.

Finally, Hay says the chief executive has been pushed into this to speed up land supply. No, it was in his election manifesto, and I commend him for pursuing this bold new initiative, against vested interests. If correctly implemented, it will give applications with sound cases opportunity for swift resolution at a fair premium.

This has to be good for Hong Kong, showing an open, fair, and more efficient land administration. We have local arbitration expertise; let's now use it, and significant new housing supply should be the most welcome result.

This article appeared in the South China Morning Post print edition as: Arbitration process can lead to significant new housing supply
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