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LCQ1: Commercial facilities divested by Hong Kong Housing Authority
     Following is a question by the Hon Alice Mak and a reply by the Secretary for Transport and Housing, Mr Frank Chan Fan, in the Legislative Council today (January 17):

     It has been reported that since 2014, Link Real Estate Investment Trust (Link REIT) has divested 45 of its commercial facilities (including shopping centres and car parks), an overwhelming majority of which are commercial facilities in public rental housing (PRH) estates that were divested in 2005 by the Hong Kong Housing Authority (HA) to the former entity of Link REIT. Some PRH residents have expressed the concern that following the divestment of such commercial facilities by Link REIT, it has become even more difficult for HA to fulfill its duty under section 4(1) of the Housing Ordinance to "secure the provision of" amenities ancillary to housing as HA thinks fit. In this connection, will the Government inform this Council:

(1) of the mechanism currently put in place to monitor the compliance with the relevant land lease conditions and covenants by the owners of the commercial facilities divested by HA; the number of suspected non-compliant cases handled by the Government in the past five years;

(2) whether, since 2005, the Government has conducted studies on the impacts of the operation modes and resale of commercial facilities divested by HA on the community, people's livelihood and the retail industry; if so, of the details; if not, whether it will conduct a study expeditiously; and

(3) given that the Chief Executive indicated earlier that she had reservation back then about HA's divestment of its commercial facilities, and now she felt "a bit having her hands tied" on "the Link REIT issue", of the specific circumstances that the expression "having her hands tied" referred to; whether the Government will proactively take effective measures, including the setting up of a dedicated inter-departmental taskforce to monitor and conduct inspections on whether or not the owners of the divested commercial facilities have breached the relevant land lease conditions and covenants, so as to alleviate the after-effects of HA's divestment of commercial facilities? 

     In 2005, the Hong Kong Housing Authority (HA) divested 180 non-residential properties (divested properties) with a view to enabling HA to focus on its core function of providing subsidised public housing, improving HA's financial position in the short-to-medium term, as well as, improving the operation efficiency of such commercial facilities. When handing down its Judgement in 2005 on a judicial review case regarding the aforesaid sale of properties, the Court of Final Appeal (CFA) affirmed that the plan was consistent with HA's objective, as laid down in section 4(1) of the Housing Ordinance. Section 4(1) requires HA "to secure the provision of housing and such amenities ancillary thereto as the Authority thinks fit" for the persons concerned. This does not mean that HA needs to be the direct provider itself and it is not stipulated in the Housing Ordinance that the tenants have any statutory right to the continued retention and control by HA of the facilities while the tenants are still using the facilities. HA has secured the provision of these facilities so long as such facilities are available, even though they are not provided by HA but by a third party. In reaching its conclusions, the CFA already noted that The Link (currently named as Link) would adopt a market-oriented commercial approach and there may be changes on the operation of the facilities, including, for example, the tenant trade mix. The CFA also noted the restrictions under land leases, as well as the restrictive covenants.
     The land lease conditions for divested property vary. In general, they do not restrict the disposal of individual shopping unit or carparking space, but, in most cases, would specify the land uses of the lots, including requirements that certain floor areas shall be used for the provision of designated facilities. Current and subsequent owners, who purchase these properties later, are all obliged to comply with these lease conditions. Owners who wish to change the land uses must submit applications to the Lands Department (LandsD). LandsD will conduct inspections and take follow-up actions for complaints. Appropriate actions will be taken if breaches of the lease conditions are confirmed. LandsD does not keep statistics on the number of cases concerning breaches of lease conditions of the divested properties. As with owners of other private properties, relevant owners are obliged to comply with various legal requirements and conditions set out in the land leases in their operations, while the authorities concerned would carry out supervision in the light of the actual circumstances. Apart from the existing regulatory mechanism, the Government has no plan to set up an inter-departmental taskforce to monitor and inspect commercial facilities of any particular private property owner. 
     Depending on individual circumstances, assignment deeds of divested properties contain certain restrictive covenants which require that commercial and carparking facilities shall not be disposed of individually by the owners under specific circumstances. Some properties are also subject to the welfare-letting covenant, which requires the owners to lease certain specific units to non-profit making organisations nominated by the Social Welfare Department, the Education Bureau, etc at concessionary rent as stipulated by HA for the provision of services. Owners shall also ensure that the restrictive covenants are incorporated in the relevant legal documents, such as assignment deeds, etc, in the event of further disposal of these divested properties. As in any property transactions, both the purchaser and vendor are obliged to clarify the rights and obligations associated with the property.
     HA has been communicating with the owners of the divested properties in the light of the circumstances of individual properties. For example, HA would, in the capacity as an owner, handle matters relating to the management and maintenance of the common areas together with other owners, and consider proposals for amendments to the land leases. In the past five years, HA has handled alleged breaches of the welfare-letting covenants by owners of five divested properties, involving matters such as rent, management fee, renovation work and relocation, etc. Having been cautioned by HA, the owners withdrew requests that were against the requirements under the covenants. HA will maintain liaison with the nominating authorities and offer assistance where necessary. In case of any breaches of covenants, the Housing Department will take appropriate follow-up actions.
     The needs of the residents of public housing for shopping, carparking, social services, etc can be fulfilled by multiple means, including services and facilities provided by public and private organisations, such as divested properties operated by private property owners in accordance with commercial principles. Neither the Government nor HA conducted or has plan to conduct any thematic study on the social impact caused by changes in the operation mode and ownership of the divested properties.
     The Government will continue to provide a wide range of facilities and services through various departments and public organisations. The Government will study the need and feasibility of providing new markets in districts where relevant facilities are alleged to be insufficient. The Government will also increase parking spaces and determine an appropriate mix of social welfare and educational facilities in various districts having regard to the local situation and needs. At the same time, HA would follow the relevant government policies and planning requirements for the provision of retail and carparking facilities when developing new public housing estates. Relevant organisations, such as the District Councils, will also be consulted. As at end-December 2017, there were some 1.74 million square metres of non-domestic facilities under HA, among which over 60 per cent were welfare and community facilities, as well as shops and markets stalls. Given the limited space in public housing estates, HA will, on the premise of ensuring that adequate open space is available for residents' access and leisure, endeavour to balance residents' needs and provide various community, educational, welfare and retail facilities where feasible.
     Thank you Mr President.
Ends/Wednesday, January 17, 2018
Issued at HKT 16:26
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