LLAW3105 Land Law III Government Leases and Termination

LLAW3105 Land Law III Christopher Chan
LLAW3105 Land Law III (Conveyancing)

Government Leases and Termination
Learning objectives
1. System of land holding in Hong Kong

 Vesting of land in the state
 Meaning of land
 Land surveys and land boundaries
 Demarcation of land and land records
 Alienation of land and division of lots
2. Government leases and Conditions of Grant
 Grant of land by the Government
 Modification of the grant
 Restrictive covenants and conditions in Conditions
 Waiver
 Approval to build granted by Building Authority does not estop Lands Department
from enforcing any breach of restrictive covenant
 Implied covenants
 Other implied terms
3. Termination (by expiry and surrender)
 Introduction
 Expiry of the term granted
 Surrender of leasehold interest
4. Termination by re-entry
 Right to re-entry
 Procedure for re-entry
 Re-entry where premises in joint ownership
 Relief against re-entry
5. Termination by resumption
 Introduction
 Procedure for resumption and challenges to that procedure
 Offer to be made within 28 days
 Claims by persons other than the owner
 Determination of compensation by Lands Tribunal
 Procedure for eviction of owners following resumption
1
1. SYSTEM OF LAND HOLDING IN HONG KONG
1.1 Vesting of land in the state
Land in Hong Kong vested in the British Crown in three distinct phases.
- (1) Hong Kong Island under Treaty of Nanking in 1843
- (2) Kowloon so far as Boundary Street under Convention of Peking in 1860
o Sham Shui Po is treated as Kowloon under land law
- (3) New Territories for 99 years until 30 June 1997 by Second Convention of Peking
o Grant by treaty and not a lease at common law
o No reversion to China in 1997 but treaty simply expired
o Squatters’ title remained unaffected when treaty expired: Li Kwok Ching v SJ (2015)
HCA 1303/2010
All land became property of the PRC from 1 July 1997: BL Art.7
- HKSAR is responsible for management, use and development and for its leasing: BL Art.7
- No freehold land except St. John’s Cathedral: Church of England Trust Ordinance s.6(1)
o What about adverse possession on HK Island?
1.2 The meaning of land
(a) Common law definition
‘Cuius est solum est usque ad coelum et ad inferos’.

- Owns airspace and all land below surface but not
o Minerals: Mining Ordinance s.3
o Treasure trove: Antiquities and Monuments Ordinance s.10
- Confirmed that it is still applicable: Bocardo SA v Star Energy UK Onshore Ltd [2011] AC
380
(b) Statutory definition
CPO s.2 provides:

- land covered by water
- any estate, right, interest or easement in or over land
- the whole or part of an undivided share in land and any estate, right, interest or easement in or
over the whole or part of an undivided share in land
- things attached to land ie fixtures.
*(c) Fixtures and fittings
Why is the distinction between fixtures and fittings important?

- All fixtures will be assigned automatically while chattels require delivery
- Stamp duties on fixtures but not on chattels
- Vacant possession does not extend to fixtures
The test is to look at the purpose of annexation and the degree of annexation: Hamp v Bygrave
- Purpose: temporary use for the owner / enhancing the value of the building / for the use and
enjoyment of the item
- Degree: ease of removal
Illustrations:
- Fixtures
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o Fixed seats in a cinema (because they were intended to be a permanent item in the
cinema): Vaudeville Electric Cinema v Muriset (1923) 2 Ch 74
o Greenhouse (conservatory) (as an integral part of building): see Goldful Way
Development Ltd v Wellstable Development Ltd [1998] 4 HKC 679
- Fitting
o Ceiling light: Haines Connie Frances v Cheung Hing Cheong (2006) HCPI No
551/2000
Whether air-conditioners are fixtures or fittings?

- Type 1: window-type air conditioner => fittings
o Preferred authority: Yu Yiu Kong Samuel v Kobylanski Stephen Andre (2001) DCCJ
No 15371/2000 (attachment was temporary; could have been removed without much
damage to wall)
o Cf. Irene Loong v Pun Tsun Hang [1959] HKDCLR 192 (window-type air
conditioner in ballroom prima facie fixture)
- Type 2: air conditioner resting on floor => fittings
o Penta Continental Land Investment Co Ltd v Chung Kwok Restaurant Ltd [1967]
HKDCLR 22 (bolted to frames but frames were not attached to the building)
- Type 3: air conditioning system => fixture
o Orient Leasing (Hong Kong) Ltd v NP Etches [1985] HKLR 292 (affixed to the
building; intended to form part of the building for the use of numerous tenants; part
and partial of the system)
- Type 4: split-level type air conditioners?
o Firmly attached to the wall or not
1.3 Land surveys and land boundaries
There is no system of guaranteed boundaries (registered titles) in Hong Kong.
(a) New Territories
- Cadastral survey conducted at the end of the 19th century to determine the boundaries of land
- NT land divided into 270 Demarcation Districts (DD) and allocated to individuals by Land
Court in 1905
- Possibility of off-plan houses
o Courts follow the DD plan; if the houses are in the wrong place, title for the house
would be defective
o The use of adverse possession to resolve issues relating to inaccuracies in DD plan
(b) Hong Kong Island and Kowloon
- Land boundaries are delineated when land is granted by way of Government

leases/Conditions of Grant in HK Island and Kowloon but this has often been imperfect
- Now a plan must be drawn up privately and registered in the Land Registry whenever land
sectioned
*(c) Discrepancy between the plan and verbal description of the land in the Government lease
The test is: to get the answer look at the intention of the parties as evidenced by the words used
(ie the objective test): Secretary for Justice v Wing Lung Wai Community [1999] 3 HKC 580, CA,
per Chan CJHC
- Have regard the conveyance as a whole, including any plan which forms part of it
Principle 1 – when the words in Government lease prevails over the plan
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- Where the Government lease says that ‘the plan is for the purposes of identification only’:
Wiggington and Milner Ltd v Winster Engineering Ltd [1978] 1 WLR 1462
- Yet even in this case plan may still be looked at for elucidation purposes but not so as to
contradict verbal description: Green Park Properties Ltd v Dorku Ltd [2000] 4 HKC 538, CA
Principle 2 – when the plan in Government lease prevails over the words
- Where the Government lease says that the land is ‘more particularly delineated on the plan
annexed to the Government lease’: Eastwood v Ashton [1915] AC 900 (HL)
For Conditions of Grant: since there is no verbal description of the land but only a plan, the problem
does not arise in that context.
(d) Resolution of boundary disputes by the courts
This unsatisfactory system of delineation of land boundaries has led to many disputes over land
boundaries.
- Tam Mo Yin v Attorney General [1996] 1 HKC 379 (126 acres granted by Government
auction to P by reference to plan attached to Government lease; in 1950 land divided into two
parts and one part sold to X constituting 1,344 sq feet; issue as to whether fishponds on land
belonged to P; plan missing; oral evidence from elderly residents and aerial photographs used
to establish land boundaries)
- Liu Ma Cheung v Liau Yin Fu (2007) HCA 181/2004 (DD plan prevailed)
(e) Land Survey Ordinance
- Land Survey Ordinance 1995 has gone some way to ameliorating the problem
- Surveyor: a plan must be drawn up by an authorised land surveyor whenever the land is
divided by way of sectioning (but not subdivision) (see below)
o Duty of the authorised land surveyor is to ensure that accuracy and completeness of
every boundary plan certified by him: s 28(4) Land Survey Ordinance
o Authorised land surveyor liable for any loss occasioned by inaccuracy of plan: Liu
Ma Cheung v Liau Yin Fu (2007) HCA 181/2004
- Registration: this plan must be registered in the Land Registry and a copy deposited with the
Land Survey Authority
- Adverse possession: many of the boundary problems in the New Territories have been
resolved by the application of the doctrine of adverse possession
1.4 Demarcation of land in Hong Kong and land records
*Land in Hong Kong is divided into lots.

- E.g. Hong Kong Inland Lots, Kowloon Inland Lots, Marine Lots, Rural Building Lots, etc.
- NT land is identified by way of the Demarcation Districts (about 270) in which the land is
located
Records of all lots are kept in the Urban Land Registry in Central District (dealing with Hong Kong
Island, Kowloon and New Kowloon) and the eight District Land Registries which keep the records of
all land in the New Territories.
- All registries are now fully computerised and, since 1997, can be accessed by computer from
solicitors' offices
- The Document Imaging System has replaced microfilm and all documents are now retained
by way of a computerised record
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The Integrated Registration System (IRIS), which came into effect in February 2005, now provides
for direct access to all deeds registered in respect of land both in Hong Kong and the New Territories.
Colour imaging of plans has also been introduced.
Plain copies of documents registered can be downloaded in solicitor’s office, but certified copies
must be paid for and collected from the Land Registry. The former may be used for checking title
but the latter are required for showing good title.
*1.5 Alienation of land and the division of lots
Subject to any prohibition in the Government lease/Conditions, any landowner is at liberty to deal
with the leasehold interest in his lot. He may sell, give away, lease or leave by will his interest in the
land. Alternatively, he might divide his plot of land into smaller segments and sell off part or he might
decide to build a multi-storey building on the land assigning each flat to a different purchaser.
(a) Sectioning of land by deed poll (on the ground)
If a landowner wishes to divide his lot on the ground into smaller lots he must section it.
- If Lot No 1234 is sub-sectioned into two, one part will become ‘Section A of Lot 1234’ and
the other ‘the Remaining Portion of Lot No 1234’
- If Section A is again sub-sectioned, the new section will be called ‘Subsection 1 of Section A
of Lot 1234’. The other part will be designated ‘the Remaining portion of Section A of Lot
1234’
- If the remaining portion of section A or the remaining portion of Lot 1234 is further
sectioned, one part becomes ‘Section B of Lot 1234’ and the other retains the designation ‘the
remaining portion of Section A of Lot 1234’ or `the remaining portion of Lot 1234’
Sectioning is carried out by deed poll (cf indentures); on sectioning Government rent will be
apportioned.
- Deed poll is a deed to which there is one party
- Cf. indentures, which are deeds inter partes, e.g. Crown Leases
o To prove good title, only half of the Crown Leas has to be shown
(b) Subdivision of land (in the air)
Where a landowner wishes to build a block of flats on his land and sell the flats to tenants in
common, he will have to subdivide his land.
- Each flat owner will become a tenant in common of the whole plot holding a number of
undivided shares in the plot
- Exclusive right (licence) to occupy, use and enjoy (NOT possess) a particular flat
- The plot will be controlled by a deed of mutual covenant (to be dealt with later)
- On subdivision Government rent is apportioned
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2. GOVERNMENT LEASES AND CONDITIONS OF GRANT
*2.1 Grant of land by the Government
Land used to be granted by the Government by way of Government leases. Land is now granted by
way of Conditions of Sale, Grant, Exchange, etc.
(a) Government leases and Block Government leases
The Government used to grant land into private ownership by way of Crown leases.
- In NT, Block Crown leases (corresponding with the Demarcation Districts) were granted
which dealt with blocks of land rather than individual plots
- These original Block Crown leases are referred to as ‘Old Schedule leases’
o Building covenant which requires the building to be built within a stated period of
time
- Crown leases granted subsequently in the New Territories are referred to as ‘New Grant
leases’
The method of sale of land varies.

- It is usually by public auction or private treaty for a premium (the purchase price) and an
annual Government rental payment
- Land is usually sold by private treaty in special cases
o E.g. For low cost housing development, public utilities, schools, churches, temples,
clinics and charitable purposes
*When the grantee receives land under a Government lease he receives a legal leasehold estate.
- Crown lease is an indenture, i.e. a deed, thus can pass a legal estate: CPO s.4(1)
(b) Conditions of Grant, Sale etc.
The manner of sale has changed to the grant of Conditions.

- The Conditions constitute a contract
- When the conditions in the Conditions have been complied with, a Government lease would
be deemed to be issued: CPO s.14(1)(a)
(c) The duration of the grant
The term granted by Government has varied over the history of the Colony.
- In the earliest times the grant was for a non-renewable term of 75 years
- In 1848 leases (mainly in Central District and the Peak) were granted for 999 years but at the
turn of the century leases were again issued only for period of 75 years or 99 years
- Up to June 30 1997 the conventional grant by way of Conditions was 75 years, renewable for
a further term of 75 years, but after the coming into force of the Basic Law, a grant may be
made only for 50 years beginning from the date of the grant
*(i) New Territories land
In NT, which were granted by treaty to the British government by China for 99 years.
- From 1 July 1898, leases were granted (usually backdated) for 75 years from 1 July 1898 (ie
up to 1973) renewable for 24 years less 3 days
o Backdating renders date of execution usually irrelevant
- These leases were automatically renewed by the New Territories (Renewable Government
Leases) Ordinance
- From 1959, the term has been 99 years from 1 July 1898 less 3 days
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- Since all leases in the New Territories were due to expire on 27 June 1997, they were all
extended by the New Territories Leases (Extension) Ordinance until 30 June 2047 unless
the lessee opted otherwise (i.e. 50 years)
The NTL(E) Ordinance does not, however, apply to special purpose leases in the New
Territories for which individual application for renewal has to be made.
- The decision whether or not to grant a renewal of special purpose leases can be judicially
reviewed
- See Hong Kong & China Gas Co v Director of Lands (1998) HCA 10/1998 (storage of gas);
Kam Lan Koon v Secretary for Justice for and on behalf of the Director of Lands [1999] 3
HKC 591, CA (Taoist temple for ancestral worship)
(ii) Land in Hong Kong Island and Kowloon (ie up to Boundary Street)
For land in Hong Kong Island and Kowloon (up to Boundary Street), there are FIVE possible
scenarios.
- (1) Leases expiring after 1997
o Recognised by BL 120
- (2) Non-renewable Government leases expiring before 1997
o Extended without payment of a premium until 30 June 2047 at an annual rental of 3%
of the rateable value as adjusted from time to time: BL 121
o New lease
- *(3) Renewable Government leases expiring before or after 1997
o Automatically renewed by ss.5(1), (2) of the Government Leases Ordinance for the
stipulated period of renewal in the Government lease
o The renewal is at an annual rental of 3% of the rateable value as at the date of
renewal (NOT as adjusted from time to time): BL 120
o NOT new lease
- (4) Grant of new Government leases before 1 July 1997
o For terms not expiring later than 30 June 2047, at a premium and, in respect of the
period after 1 July 1997, at a rental of 3% of the rateable value adjusted from time to
time: see Annex 3 of the Joint Declaration
o Recognised by BL 120
o New lease
- *(5) The grant of new Government leases after 1 July 1997
o New Government leases must be dealt with in accordance with the policy of the
HKSAR: BL 123
o Grant new leases for a period of 50 years from the date of the grant (i.e. they can
expire beyond 2047) upon payment of a premium together with an annual rental of
3% of the rateable value as it changes from time to time
o New lease
(iii) Renewal of leases of flats in multi-storey buildings
There are special rules in respect of the renewal of leases of multi-storey buildings.
- As it is possible that not all the co-owners might be willing/available to renew, the lease is
renewed in the name of The Financial Secretary Incorporated, who assigns to each co-owner
who wishes to renew
- New DMC is drawn up by Government
(iv) Effect of renewal/extension on pre-existing rights
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Where a Government lease expires and is either renewed or replaced by a new Government lease
relating to the same land, any covenant relating to that land shall, unless the contrary intention is
expressed, continue to have effect: CPO s.42(3)
As to the effect of such a renewal/extension on extension on pre-existing easements: Lam Pau Ho v

Cheung Kam Ming (1997) MP 2026/97 (easement granted ‘for residue of term of lease’; question
whether easement continued to exist after lease renewed by statute; held that it could not have been
the intention of the parties that the easement would cease if the term of the lease were extended;
therefore easement continued to end of extended term)
*(d) Conditions of Sale, Grant, Exchange, Extension, Re-Grant [=> when referring to the terms
within the Conditions, “conditions”]
(i) The FIVE different types of Conditions
As we have seen above, Government leases are no longer issued by Government and land is granted
by way of Conditions. These may be either:
- (1) Conditions of Sale
o Land is sold
- (2) Conditions of Exchange
o Land granted is exchanged for other land – grantee surrenders land for somewhere
else
o E.g. to correct the boundaries of land with the agreement of the Lands Department
o Previously conditions of exchange were also granted in exchange for land exchange
entitlements (Letters A and B), but such entitlements may now only be exchanged for
a cash payment.
- (3) Conditions of Grant
o Land is granted for a particular purpose
o Gift where no premium is paid
o E.g. charitable purposes or by way of the small house policy in the New Territories
- (4) Conditions of Re-grant
o Government lease has expired and the grantee applies for a fresh grant
o With or without a premium
- (5) Conditions of Extension
o Additional land is granted by the Government, e.g. for development purposes
o Extension of area not the time/duration of the grant
The Conditions are invariably in two parts: General and Special Conditions (see the specimen
Conditions attached to these notes).
- A Condition is basically a contract under hand relating to land
- General Conditions (terms): applicable to all grants of land
- Special Conditions (terms): related to a specific grant, e.g. restrictive and positive covenants
(ii) The binding nature of Conditions
The Conditions of Sale together with the Memorandum of Agreement constitute a binding
contract: Attorney General v Tong Iu [1968] HKLR 603.
- Where land is sold under Conditions of Sale etc., the purchaser receives Conditions of Sale
together with a Memorandum of Agreement which he signs
The interest of the purchaser under the specifically enforceable Conditions of Sale etc is merely
an equitable interest under the agreement.
- The Conditions, being a contract relating to an interest of land, are specifically enforceable:
Walsh v Lonsdale and see also CPO s.3(1)
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o What if there is an exclusion clause in the Conditions which excludes specific

performance? Then no interest will be passed by the signing of the Conditions
o Are Conditions of Grant specifically enforceable even though it is a gift? MW argues
that they are because the performance of the conditions (i.e. the terms) constitutes
consideration
- It is converted into a legal estate when the conditions have been complied with: CPO s.14(1)
(a)
- To protect his interest, the grantee should register his interest under the agreement in the Land
Registry
*(iii) Compliance with the Conditions
When the conditions have, as a matter of fact, been complied with, a Government lease is
deemed issued: CPO s.14(1)(b)
- The terms of the (deemed issued) Government lease are those conventionally contained in
Government leases
- These will include (i) in an appropriate case, perhaps, the offensive trades clause (see below
but not likely) and (ii) the reservation of minerals and the right to lay sewers in favour of
Government
The effect of factual compliance with the conditions converts the equitable interest of the
grantee into a legal estate and a Government lease is deemed issued.
- It is suggested that not all conditions need to be complied with; only positive conditions and
no breach of negative covenants
- It is important to appreciate that conversion occurs upon factual compliance, NOT upon
the issue/registration of a certificate of compliance
o However, one way to know whether there is factual compliance is through an
inspection by the Lands Department and the issue of a certificate of compliance
o Registration of the certificate of compliance effects as deemed compliance, deemed
conversion of equitable to legal interest and deemed issuance of Government lease
(iv) Certificate of compliance
Scenario A - Conditions dated after 1 January 1970
The owner needs to prove such compliance.

- The certificate of compliance provides EVIDENCE (of prior conversion) that the positive
conditions have been complied with (and there has been no breach of any restrictive
covenant)
- Will be granted by the Director of Lands when he is convinced that the relevant positive
conditions have been complied with and that there is no current breach of any restrictive
conditions: CPO s.14(3)
- Certificate of compliance must be registered in the Land Registry: CPO s.14(3) and Tai Wai
Kin v Cheung Wan Wah Christina [2004] 3 HKC 198
Scenario B - Conditions dated before 1st January 1970
Conditions entered into before 1st January 1970 are deemed to have been complied with: CPO
s.14(2)
- The effect of this provision is deemed compliance, conversion into a legal estate and issuance
of the Government lease
- As no certificate of compliance is required, no requisition should be raised as to any
certificate of compliance issued before 1 January 1970: Minchest Ltd v Lau Tsui Kwai [2008]
2 HKC 283, CFA
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(e) Instruments entered into or registered between Conditions of Grant and deemed issued
Government lease
Any instrument entered into and taking effect after an agreement for the Government lease of the land
affected by the instrument but before the issue of the Government lease of that land shall have the
same force and effect in relation to that land after the issue of the Government lease as it had
immediately before that issue: CPO s.42(1)
- Possible situation: when there has not been factual compliance, i.e. some positive covenants
not met
- These instruments will continue to be effective after the deemed issue of the Government
lease
A similar statutory provision embraces other instruments registered between the date of the
Conditions of Grant and the deemed issued Government lease: CPO s.42(2)
- Registration shall continue in force for instruments entered into between the Condition and
the deemed issuance of Government lease
(f) Difference between interest under Government lease and Conditions of Grant etc.
The interest of a grantee in land held under a Government lease is a legal estate.
The interest of a grantee under Conditions of Grant etc is merely an equitable interest, until the
conditions in the Conditions have been complied with.
2.2 Modification of the grant
(a) Application for variation/modification
It is very common in Hong Kong for a grantee to apply for variation/modification of the Government
lease/Conditions of Grant etc.
- E.g. the Conditions may contain a restrictive covenant (only to build a house of particular
specifications or use might be restricted to residential/commercial/industrial) or a stipulated
maximum height, plot ratio or site coverage which the developer wishes to exceed
- Application may be made to LACO (Legal Advisory and Conveyancing Office in the Lands
Department) for a variation or modification of the Government lease or Conditions
- A premium will usually be charged which brings in substantial revenue for Government
(b) Mode of variation/modification
At common law a deed can only be varied by another deed: West v Blakeway (1841) 2 Man & G 729,
although equity permits a deed to be varied by a document under hand at least where such variation
has been acted upon to the detriment of the person relying upon the variation: Berry v Berry [1929] 2
KB 316.
A Government lease (also the deemed Government lease) should ideally therefore be varied by a
Deed of Variation (under seal), whereas Conditions (which are simply a document under hand) may
properly be varied by a letter of modification.
To ensure that previous breaches of this principle did not have any adverse effect, Government may
now modify a Government lease even with a written letter of modification: CPO s.14A
(c) Decision not amenable to judicial review
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In deciding whether or not to grant a modification of a restrictive covenant in a Government

lease/Conditions of Grant etc (and in respect of the premium chargeable), the Government is not
acting in a public capacity but rather as a private landlord and its decision is not, therefore,
amenable to judicial review on the grounds of irrationality: see Hang Wah Chong Investment Co Ltd
v Attorney-General [1981] 1 WLR 1141, [1981] HKLR 336, PC, Director of Lands v Yin Shuen
Enterprises Ltd [2003] 2 HKC 490, CFA
2.3 Restrictive covenants in Government leases and restrictive conditions in Conditions of

Grant, etc.
(a) User restrictions in Government leases/Conditions
It is common to have user restrictions in the Government lease/Conditions of Grant. The lease may,
for example, restrict user to residential use or agricultural use or there might be a restrictive covenant
as to the type of building to be constructed on the site. It might be helpful to look at some case
illustrations:
(i) ‘Residential/private dwelling house/domestic use’
The meaning of ‘house’/ ‘villa’ does not cover a block of flats / high-rise building
- ‘Purchaser might only erect detached or semi-detached residential premises of a

European type’ which had to be used as private dwelling house; held that this prohibited the
erection of a block of flats: Wong Bei-nei v Attorney General [1973] HKLR 582
- Area zoned for ‘village type development’ and the developer would like to erect 33-storey
block of flats. Held that (i) a residential block with one common entrance but containing a
number of flats within the building envelope can be a house; (ii) it does not follow that, in
the ordinary use of language today, a 30-storey residential block can be referred to as a house:
Wah Yick Enterprises Co Ltd v Building Authority (1999) 2 HKCFAR 574
- Restrictive covenant in Crown lease requiring no more than one house to be constructed on
the lot. Held that construction of multi-storey building was prohibited, in light of the existing
type of houses on the lot when Crown lease was drafted: Fully Profit (Asia) Ltd v Secretary
for Justice (2013) 6 HKCFAR 351
- ‘Owner permitted to erect one or more villa residences only’. Held that (i) erection of block
of flats / high-rise building was not permitted but a one-storey house; (ii) including ‘villa’ in
the name of the building does not turn a block of flats into a villa: TS Cheng v Attorney
General [1986] HKC 607
‘A dwelling house’ does not restrict the number of dwelling house to one
- Covenant ‘not to allow buildings to be erected to be used for any purpose other than as a
dwelling house’. Held that this did not restrict the number of dwelling houses that could be
built on the plot to one: Martin v David Wilson Homes Ltd [2004] EWCA 1027
The meaning of ‘residential use’ does not tolerate any commercial use
- Meaning of words ‘private dwelling house’ appearing in a Crown Lease. Phrases ‘private
dwelling house’, ‘residential use’ and ‘domestic use’ all mean the same: Pandix Ltd v Hui
Kam Kwei (2010) LDCS No 4000/2009.
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- DMC limited to private residential use; property used as photographer's studio and
guesthouse; both uses breached covenant: Incorporated Owners of Hamilton Mansion v Yu
Keim Chiu [1998] 1 HKC 112
o The test: “whether it can be described as a private residence of someone who
resides there” and the use of the whole flat has to be considered
o “The sole purpose of the tenant to rent the flat is to operate a photo studio there. The
rent is substantial. It would not have been commercially expedient and wise if the
tenant does not utilise most, if not all, of the space in the flat. The permission or
license given to the staff member to live there is only incidental to his employment.”
o “[T]here are expensive equipment and apparatus in the flat. Definitely, it is most
unlikely that he or she can let a guest stay overnight in the flat alone when he or she is
absent from the flat.”
- Use of residential premises as a guesthouse breached the user clause since use as a
guesthouse constituted commercial rather than residential use: Lau Yan Kin v Perfection
(Global) Ltd (2016) LDPD 2697/2014
- Crown lease provided premises to be used only for private residential purposes. Held that use
of basement as commercial car park breached covenant: Attorney General v Lo Hoi-ming
[1965] HKLR 1152
- Occupation by paying tenants by way of holiday lets constituted breach: Caradon District
Council v Paton (2000) Times May 17, CA
o MW argues that the principle should be restricted to the situation where the landlord
resides in the property and lets out part of the property; otherwise the entire tenancy
system in HK would be eradicated
- Top floor sub-let to tenant held to constitute breach of covenant not to use premises other
than a private dwelling house: Dobbs v Linford [1952] 2 All ER 827
Prohibiting use as ‘boarding house’, including nursing home
- Restrictive covenant prohibiting use as boarding house (where people were

accommodated and provided with food, e.g. cheap hotel). Held that nursing home / home for
the elderly is also prohibited: Aberdeen Shopping Plaza Ltd v Incorporated Owners of
Aberdeen Na King Mansions (2003) HCA No 9319/2000, Winland Finance Ltd v Profit Fine
Ltd [2006] 1 HKC 582
(ii) ‘Industrial use’
- Use of property restricted in Conditions of Sale to industrial purposes; conditions of sale

further provided that no building could be erected on the lot except a factory; building used
for manufacture of pagers and also provision of paging services; held provision of paging
services was substantial and breached terms of Conditions of sale: Raider Ltd v Secretary
for Justice [2000] 3 HKLRD 300, CFA
o ‘Industrial’: activities carried on in a factory
o Paging service provided is not one by which articles are manufactured, altered,
cleansed, repaired, ornamented, finished, adapted for sale, broken up, demolished or
transformed
- Restriction on use to industrial or godown purposes only. Use of premises by garment

company for research, testing and manufacture of sample clothing; test as to whether user
was `industrial’ was whether manufacturing involved; held on the facts that present use was
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permissible since the offending use for research and testing was not substantial: Mexx
Consolidated (Far East) Ltd v Attorney General [1987] HKLR 1210
- Only permitted industrial purposes only permitted. Held that use of premises by bank for
data processing (housing the company’s computers) breached covenant: Cavendish
Property Development Ltd v Attorney General (1988) HCMP 762/1987
- Use of premises for selling flowers breached covenant restricting use to industrial or go-
down: Pak Wai Ching v Secretary for Justice (2003) HCMP 255/2003
- Use of premises as Chinese Medical Clinic breached restriction to industrial user:

Incorporated Owners of Wing Ming Industrial Centre v Mantex Supplies Co Ltd (2007) HCA
1505/2007
- Premises had been used by the previous tenant for his logistics business and this was the
intended user of the defendant; this fact was known to the plaintiff at the time the parties
entered into the lease; it was agreed by the parties that a logistics business constituted
commercial rather than industrial use: Regency Power Enterprises Ltd v SCS Express
International Ltd (2010) HCA 2195/2009
(iii) Other specified uses
- Land was permitted to be used for religious purposes, that use as a columbarium (niches for
ashes of deceased persons) breached the permitted user: Regal Shining Ltd v Secretary for
Justice [2016] 3 HKC 291, CA
(iv) Partial breach
- Principle 1: How extensive or substantial is the offending use? See Donald W Shields (No
2) v Mary Chang [1972] HKLR 121 (‘premises to be used as private and domestic premises
only’; held use of one room for conducting Oxfam business did not breach covenant)
o Relevant factors: number of rooms, hours used for offending user, etc.
o The premises consists of three bedrooms, a dining and sitting room on an open
plan, a kitchen and the usual offices. In addition, adjoining the kitchen is a small
room, which was designed as a servant's room. It can only be enter through the
kitchen. … This room was furnished with a desk and two filing cabinets by the
appellant. And the appellant used the desk when he wrote letters relative to his
office as the Field Director of Oxfam. But other members of the family used this
room for their own purposes
o Any letters that came to him concerning Oxfam affairs would have come to this
address; the telephone directory gives this address for Oxfam
o The duties of the appellant require him to travel in the Far East very extensively. And
when he is in Hong Kong he has to inspect and supervise projects with which his
organisation is connected. This is not a case where a man has to sit behind a desk
for regular periods of time. There was no indication from the outside of the
premises to connect them with Oxfam. There is no evidence of any business
activity as such. No person was interviewed on the premises in connection with
the appellant's work. There is no evidence that the premises were used to solicit
assistance for Oxfam
See also Mexx Consolidated (Far East) Ltd v Attorney General [1987] HKLR 1210 (use of
premises by garment company for research, testing and manufacture of sample clothing; held
on the facts that present use was permissible since the offending use for research and testing
was not substantial)
13
- Principle 2: Is the offending user merely ancillary to the permitted user? Raider Ltd v
Secretary for Justice [2000] 3 HKLRD 300, CFA
o Use of property restricted in Conditions of Sale to industrial purposes
o Building used for manufacture of pagers and also provision of paging services; held
provision of paging services was substantial and breached terms of Conditions of sale
o Research, design, testing, making, inspection, packing and despatch form a
chain of activities pertaining to bringing the articles into existence, seeing that
they are fit to be supplied to customers and getting them to customers. The paging
service does not pertain to any of that
(b) Offensive Trades Clause
There will also be an ‘offensive trades clause' in Government leases (but not in Block Government
leases or Conditions of Grant etc.) unless it has been deleted.
(i) Is the clause still effective?
- The question whether such a clause continues to be binding and the potential problems caused
by such a clause are illustrated in Sunny Star Ltd v Au Mui (1995) MP No 897/95 (shop used
for sale of roast meat; title defeasible); yet cf. Green Park Properties Ltd v Dorku Ltd [2000]
2 HKLRD 400 (pizza restaurant; unthinkable that Government would enforce the clause, per
Cheung J)
- Yet when construing condition in tenancy agreement dated 1950 prohibiting use of premises
as ‘victualler’, court in Joint London Holdings Ltd v Mount Cook Land Ltd [2005] All ER (D)
77 held that use as ‘Pret á Manger’ outlet prohibited
(ii) The scope of the restrictive covenants
- ‘Victualler’: a person providing food (and drink): Joint London Holdings Ltd v Mount Cook
Land Ltd [2005] All ER (D) 77
- ‘Tavern’: covers hotel but how about self-serviced apartments? Use of premises as a home
for the elderly breached the restriction on use as a ‘tavern’; the word ‘tavern’ meant ‘a
dwelling place, an abode, a lodging house’ or ‘a public house providing accommodation,
refreshments for payment especially for travellers’: Incorporated Owners of Yue Sun
Mansion v Lake Side Elderly Centre Ltd (2016) LDBM 26/2015
- ‘Noisy, noisome’: use of land in a deserted village as a columbarium (niches for deceased
persons) did not, on the evidence, breach the restriction on noisy or noisome trades: see Uni-
Creation Investments Ltd v Secretary for Justice (2017) HCMP 2166/2015
o ‘Noisy’ means a lot of noise; ‘noisome’ means irritating and annoying
(c) Special user restrictions in Block Government leases
There would appear to be two restrictive covenants in Block Government leases in respect of New
Territories land: one in the body of the lease (the ‘Watford’ covenant) and the other in the Schedule to
the lease.
(i) The ‘Watford’ restrictive covenant
- The first covenant (which appears in the body of the Block Government lease) restricts land
delineated as ‘agricultural or garden land’ from being used for building purposes. This
14
covenant was held to be binding: Watford Construction Co v Secretary for the New
Territories [1978] HKLR 410, CA
(ii) ‘Melhado’
- The second ‘covenant’ appears in the Schedule to Block Government leases and describes the
land as ‘padi’, ‘waste’, ‘garden’, ‘house’, ‘grave’. Description of the land in the Schedule
to Block Government leases was a mere description of the use of the land at the time of the
granting of the lease and is not a restrictive covenant: Attorney General v Melhado
Investments Ltd [1983] HKLR 327
(d) Design, disposition and height (DDH) clauses
A typical clause will provide that ‘the design disposition and height of the building to be erected on
the lot shall be subject to the prior written approval of the Director [of Buildings] and no building
works shall be commenced until such approval has been given’.
- Chinachem wished to build the highest building in the world on a plot in Tsuen Wan. The
Director refused to approve the design because the building would interfere with the airport
landing system at Chek Lap Kok. Held that the Government had properly exercised its
discretion in refusing its approval under the DDH clause: Ying Ho Co Ltd v Secretary for
Justice [2005] 1 HKLRD 135, CFA
- DDH clause in Conditions of Grant together with restrictions on height etc; restrictions on
height etc subsequently modified by Government; held that the modification did not affect the
DDH clause which operated independently of the height restrictions: United Bright v
Secretary for Justice [2015] 4 HKC 12, CA
o Apart from the specific 2-storey restriction in SC6, the DDH clause itself operated as
an independent restriction
o While the Letter by implication must have released the 2-storey height restriction as
far as 3-5 storey buildings were concerned, there was no provision for any general
release as to the requirement for the Director's approval in respect of DHH
(e) Restriction on alienation
Where Government grants land for development purposes there will usually be a restriction that the
grantee/developer may not alienate the land without the consent of the Director of Lands until the
conditions (positive) have been complied with. This invokes the operation of the Consent Scheme
where the developer wishes to pre-sell flats in the property.
(f) Car parking spaces
Conditions of Grant restricting each owner to ‘one car-parking space’; held that car-stacking
device contravened the restriction: Radford Portfolio Management Ltd v Secretary for Justice (2010)
CACV No 257/2009
Conditions of Grant specified parking only for vehicles of residents; held that parking of lorry used
for commercial purposes breached the restriction: Latangan Co Ltd v Chu Yip Sing (2011) DCCJ
No 3373/2008
(g) Covenant ‘not to cause nuisance or annoyance to other residents’
There are frequently restrictive covenants in deeds of mutual covenants whereby the owner or tenant
covenants not to cause noise, nuisance or annoyance to other residents.
15
(i) Annoyance
- Running of hospital for out-patients held to constitute annoyance to neighbours: Tod-

Heatly v Benham (1889) 40 Ch D 80
- Internet bar; insufficient evidence to establish that annoyance caused: Lam Pui v
Incorporated Owners of Beverly Garden (2006) LDBM 360/2005
- Presence of antennae and radio based stations on the roof of a building which emitted
micro-waves constituted an annoyance in breach of DMC; mandatory injunction granted:
Incorporated Owners of Fanling Centre v Wong Yu Ting Terence (2014) HCMP 1979/2014
o Cf. Presence of antennae on roof did not constitute nuisance; no injunction:
Incorporated Owners of Kadoorie Avenue Mansion v Rising Dragon International
Ltd (2014) LDBM No 201/2013
(ii) Nuisance (requires proof of damage or loss)
- Seepage of water breached ‘no nuisance’ covenant; judgment against landlord despite
seepage being caused by tenant on grounds that landlord exercised sufficient control over
premises: Wong Huen Min v Wong-King Chong-Kam-Sau Tong Clansman Association (2007)
DCCJ 6455/2004
(h) General maintenance covenant
Many Government leases and Conditions of Grant contain a general maintenance covenant requiring
the grantee to maintain the land granted.
- Covenant construed to require grantee and successors in title to maintain slope adjacent to
his land: Building Authority v Appeal Tribunal (Buildings) (2015) HCAL 14/2014
- Grantee under Conditions of Sale required to maintain and repair paved road and everything
pertaining to it; held that grantee required to repair dangerous slope adjacent to paved
road since it pertained to the road: Building Authority v Appeal Tribunal (Buildings) (2016)
HCAL 180/2016
(i) ‘Not to keep dogs without permission of [manager]’
Where prohibition on keeping dogs without permission of designated authority, the court will only set
aside that authority’s refusal of permission where such decision has not been reasonably taken: see
Lee Yin Hong v Incorporated Owners of Serenade Cove (2011) CACV 21/2011.
(j) Not to use premises for illegal or immoral use
Use of flat by sub-tenant for prostitution; held that head tenant liable for re-entry by landlord since
he had failed to stop offending user in timely manner: Patel v K & J Restaurants Ltd [2011] 1 P & CR
DG7
(k) Other restrictions
Secan Ltd v Attorney General [1995] 2 HKC 629, CA (approval of Director of Environmental
Protection required within six months of completion of development and duty to comply with any
measures deemed necessary by the Director; Director required construction of noise barrier by
roadside for South Horizons on Ap Lei Chau. Developer merely insulated windows by double glazing
and applied for judicial review of decision of Director. Court of Appeal held that the decision was not
16
amenable to judicial review since the Director was not performing a public duty, although, even so, he
still had to act in good faith; therefore developer obliged to comply with decision of Director).
Canadian Overseas Development Co Ltd v A-G [1991] 1 HKC 288 (Conditions stated that layout plan
had to be approved; held that decision not subject to judicial review)
(l) Will restrictive and positive covenants bind successors in title of the covenantor (i.e.
the grantee/developer under the Government lease)?
Such covenants bind the developer because of privity of contract.
Two issues must be considered:
(i) Does the covenant run with the land?
- Burden of a covenant runs with the land and bind successors in title of the covenantor and
persons claiming under or through the covenantor and his successors in title if (i) the
covenant is a land covenant and (ii) is expressed or intended to run with the land: CPO
ss.41(1), (2)
- See the discussion on the burden of covenant in DMC
(ii) Is the covenant ‘spent’?
- The test is objective: as a matter of construction, whether the covenant was intended to
continue to bind the land or whether it has been ‘spent’ upon initial compliance
- As a general principle, a restrictive covenant will not be ‘spent’ (ie no longer of effect)
once it has been initially complied with but it will continue to bind the land
o MW argues that certain covenants will be spent, e.g. ‘developer must spend not less
than $500,000’
- Restrictive covenant ‘lessee will not be allowed to erect any building except domestic
houses’; question whether such restriction affected future use once domestic building had
been erected; held it did: the words ‘and keep for domestic use’ should be implied into the
covenant: Expressluck Development Ltd v Secretary for Justice (2007) HCMP No
1432/2005
- Replacement of `the Lido Complex’ in Repulse Bay; land granted by Government at a

reduced premium under Conditions of Exchange; special condition (4) provided that ‘The
lessee shall remove the existing bungalows … and shall erect in lieu a pavilion … Save as
aforesaid the lessee shall not without the consent of the Governor erect any building on
the lot’; pavilion duly built in 1937; in 2000 the plaintiff, having acquired the land and
demolished the existing pavilion complex, erected a new complex; Director of Lands refused
consent to new complex; plaintiff contended that the Governor’s required consent only
applied to the first pavilion to be erected and not to any subsequent buildings; held that a
reasonable reader would assume that the reference to ‘any building’ in the second limb
of special condition (4) referred to any building to be built immediately after that grant
as well as any building to be built in its place thereafter; should the first grantee or its
successors in title wish to erect any other building or replace the existing pavilion it had to
obtain the Governor’s consent, per To J): Gold Shine Investment Ltd v Secretary for Justice
[2010] 1 HKC 212
2.4 Waiver of restrictive covenants
17
There have been several important decisions involving the question as to whether restrictive
covenants have been waived by the Government.
(a) Express waiver (oral or written notification through the Lands Department)
Restrictive covenants in agricultural leases in the New Territories were often waived by Government
in the past. Express waiver may take one of three forms: temporary waiver; limited waiver or
permanent waiver.
The test is to identify the intention of the parties as evidenced by the words used, i.e. an
objective test.
(i) Temporary waiver
Covenant restricted building to no more than one detached residence; block of flats erected on plot but
Government wrote that it was ‘current policy' not to enforce the covenant and reserved its
position; held this was only a temporary waiver and did not amount to permanent waiver. A
temporary waiver may be withdrawn on reasonable notice: Citiward Ltd v Tai Ping Wing [1995] 2
HKC 181
- What will be reasonable notice will depend upon the nature of the restrictive covenant
- E.g. Not to hang out the washing (24 hours) vs. keep the dogs (time to find alternative
owners) vs. build not beyond four storeys in height (time to demolish the building)
(ii) Limited waiver
For the life of the building. When the building is pulled down, the waiver will come to an end. A
limited waiver as to height and a temporary waiver as to height converge in effect.
Height restriction in Government lease; as a result of correspondence between owner and Colonial
Secretary and between architect and Building Authority the height restriction was waived to permit
construction of block of flats; held the waiver applied only for the construction of that particular
block of flats and not for future construction. A limited waiver will come to an end when the
building is demolished: Real Honest Investment Ltd v Attorney-General [1997] 2 HKC 436, PC
- “It is to be noted that the letter was written expressly in connection with the tentative
plan for the erection of flats. It then becomes difficult to construe it as giving a general
waiver for all time of the restriction on height. Indeed the whole of the correspondence was
concerned with this particular development. The request which was made in the letter of 6
September for consent to exceed the 35ft limit was sought in relation to ‘the proposed
building’. The terms in which the waiver was promised in para 2(a) of the letter of 29
September were less precisely formulated but the terms of the waiver itself are plainly
directed to ‘the building’, that is the particular building then proposed and not with any
ideas of a more far-reaching dispensation.”
(iii) Permanent waiver
Binds all similar buildings in the future.
Similar restrictive covenant to Citiward (above); following letter from District Land Office saying
that under current policy block of flats could be erected, developers erected block of flats. Further
letter from LACO after construction confirmed that Government policy was not to enforce the
restrictive covenant; held Government had permanently waived the right to enforce the covenant and
the title was good: Peter and Angeli Wong Co Ltd v Silverera Ltd [1995] 3 HKC 411
18
- The letter from LACO: “… I confirm that government policy is not to take enforcement
action in respect of it under the lease governing the above lot...”
- “From that letter, the Director of Lands no longer said it is the current government policy but
it is the government policy.”
(iv) Express waiver subject to conditions
Even where Government waives its right to enforce a restrictive covenant, that waiver may cease to
have effect if the waiver was granted subject to conditions which have subsequently been breached:
Favourable Issue Co Ltd v Secretary for Justice [2014] 1 HKC 453, CA.
(b) Implied waiver/acquiescence/estoppel
Inaction (for a significant period of time), with actual or constructive knowledge of breach by
Government might constitute an implied waiver or acquiescence.
(i) Enforcement action by Government
Restrictive covenant limiting construction to one or more villa residences; terraced houses built
on the plot before 1939; in 1958 six-storey block built. High rise buildings constructed on
neighbouring plots which were subject to similar restrictive covenant; held implied waiver
(‘notorious and avowed acquiescence’) and declaration granted that restrictive covenant no
longer enforceable: Gibson v Doeg Fairfax Ltd v Attorney General [1997] 1 HKC 17, PC
- “In the absence of any explanation the only possible inference from the fact that over a
period of 40 years multi-storey blocks have been built over virtually the whole of Lot 757 is
that everyone, including the Crown, must have been aware of those facts.”
Applicant owned four out of five floors of a multi-storey building (all save the third floor); building
was resumed by Government and the applicant claimed compensation under the Lands Resumption
Ordinance; the Crown lease designated the user, inter alia, as a dwelling house, but the ground floor
had been used for many years by the applicant as a shop; at issue was whether compensation
should be calculated on the basis of the use of the ground floor as residential or commercial; the
Government contended that the use of the ground floor as a shop was in breach of the Crown
lease so that compensation should only be calculated on the basis of residential user; Government
had, with constructive knowledge of the breach, acquiesced in the breach since it had existed for
more than 50 years; the restrictive covenant had not, therefore, been breached and compensation
should be awarded on the basis of the use of the ground floor as a shop): Cheermark Investment Ltd v
Director of Lands (2015) LDLR 2/2013, Happy Enough Ltd v Director of Lands (2016) LDLR No 5
of 2012
(ii) Sale of property by vendor to purchaser where breach of Government lease/Conditions
Height restricted to 35ft in Crown lease but height breached; Government had taken no action for
many years; when vendor came to sell to purchaser, purchaser raised requisition as to whether vendor
had shown good title; held that vendor had shown good title since no real risk of enforcement by
Government): Jumbo Gold Investment Ltd v Warren Yuen Cheong Leung (2000) 3 HKCFAR
52, CFA
(iii) The difference in approach explained
Pak Wai Ching v Secretary for Justice (2003) HCMP No 255/2003 (premises granted under
Conditions of Sale restricting use of premises to industrial purposes; premises used as flower shop;
owner argued that Government had waived its right to enforce):
19
- Fairfax: where Government was involved in enforcement and waiver would only apply
where it was shown that Government had knowledge of breach and had delayed in taking
enforcement action;
- Jumbo Gold: where action between private individuals and Government not a party to
action; real risk test in Jumbo Gold clearly inapplicable where Government was already
taking enforcement action
- Here no evidence to establish that Government had been aware of the breach for any
significant period of time and applying Fairfax, no waiver applicable
2.5 Approval to build granted by the Building Authority does not estop the Lands Department
from enforcing a breach of any restrictive covenant in the government lease
Note that any approval to build (ie approval of building plans and grant of permission to commence
construction issued by the Building Authority) or the issue of an occupation permit does not estop the
Lands Department from enforcing any restrictive covenant in the Government lease: Hang Wah
Chong Investment Co Ltd v Attorney-General [1981] HKLR 336, PC
Government lease contained a restrictive covenant which provided that no building exceeding 4
storeys shall be erected on the site; OP issued for 5 storey building; held that, since OP issued by
Building Authority, Government (i.e. through Lands Department) could still re-enter for breach of the
Government lease: Lee To Ming v Tam Kim Sum William [1999] 2 HKC 865
2.6 Implied covenants on part of Government in Government leases / Conditions of Grant etc.
Two important covenants on the part of Government as grantor are implied in all Government
leases/Conditions of Grant etc:
(a) Covenant for quiet enjoyment
Possible breaches include:
- Demolition of tenant's bedroom wall: Yeung Wah James v Alfa Sea Ltd (1993) HCA No
A426 of 1992
- Cutting off electricity: Pereira v Vandiyar [1953] 1 WLR 672
- Cf. Temporary interference: tenant who ran restaurant claimed that landlord had blocked
access to restaurant and caused loss of profits through carrying out renovations to building;
held no substantial interference: Manchester, Sheffield and Lincolnshire Railway Co Ltd v
Anderson [1898] 2 Ch 394; Wing On Properties and Securities Co Ltd v Create Wealth
Development Ltd (2005) HCA No 632/2004
- Cf. Landlord will not be liable for breach of the covenant for quiet enjoyment if the
leased premises are infected by vermin (rats etc.) unless the landlord has done something
which might have attracted the vermin to the premises or has let them escape into the leased
premises: WE Sharp v Samtani Anand P (2016) LDPD 1548/2016
(b) Covenant as to non-derogation from grant
- Erection of adjacent latrine did NOT breach the obligation: Lam Kwok Leung v Attorney
General [1978] HKLR 145
20
- Govt granted easement over Govt land which included vehicular use; Govt then carried out
developments which rendered the road incapable of use for vehicles; held this constituted
derogation from grant: Wisename Ltd v Secretary for Justice [1998] 1 HKC 128, CA
- Land granted under Conditions requiring part of land to be used as public car park; at
time of grant much of area zoned industrial, so few car parks provided; before car-park
constructed, land re-zoned as commercial making extensive provision for new car-parks;
Government lessee contended that Government had derogated from its grant by making
applicant’s car parks a ‘white elephant’; held that it could not be regarded as necessarily
implicit in the Government grant that the scheme of development would be maintained
throughout the duration of the grant; there had, therefore, been no derogation from grant;
further zoning was a matter for Town Planning Board not Government; also nothing to
prevent car park from still being built: Rank Profit Industries Ltd v Secretary for Justice
[2008] 4 HKC 61, CA
2.7 Other implied terms
Hang Tak Co Ltd v Attorney General (1986) HCA 2567/1983 (duty to provide reasonable access to
site to permit development).
21
3. TERMINATION (BY EXPIRY AND SURRENDER)
3.1 Introduction
Government leases and Conditions of Grant may terminate or be determined in FOUR different ways:
- (1) upon the expiry of their term,
- (2) upon surrender by the lessee,
- (3) upon re-entry by the Government and
- (4) upon resumption by the Government (or other statutory bodies).
3.2 Expiry of the term granted
Government leases will generally determine upon the expiry of their terms, but this is subject to
- Any express term in the lease providing for a right of renewal (an option to renew) or
- Any statutory provision conferring a right of renewal and its exercise by the lessee or any
statutory provision effecting automatic renewal.
Example 1: New Territories (Renewable Government Leases) Ordinance

- Automatic renewal of all Government leases in the New Territories which had been initially
granted for 75 years from 1 July 1898 and were renewable for a further 24 years
Example 2: New Territories Leases (Extension) Ordinance

- Extended all leases in the New Territories which would expire before 30 June 1997 until 30
June 2047
Example 3: Government Leases Ordinance

- Automatically renewed all renewable Government leases in Hong Kong Island and Kowloon
(up to Boundary Street)
3.3 Surrender of leasehold interest
If the lessee surrenders his leasehold interest to the lessor and the lessor accepts the surrender, the
lease is merged with the reversion and will terminate.
Surrender and re-grants are common in Hong Kong whereby the Government lessee surrenders his
plot of land in return for a re-grant either of the same plot or of a different lot. This is effected by
Conditions of Exchange.
- Effective tool in resolving land boundary issues
22
4. TERMINATION BY RE-ENTRY
4.1 The Government’s right of re-entry
Government leases invariably contain a right of re-entry by the Government in the case of a breach of
a covenant in the lease or failure to pay the Government rent: Government Rights (Re-entry and
Vesting Remedies) Ordinance or the Government Rent (Assessment and Collection) Ordinance.
- Remedy of re-entry is rarely invoked, since a minor breach can be resolved by an action for
damages or injunction
A right of re-entry can be enforced by the Government whether the breach is committed by:
- (i) the Government lessee,
- (ii) an assignee from the lessee [successor in title]: see CPO s.41
- (iii) a tenant
For the right of entry to be enforceable, it is not necessary that the covenant itself is enforceable
against the person in breach: Shiloh Spinners Ltd v Harding [1973] AC 691.
- Right of re-entry can be enforced against a tenant even where the tenant is not in breach, i.e.
right of re-entry can be enforced even for a breach of positive covenant against the
tenant!
The owner whose land has been re-entered will not be entitled to compensation.
- Realistically, the Government might choose to seek injunctive relief or damages
4.2 The procedure for re-entry
Step 1: When a right of re-entry in favour of the Government has arisen, it may be exercised, without
actual re-entry being made, by the registration of a memorial of an instrument of re-entry in the
Land Registry: s.4(1), Government Rights (Re-entry and Vesting Remedies) Ordinance.
Step 2: Notice of the registration of the memorial must be published in the Gazette.
Effect: Upon registration of such memorial, the Government will be (i) deemed to have re-entered
upon the land and the land will be (ii) deemed to be re-vested in the Government as fully as if the
Government lease had determined.
The acceptance of rent by the Government will NOT operate as a waiver of a right of re-entry.
4.3 Re-entry where premises in joint ownership (e.g. shares in multi-storey buildings)
HISTORY: Crown Rights (Re-entry) Ordinance [REPEALED]
Where the premises to be re-entered were jointly owned, re-entry had to be made in respect of the
whole premises (each and every co-owner).
NOW: Government Rights (Re-entry and Vesting Remedies) Ordinance s.7
Procedure: (i) A vesting notice under the hand of any authorised public officer may be
registered in the Land Registry. (ii) The vesting notice MUST be served on the former owner and
published in the Gazette.
Effect: Upon registration, the owner’s interest in the flat (the affected undivided share), in
respect of which the default has occurred, will vest in The Financial Secretary Incorporated free
23
from any mortgage or charge, any lien or any right in any person contained in any instrument not
registered in the Land Registry.
4.4 Relief against re-entry / from forfeiture
Where a memorial of re-entry has been registered in the Land Registry, the owner may seek relief
against re-entry either (1) by petition to the Chief Executive of the HKSAR or (2) by application
to the Court of First Instance in its equitable jurisdiction if he disputes the right of the
Government to re-enter or if the circumstances are such that he would have been entitled to apply for
relief against re-entry had the lessor been a private party who had exercised his right of re-entry:
Government Rights (Re-entry and Vesting Remedies) Ordinance s.8(1).
(a) Petition or application must be made within 6 months
A petition to the CE or application to the Court MUST be made within SIX months of the memorial
of re-entry or vesting notice but, in the case of a petition to the Chief Executive, the Chief Executive
may extend this period where he considers it just to do so: s.8(3) of the Ordinance.
- However, the court does not have similar jurisdiction in time extension
A petition to the Chief Executive constitutes a bar to any application for relief to the Court of
First Instance: s.8(4) of the Government Rights (Re-entry and Vesting Remedies) Ordinance.
- Therefore, application for relief should first be made to the CFI
(b) Whether to petition the Chief Executive or apply to court
Where application is to be made challenging the validity of the exercise of the right of re-entry,
application should first be made to the CFI and only if the application is refused should a further
application be made to the CE: Hong Kong Canadian International Hospital Foundation Ltd v
Secretary for Justice (on behalf of the Chief Executive in Council) (2007) HCAL 131/2006.
- Applicant had in 1995 been granted land in Aberdeen on which to construct a hospital and the
grant provided that the construction of the hospital had to be completed and the hospital be
ready for operation within 3 years of the grant.
- The applicant had obtained 4 extensions of time, but the last extension had expired in 2001.
The Government then re-entered the land.
- In 2003 the applicant petitioned the Chief Executive to grant relief against re-entry, but the
application had been dismissed and no reasons for the dismissal given.
- The applicant then applied for judicial review of the Chief Executive’s decision on the
grounds that the re-entry had been unlawful since the Government’s right to re-enter had not
yet arisen.
As to whether the CE had jurisdiction to consider whether the right to re-enter had been lawfully
exercised:
- If the former owner wished to challenge the lawfulness of the re-entry, he first had to
commence proceedings in the Court of First Instance under s 8(1)(b)(i) of the Ordinance
and could not petition the Chief Executive for relief on that ground.
- There was nothing to prohibit the former owner from first applying to the Court of First
Instance for relief on the grounds of alleged unlawfulness of re-entry.
- If the result were unfavourable, lodging a petition subsequently to the Chief Executive for
relief based on far wider considerations.
(i) Petition to the Chief Executive of the Special Administrative Region
24
Upon a petition being made to him, the Chief Executive has the power to order the cancellation of
the memorial of re-entry or the vesting notice upon such terms as to costs, expenses, compensation,
penalty or otherwise as he in his discretion thinks fit: s.9 of Government Rights (Re-entry and Vesting
Remedies) Ordinance.
(ii) Application to the Court of First Instance; court’s exercise of discretion
The CFI has the power to make the same order as in an action between private parties (ie landlord and
tenant) for the same relief and may order the cancellation of the memorial of re-entry or vesting
notice: s 9 of the Government Rights (Re-entry and Vesting Remedies) Ordinance.
Re-entrance by the Government does NOT bar relief. The court had jurisdiction to grant equitable
relief against forfeiture on the ground of ANY breach of covenant: Kung Wai-ying v Attorney-
General [1975] HKLR 1.
No rigid rules for guiding the exercise of judicial discretion and all the circumstances and the
conduct of the parties had to be taken into account: Chan Hung-kay v Attorney-General [1981]
HKLR 171.
- A relevant consideration on the facts was that it was clear Government policy to ensure
reasonably zealous development of Government land and deter unnecessary speculation in
landed properties.
- The plaintiff had been dilatory and indifferent to enquiries of the authorities and there were no
exceptional circumstances meriting the granting of relief.
25
5. TERMINATION BY RESUMPTION
5.1 Introduction
Since the landowner merely holds a leasehold estate with the Government holding the reversion, the
appropriate manner for the Government to recover the land is by way of resumption: Lands
Resumption Ordinance (Cap 124).
The constitutional right to compensation
Article 6 of the Basic Law protects the right to private ownership of property and Article 105 confers
upon individuals the right to compensation for lawful deprivation of their property.
5.2 The statutory procedure for resumption and challenges to that procedure
1 month later:
Within 28 days after Within 28 days after
Publication of resumption of land
resumption: offer of offer: referral to
notice (reversion of all
compensation Lands tribunal
(Point 5.2, LRO s.4) interests)
(Point 5.3, LRO s.6) (Point 5.3, LRO s.6)
(Point 5.2, LRO s.5)
Whenever the CE in Council (‘EXCO’) decides that the resumption of land is required for public
purposes, he may order the resumption thereof: s.3, Lands Resumption Ordinance (‘LRO’).
- Resumption of land for any purpose other than public is ultra vires and is amenable to judicial
review
(a) Steps required for resumption of land: LRO s.4(1), (2)
- (1) A notice will be published in the Gazette in English and Chinese

- (2) A copy of this notice must be served on the owner
- (3) A further notice affixed on a conspicuous part of the land to be resumed
(b) The timeline and legal effect: LRO s.4, 4A, 5
Notice must state the date it was affixed and that the land will be resumed on the expiration of one
month from such date, unless CE has agreed to a longer period of notice: LRO s.4(3).
Once notice has been given, the Government may enter upon the land for the purpose of surveying the
land; before the month expires, the owner may enter into an agreement to sell the property to the
Director of Lands: LRO s.4A.
When the one month expires, the land will automatically revert to the Government and all rights
of the owner and of any other person having any rights in the land will cease: LRO s.5.
(c) Challenges to the legitimacy of the procedure
There have been several challenges to the legitimacy of the procedure especially on the grounds that
no provision has been made for the owner to make representations opposing the resumption.
(i) Re An Application by KOY Investment Co Ltd [1983] HKLR 28
There is NO obligation on the Government to provide prior notice to persons whose lands were
intended to be resumed in order to afford an opportunity to make representations.
26
(ii) Cf. Fok Lai Ying v Governor in Council (1997) PC App No 11/97, PC
Held: on the facts, that the applicant had been given opportunity to raise objections before EXCO and
had done so. Appeal dismissed from CA.
*Obiter: expressed grave doubts as to whether the statutory regime was fair and whether it
contravened HKBORO Art.14 in the context of compulsory resumption of a home. Did not
reject the construction that LRO s.3 required a fair procedure including a reasonable
opportunity for objection.
5.3 Offer of compensation to be made within 28 days
LRO s.6:
- Within 28 days from the date on which the land reverts to the Government (i.e. 1 month from
the issuance of notice), the Director of Lands must write to the former owner and any other
person having any rights in the land under any instrument registered in the Land Registry (eg
the owner of any easement or a subsequent purchaser who has registered his sale and
purchase agreement), making an offer of compensation in respect of the resumption.
- This offer should be expressed in such a way that its acceptance by the claimant will create
a legally binding contract.
- If the former owner does NOT accept the offer of compensation within 28 days from the
date of the offer, that person or the Director of Lands may refer the matter to the Lands
Tribunal for determination of the amount of compensation to be paid.
Where a claimant contends that the Government’s offer is NOT fair and reasonable, he must
commence an action in the Lands Tribunal and it is not, save in exceptional cases, appropriate to
apply to the CFI to resolve it by judicial review: Re Zitta Investments Ltd [2013] 5 HKLRD 32.
5.4 Claims by persons other than the owner
Claims for compensation may be made by any person who has a valid legal / equitable estate or
interest in the land.
- Include any person having an equitable interest in the land by way, e.g. of resulting trust or a
tenant or sub-tenant
o E.g. the spouse contributing to the purchase price of the land: constructive trust
- Cf. licensee who does NOT hold any interest in land, no compensation: Wing Hing Oil Co
Ltd v Director of Buildings and Lands [1988] HKDCLR 25
Cf. Invalid interest is not entitled to compensation: sub-tenant is not entitled to compensation if the
head lease was invalid because all the managers of the lessor had not joined in the grant: So Kee
Transportation Co Ltd v Secretary for Environment, Transport and Works [2005] 4 HKC 234.
5.5 Determination of compensation by the Lands Tribunal: LRO ss.10, 11, 12
Compensation is to be determined on the basis of the loss or damage suffered by the claimant due to
the resumption of the land specified in the claim.
The Lands Tribunal will determine the compensation payable on the basis of the following
considerations, which are laid down in LRO s.10(2)(a)-(e).
27
(a) The value of the land resumed and any buildings erected thereon AT the date of resumption:
LRO s.10(2)(a)
Compensation will be assessed as AT THE DATE OF RESUMPTION (date of gazette of notice)

and will not be affected by subsequent events which might either increase or decrease the land’s
value: Penny’s Bay Investment Co Ltd v Director of Lands [2010] 4 HKC 69, CFA.
- Plaintiff’s land resumed for purpose of construction of container port; before claim for
compensation adjudicated upon Government changed its mind and decided to allocate the
land for construction of Disneyland
- Held that change would have no effect on compensation payable which had to be based on
intended future use as container port, even if there was no longer any intention to build the
container port
Subject to certain other provisions in the LRO, the value of the land resumed shall be taken to be
the amount which the land, if sold by a willing seller in the open market, might be expected to
realise.
- The purpose for which the land is used is a relevant consideration

- Assessment of the value of land by inviting a surveyor to check on with a comparable land
*Development potential of the resumed land
Subject to what is said below in respect of enhanced or decreased value by reason of a development
scheme of which the land resumed forms part, an owner will be entitled to compensation in respect of
the potential development value of his land.
It is essential, however, for the owner to establish that there is likelihood of development:
Cheung Lai-wan v Director of Public Works [1977] HKLTLR 14.
- Claimant must establish on the balance of probabilities the existence of development

potential: as a single site OR as part of an amalgamated site
- Where the probability of amalgamated site redevelopment is established, the compensation
will be awarded for the value of such potential in each individual site: Kwok Lee Sau-
sang v Director of Lands and Survey [1977] HKLTLR 105
- Compensation may be awarded in respect of the probability of developing two sites in
different ownership as one amalgamated site where the applicant can establish, on the
balance of probabilities, the potential for development as an amalgamated site; i.e. whether it
is more probable than not that the two (or more) sites in question would have been
amalgamated for development purposes: Highail Co Ltd v Director of Lands (2014) LDLR
No 5/2009
In determining whether development potential should be compensated, the court will take into
account a TWO-STAGE TEST: Siu Sau Kuen v Director of Lands [2012] 2 HKC 76, LT.
- Applicant owned a shop in Kowloon used for processing and selling glass
- His property was resumed in 2005 for a development project to be implemented by the Urban
Renewal Authority in association with the Hong Kong Housing Society
- The quantum of compensation payable was disputed
- Applicant had failed to adduce evidence as to any such development potential
The value of the land should be the amount which the land if sold by a willing seller in the open
market might be expected to realise – this was an objective test: LRO s.12(d).
STAGE 1: Whether it was more likely than not that such redevelopment would take place
28
in a no-scheme world, when considered as at the date of the resumption?
STAGE 2: If NO, then the case would be dismissed.
If YES, then the Tribunal would then proceed to conduct a valuation of the
development potential: Cheung Lai-wan v Director of Lands and Survey [1977]
HKLTLR 14.
Regarding STAGE 1, the Tribunal should consider whether there were people ready to buy up
properties in the lot in question with a view to collecting a site worth developing.
- The burden rested upon the applicant to show that there was a likelihood of
redevelopment: Harding v Cardiff Corporation (1971) 219 EG 885
- Offers made under the scheme in respect of which the resumption took place had to be
disregarded: Pointe Gourde Quarrying and Transport Co Ltd v Sub -intendent of Crown
Lands [1947] AC 565
- What if the land is limited by a restrictive covenant (e.g. Watford covenant) and its
development potential can be realised by modification of the lease or Government
approval? Compensation will be excluded where modification is required: LRO s.12(c),
Director of Lands v Yin Shuen Enterprises Ltd [2003] 2 HKC 490 (CFA) (agricultural land
with development potential but only if Government approval was obtained), Dragon House
Investment Ltd v Secretary for Transport [2005] 4 HKC 480 (CFA), View Point Development
Ltd v Secretary for Transport [2004] 2 HKC 52 (CA) (lessee of agricultural land held under
Crown lease which contained restrictive covenants as to user and building)
o LRO s.12(c): “no compensation shall be given in respect of any expectancy or

probability of the grant or renewal or continuance, by the Government or any person,
of any licence, permission, lease or permit whatsoever”
(b) The value of any easement or other right in the land resumed, owned, held or enjoyed by the
claimant at the date of resumption: LRO s.10(2)(b)
(c) The amount of loss or damage suffered by any claimant due to the severance of the land
resumed or any building erected thereon from any other land of the claimant, or building
erected thereon, contiguous or adjacent thereto: LRO s.10(2)(c)
[You own a piece of land and part of it is resumed by the government and you are left with the
rest. Compensation for losing part of the land.]
Severance can have important consequences for the landowner, especially if the land severed reduces
the development potential of the remaining land by affecting the plot ratio or designation of the
site.
If the portion of land remaining after a substantial area of the land had been resumed leaving no
public access had no general marketable value, compensation would be awarded accordingly: Suen
Sun-yau v Director of Buildings and Lands [1991] HKDCLR 33.
(d) The amount of loss or damage to a business conducted by a claimant at the date of
resumption of the land resumed or in any building erected thereon, due to the removal of the
business from that land or building as a result of the resumption: LRO s.10(2)(d)
This provision is applicable where a business is totally, as well as partially, extinguished by the
resumption: Chan Kwok Lam v Director of Buildings and Lands [1988] HKC 822 (LT).
29
(i) Assessment of goodwill – the basics
In assessing the goodwill of the business, the court must establish what the business is worth to the
claimant and special circumstances which affect the loss suffered by the individual claimant should be
taken into account.
- An expert witness should be called, e.g. an accountant
- Should be based on how long the business would have continued:
o E.g. 1: Where the owner of the business holds the land under a short term lease, such
as a monthly tenancy agreement, the Lands Tribunal will have to decide when, in all
probability, the tenancy would have otherwise been terminated: Weco Textiles
Manufactures Ltd v Secretary for Transport [1991] HKLTLR 77
o E.g. 2: A periodic tenant was capable of enjoying the property for an indefinite time
having a tenancy which was expected to continue but which was liable to be put to an
end by notice. Therefore, where a property subject to a periodic tenancy was
resumed, it was open to a tenant to claim compensation based upon as reasonable
prospect (on the date of resumption) of the continuation of his or her tenancy:
Tang Ping Choi v Secretary for Transport [2004] 3 HKC 178, CA
(ii) Is compensation to be assessed on the extinguishment or relocation basis?
Where a claimant who owns the land resumed loses his business as a result of the resumption,
compensation may be assessed either on an extinguishment or relocation basis.
- Compensation will be awarded on an extinguishment basis where the business operator

cannot reasonably be expected to continue the business elsewhere
The three questions were asked in Director of Buildings and Lands v Shun Fung Ironworks
[1995] 1 HKC 417:
QUESTION 1: Could the business be relocated or had it effectively been extinguished?
QUESTION 2: Did the claimant intend to relocate?
The claimant must have reached a firm decision to relocate and must be reasonably
assured that he would be able to do so.
QUESTION 3: Would a reasonable businessman choose to relocate the business?
Example 1: Director of Buildings and Lands v Shun Fung Ironworks [1995] 1 HKC 417
- Government resumed the claimant’s factory to enable Junk Bay to be redeveloped as a

satellite town and the claimant sought compensation by way of a sum in excess of $1 billion
for relocation of his factory to Shunde in PRC.
- The claimant contended in the Lands Tribunal that compensation under section 10(2)(d),
LRO, should be awarded on a relocation basis rather than an extinguishment basis.
- As to whether compensation should be awarded on a relocation or extinguishment basis, the

fact that the costs of moving to another site would exceed the present value of the
30
business was NOT of itself an absolute bar to the assessment of compensation on a

relocation basis.
- PC concluded that as a matter of fact and degree, the business had effectively been
extinguished and, in all the circumstances and in particular taking into account matters
relating to profitability, a reasonable businessman would NOT have decided to relocate to
Shunde.
- Compensation would, therefore, be assessed on the extinguishment basis.
Example 2: Hongda Containers Ltd v Secretary for Transport (2005) CACV 269/2003
- Only 20% of site resumed but claimant ceased ALL business and claimed compensation on
total extinguishment basis; no compensation awarded.
- Where only part of a claimant’s land is resumed and the claimant unreasonably totally ceases
to conduct business on the land, he will not be entitled to any compensation, i.e. there is duty
to mitigate.
- Note: The duty to mitigate can also be seen where the compensation for goodwill is dated
from the date of resumption to the date when the business restarts.
Example 3: Happy Dragon Restaurant Ltd v Director of Lands (2009) LDLR 17/2006
- No compensation will be recoverable where an applicant unreasonably fails to relocate his

business and claims on the extinguishment basis.
(e) The amount of any expenses reasonably incurred by him in moving from any premises
owned or occupied by him on the land resumed to, or in connection with, the acquisition of,
alternative land or land and buildings, but EXCLUDING any amount to which paragraph (iv)
above applies: LRO s.10(2)(e)(i)
The purpose of the powers set out in paragraph (e) was to confer on non-business claimants some of
the rights already enjoyed by business claimants under paragraph (iv): Shun Fung Ironworks Ltd v
Director of Buildings and Lands (1992) Crown Lands Ref 18/1987, per Rhind J.
(f) In certain cases, the amount of any costs or remuneration reasonably incurred or paid by the
claimant in employing persons to act in a professional capacity in connection with such claim:
LRO s.10(2)(e)(ii)
The costs of the litigation relating to the resumption should NOT be claimed under this section but
rather under the court’s general jurisdiction to award costs of civil proceedings: Penny’s Bay
Investment Co Ltd v Director of Lands (2007) LDMR 23/1999.
- Although the phrase was wide enough to cover legal costs, the legislature had not intended to
curtail the general discretion of the Tribunal in respect of costs incurred in proceedings
- The reference to costs and remuneration that could be included in a claim under s 12(3) of the
Ordinance was a reference to costs and remuneration incurred prior to the consideration
of the claim by the Tribunal and not costs incurred thereafter
(g) Other relevant considerations – LRO s.11
(i) The nature and condition of the property
31
The Lands Tribunal may take into consideration:
(i) the nature and existing condition of the property,

(ii) the probable duration of the buildings in their existing state and
(iii) the state of repair of the buildings, and
may decline to award any compensation in respect of any addition to or improvements to the property
made after the date of publication in the Gazette of the notice of intended resumption: LRO s.11.
(ii) The fact that premises are used for illegal purposes, constitute a nuisance or are unfit for
human habitation
The Lands Tribunal may also receive evidence that the rental value of the premises has been enhanced
by virtue of the fact that they are used as a brothel, gaming house or for illegal purposes, the condition
of the premises is such as to constitute a nuisance or that they are unfit for human habitation: LRO
s.11(3).
(iii) The relevance of any development scheme in assessing value for compensation purposes
Where the land resumed forms part of a development scheme and, by virtue of that fact, the value of
the land has been increased or reduced, the increase or reduction should not be taken into account.
Scenario 1: Enhanced value – Point Gourde Principle
Compensation for the compulsory acquisition of land CANNOT include an increase in value which is
entirely due to the scheme underlying the acquisition: Pointe Gourde Quarrying and Transport Co
Ltd v Sub-Intendent of Crown Lands [1947] AC 565, HL.
- Note: If the government has a development scheme which involves several pieces of plots of
land, and the government is going to resume the land to build a housing estate. The
government announces the intention to resume the whole area of land, involving several land
owners. The resumption of the plots of land will increase/decrease the value of the land to be
resumed soon. When assessing compensation, for the value of the piece of land, the
increase/decrease in the value of the land resumed which has been caused by the government
scheme will be ignored.
Scenario 2: Decreased value – Reverse Pointe Gourde Principle
Similarly, any decreased value of land due to the scheme underlying the resumption is also to be
DISREGARDED: Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426, PC.
Application: Tang Yue Chung v The Director of Lands [1986] HKDCLR 27
- A plot of land had previously been designated as a firing area and as a consequence,
contained unexploded ordnance which diminished the value of the land
- The Lands Tribunal held that the resumption of the land was made in pursuance of a long
standing scheme by the Government to provide training facilities in the Castle Peak area
- The Pointe Gourde principle applied to depreciation as well as appreciation in value

attributable to the scheme of which the resumption formed a part: The fact that the land was
designated as a firing area and contained unexploded ordinance would be DISREGARDED
for the purpose of assessing compensation
(h) Matters not to be taken into account in assessing compensation
32
According to LRO s.12(a)-(c), in determining compensation to be paid:
(i) LRO s.12(a): No allowance shall be made on account of the resumption being compulsory.
(ii) LRO s.12(aa): No account shall be taken of the fact that the land lies within or is affected by
any area, zone or district reserved or set apart for the purposes specified in Town Planning
Ordinance s.4(1)(a), (c)-(i)
Blight
Blight most commonly occurs where land is zoned by Government for some future public purposes,
but the intended scheme requiring the resumption of land will not be implemented for some years to
come. In the absence of an immediate resumption notice, the effect of blight on an owner is two fold:
- First, blight has an adverse effect upon the owner who wishes to develop his land but will be
unable to do so as a result of the zoning
- Secondly, if the owner wishes to sell, he will be obliged to do so at a considerably reduced

price in view of the fact that the development potential of the land has been stifled
The word ‘affected’ meant ‘affected either way’, whether prejudicially or beneficially: Director
of Lands and Survey v Wong Chun-don [1977] HKLTLR 43.
For the purposes of compensation, no account will be taken of the fact that the land is `blighted’, i.e.
when assessing compensation for resumption, the fact that the plot of land was zoned by the
TPB as anything other than residential, commercial or industrial, that zoning would be ignored.
- E.g. if the plot of land to be resumed was re-zoned as a country park, or the Government
institution community, no one would purchase it. The house would be “blighted”.
Nonetheless, the house would still be compensated as residential. The house owner would not
be penalized.
- Similarly, the commercial businessman or the factory owner would be “blighted”.
- This provision in the LRO could act as consumer protection, so that the Government would
not benefit from re-zoning the plot of land.
*Nam Chun Investment Co Ltd v Director of Lands [2005] 1 HKC 390, CA
- The applicant was the owner of land in NT held under a Block Crown lease which contained a
Watford restrictive covenant
- The land, which was zoned as ‘residential’ in the Outline Zoning Plan, was resumed by
Government in 1999
- ISSUE: whether (i) Director of Lands v Yin Shuen Enterprises Ltd [2003] 2 HKC 490, CFA
should be applied in the instant case such that any potential modification to the use of land
(i.e. the effect of residential zoning) should be ignored (LRO s.12(c)) OR (ii) by LRO
s.12(aa), the ‘residential use’ zoning should now be taken into account?
- ANSWER IS NO:
o LRO s.12(aa) ensured that landowners whose land was to be resumed were awarded
proper compensation when the land in question was the subject of zoning restrictions.
33
It prevented the Town Planning Ordinance from being used by the Town Planning
Board to rezone or otherwise blight land so as to reduce the compensation payable on
a later resumption.
o The relief aimed at by LRO s.12(aa) was not to affect the value of land adversely
because of its being rezoned from the uses set out in s 4(1)(b) of the Town Planning
Ordinance to other uses (e.g. public uses) that would reduce its value.
o The fact that the land was zoned as ‘residential’ did not affect the position that, in
assessing compensation, any hope that Government would modify the terms of the
restrictive covenant in the Block Crown lease had to be ignored.
What is contained in the Town Planning Ordinance s.4(1)(a), (c)-(i)?
- s.4(1)(a): streets, railways and other main communications

- s.4(1)(c): reserves for Government, institution or community purposes,
- s.4(1)(d): parks, recreation grounds and open spaces
- s.4(1)(e): zones for undetermined uses)
- s.4(1)(f): comprehensive development areas
- s.4(1)(g): country parks, green belts etc.
- s.4(1)(h): zones for village type developments, agriculture or other specified rural uses
- s.4(1)(i): zones for open storage
(iii) LRO s.12(b): No compensation shall be given in respect of any use of the land which is not in
accordance with the terms of the Government lease
Compensation was NOT allowable in respect of buildings erected on a plot of land in NT, which was
in breach of Watford covenant that restricted the use of the land to agricultural purposes and there was
a prohibition against such erection: R v Board of Arbitrators, ex p Attorney-General [1955] HKLR 47.
This was the case even though there was evidence that the Government had waived performance of
the covenant not to build: Re A Compensation Board, ex p Attorney-General [1971] HKLR 338.
- Cf. Cheermark Investment Ltd v Director of Lands (2015) LDLR 2/2013, where applying
Fairfax Ltd v Attorney General [1997] HKLRD 243, PC, the Government had, with
constructive knowledge of the breach, acquiesced in the breach (residential premises used
as shop which was not permitted) since it had existed for more than 50 years; the restrictive
covenant had not, therefore, been breached and compensation should be awarded on the
basis of the use of the ground floor as a shop but not residential use.
(iv) LRO s.12(c): No compensation shall be given in respect of any expectancy or probability of the
grant or renewal or continuance by the Government or by any person of any licence, permission,
lease or permit whatsoever. This provision will not, however, apply where the grant, renewal etc
could have been enforced as of right if the land in question had not been resumed
The principle is applicable to fixed short term tenancies but not to periodic tenancies, which
may continue indefinitely until properly determined: Weco Textiles Manufactures Ltd v
Secretary for Transport [1991] HKLTLR 77.
Cf. Ching Chun-kau v Director of Lands and Survey [1978] HKLR 320
- The owner of New Kowloon Dairy Farm sought compensation in respect of the resumption of
the farm
34
- The licence to maintain a dairy would be issued annually at the Director’s discretion under
The Dairy Regulations
- Government tried to argue LRO s.12(c), by saying that almost no compensation would be
given because the running of the dairy farm was premised on renewal of an annual licence.
CA refused to accept that the unexpired term of the lease had no value apart from the
expectancy of a renewal of the dairy licence [MW: the court ignored the effect of the law to
achieve a just result]
This exclusion applies where development of land is limited by a restrictive covenant (such as in
block Crown leases restricting building on agricultural land): Director of Lands v Yin Shuen
Enterprises Ltd [2003] 2 HKLRD 399, [2003] 2 HKC 490, CFA; Dragon House Investment Ltd v
Secretary for Transport [2005] 4 HKC 480, CFA; View Point Development Ltd v Secretary for
Transport [2004] 2 HKC 52, CA.
(i) Provisional payment pending determination of compensation
The Director of Lands may, pending the determination of compensation by the Lands Tribunal, pay an
amount as a provisional payment and interest upon that payment, but such payment is made without
prejudice to the claim and any excess over the sum awarded will be recoverable.
5.6 The procedure for eviction of owners etc. following resumption of their land
Once a resumption notice has been published in the Gazette and properly served, the land reverts to
the Government on the expiration of one month after such service and all rights of the owner will
cease: LRO s.2.
If the owner does not then leave the land, Government may commence eviction proceedings by
serving a clearance notice under s.6 of the Land (Miscellaneous Provisions) Ordinance.
The eviction procedure was amenable to judicial review: Wong Wai Hing Christopher v Director of
Lands (2010) HCAL 95/2010.
35

LLAW3105 Land Law III Government Leases and Termination

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LLAW3105 Land Law III Government Leases and Termination

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LLAW3105 Land Law III Christopher Chan

LLAW3105 Land Law III (Conveyancing)

1. System of land holding in Hong Kong

1. SYSTEM OF LAND HOLDING IN HONG KONG

1.1 Vesting of land in the state

1.2 The meaning of land

(a) Common law definition

‘Cuius est solum est usque ad coelum et ad inferos’.

(b) Statutory definition

CPO s.2 provides:

*(c) Fixtures and fittings

Why is the distinction between fixtures and fittings important?

Whether air-conditioners are fixtures or fittings?

1.3 Land surveys and land boundaries

There is no system of guaranteed boundaries (registered titles) in Hong Kong.

(a) New Territories

(b) Hong Kong Island and Kowloon

- Land boundaries are delineated when land is granted by way of Government

(d) Resolution of boundary disputes by the courts

(e) Land Survey Ordinance

1.4 Demarcation of land in Hong Kong and land records

*Land in Hong Kong is divided into lots.

*1.5 Alienation of land and the division of lots

(a) Sectioning of land by deed poll (on the ground)

(b) Subdivision of land (in the air)

2. GOVERNMENT LEASES AND CONDITIONS OF GRANT

*2.1 Grant of land by the Government

(a) Government leases and Block Government leases

The method of sale of land varies.

(b) Conditions of Grant, Sale etc.

The manner of sale has changed to the grant of Conditions.

(c) The duration of the grant

*(i) New Territories land

(iii) Renewal of leases of flats in multi-storey buildings

(iv) Effect of renewal/extension on pre-existing rights

As to the effect of such a renewal/extension on extension on pre-existing easements: Lam Pau Ho v

(i) The FIVE different types of Conditions

(ii) The binding nature of Conditions

o What if there is an exclusion clause in the Conditions which excludes specific

*(iii) Compliance with the Conditions

(iv) Certificate of compliance

Scenario A - Conditions dated after 1 January 1970

The owner needs to prove such compliance.

Scenario B - Conditions dated before 1st January 1970

2.2 Modification of the grant

(a) Application for variation/modification

(b) Mode of variation/modification

(c) Decision not amenable to judicial review

In deciding whether or not to grant a modification of a restrictive covenant in a Government

2.3 Restrictive covenants in Government leases and restrictive conditions in Conditions of

(a) User restrictions in Government leases/Conditions

(i) ‘Residential/private dwelling house/domestic use’

- ‘Purchaser might only erect detached or semi-detached residential premises of a

Prohibiting use as ‘boarding house’, including nursing home

- Restrictive covenant prohibiting use as boarding house (where people were

(ii) ‘Industrial use’

- Use of property restricted in Conditions of Sale to industrial purposes; conditions of sale

- Restriction on use to industrial or godown purposes only. Use of premises by garment

- Use of premises as Chinese Medical Clinic breached restriction to industrial user:

(iii) Other specified uses

(iv) Partial breach

(b) Offensive Trades Clause

(i) Is the clause still effective?

(ii) The scope of the restrictive covenants