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LCQ6: Definition of "industrial use"

Following is a question by the Hon Jimmy Ng and a reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (November 30):
 
Question:
 
Some members of the innovation and technology (I&T) industry have relayed to me that since the Lands Department (LandsD) interprets the definition of "industrial use" in the land leases of industrial buildings too narrowly, owners of industrial building units have refused to lease the units to them, lest the land leases may be breached. The definition of "industrial use" adopted by LandsD follows the definition of "factory" under the Factories and Industrial Undertakings Ordinance enacted in the sixties of the last century, which refers to any premises or place, in which articles are manufactured, altered, cleansed, repaired, ornamented, finished, adapted for sale, broken up or demolished or in which materials are transformed. Notwithstanding that the definition of "industrial use", among the planning terms used by the Town Planning Board (TPB) in interpreting statutory plans, is broadly in line with that adopted by LandsD, TPB has amended the definition for many times to cover processes such as research, design and development. Moreover, TPB has widened the scope of uses that are permitted under the "industrial" zone so that uses falling outside the definition of "industrial uses" (e.g. uses for information and technology as well as telecommunications industries) are allowed in buildings in the industrial zone. In this connection, will the Government inform this Council:
 
(1) of the number of cases in the past five years in which LandsD took enforcement actions against lease breaches involving industrial buildings; among such cases, the number of those involving breaching of the lease for I&T industry use; whether LandsD will consider amending the guidelines on enforcement actions to deem those permitted uses in the land leases of new industrial buildings applicable to the land leases of old industrial buildings; if LandsD will, of the details; if not, the reasons for that;
 
(2) given that owners of industrial building units may apply to LandsD for a temporary waiver concerning changes in the use of such units, of the reasons why LandsD has not regularly compiled statistics on the relevant information of such cases; regarding the owners whose ownership of their industrial building units had been re-entered by LandsD on grounds of lease breaches, of the number of cases in the past five years in which such owners petitioned, under section 8 of the Government Rights (Re-Entry and Vesting Remedies) Ordinance, the Chief Executive to grant them relief against the re-entry and, among such cases, the number of those in which relief was granted, with a breakdown by lease-breaching use; and
 
(3) of the reasons why LandsD has not followed TPB's practice in amending the definition of the term "industrial use" over the years; whether the authorities will align the definitions adopted by TPB and LandsD for the term; if they will, of the details; if not, the reasons for that?

Reply:
 
President,
 
The crux of this question raised by the Hon Ng appears to be that the Lands Department (LandsD)'s interpretation of the term "industrial purposes" stipulated in land leases is outdated, and its interpretation does not tally with the definition of "industrial use" in the context of town planning. Before responding to his question part by part, I wish to first point out that the statutory town planning and land lease administration are two different systems. Let me explain the differences between them.
 
The Town Planning Board (TPB) prepares statutory plans in accordance with the statutory procedures under the Town Planning Ordinance to set out the planning intention of various land use zonings taking into account the latest circumstances, and to list out the uses which are always permitted and those which require planning permission from TPB under respective zones. Statutory plans enable the general public and stakeholders to understand the planning intention of particular land use zonings and whether application for planning permission is required for certain development or non-development projects. The uses and requirements stated in the statutory plans reflect the latest planning intention of the plans and the statutory planning control in broader areas, and would be subject to changes in accordance with the amendment of statutory plans or planning definitions.
 
On the other hand, land lease is the private contract executed between the Government (with LandsD acting as the land agent) and owners of private lot. Lease conditions, as stipulated in the light of individual private lots, also reflect the situation at the time when the leases are finalised. When putting up land for sale, the Government will work out the uses of the lots to be specified in the leases by reference to the applicable outline zoning plans. If the land has been included in the statutory plan applicable at the time when the land lease is entered into, the user clauses in the lease need not and do not necessarily cover all the uses permitted in the land use zone of the lot under the relevant statutory plan. But the basic principle is that the user clauses stipulated in the lease cannot contravene the statutory plan. Once the lease is executed by both parties, the user clauses therein will not automatically change with the amendments to the statutory plan; and they must be construed according to established legal principles governing the applied contracts. As a result, the relevant clauses in the lease will not and cannot automatically change with the amendments to the definition of terms in the Town Planning Ordinance once the lease is executed. When putting up land for sale, LandsD will consider whether the uses of the lots have to be adjusted in response to the changing social circumstances. For example, the two industrial sites in Kwai Chung sold in recent years, the lease conditions not only permit industrial and godown uses, but also incorporate other permitted uses such as office in direct support of an industrial operation; information technology and telecommunications industries; research, design and development centres; and laboratory, inspection and testing centres, etc.
 
Should there be any amendments to the land use zoning of a private lot under the statutory plan, the owner of the private lot may apply to LandsD for lease modifications or a temporary waiver so as to change the permitted uses of the lease governing the lot. However, the land uses of the lease proposed to be changed must comply with the always permitted uses specified in the respective land use zones or uses for which planning permission has been obtained. In processing the applications, District Lands Offices (DLOs) will consult the relevant departments including the Planning Department and the Fire Services Department, and conduct local consultation through the District Offices when necessary.  DLOs will, depending on the comments received from the relevant government departments, consider in the capacity of the landlord. If the application is approved, the applicant will have to pay a waiver fee/land premium and an administrative fee, and accept other terms and conditions stipulated.
 
Based on policy considerations, the Government may introduce a fee exemption/concessionary scheme in respect of an individual trade or a specified use, so as to facilitate the conversion of an industrial lot or an existing industrial building to specified uses.  Recent examples include policy measures introduced by the relevant bureau effective from June 2012 and February 2016 that encourage the operation of data centres and testing and calibration laboratories in industrial buildings. For cases meeting the policy requirements, the Government may grant a waiver to allow the operation of data centres and testing laboratories in industrial buildings and exempt the payment of a waiver fee that would normally be chargeable.
 
Taking industrial use mentioned in the question as an example, TPB has amended several times, through statutory procedures, the land use zonings on the statutory plans of traditional industrial areas and the definition of "Industrial Use" under the planning regime in accordance with the results of the Area Assessment of Industrial Land. For instance, certain "Industrial" zones have been rezoned to "Other Specified Uses" annotated "Business" zones, and uses such as radar, telecommunications electronic microwave repeater as well as canteens, cooked food centres related to industrial uses are allowed in the "Industrial" zone. As mentioned above, such amendments relating to land use planning would not replace the land use clauses already stipulated in the leases for the respective land lots.  Meanwhile, for the term "industrial purposes" used in Government leases, there is Hong Kong case law on what it means. LandsD as a party to the lease cannot and will not unilaterally modify the lease that has been entered into or interpret the user in the lease in a way different from the context under which the lease is entered into and the common law cases. Should the owners wish to amend the land use of the lease or apply for a waiver in response to the changes in planning, they may submit an application to LandsD.
 
My reply to the various parts of the question is as follows:
 
(1) and (3) Regarding the statistics on lease enforcement actions against lease breaches in industrial buildings over the past five years, the LandsD has only kept the figures since 2012.There were 157 cases in 2012, 208 cases in 2013, 209 cases in 2014 and 172 cases in 2015.
 
There is no breakdown of the statistics by industry since LandsD does not target any industry when it takes lease enforcement actions.  In addition, the term "innovation and technology industry", as specified by the Hon Ng, covers a wide range of operations, and does not have a concrete definition. For these reasons, it would be difficult for LandsD to compile any statistical data readily. From the experience of LandsD, irregularities found in industrial buildings in the cases mentioned above generally involve offices, shops, learning centres, places of entertainment/recreation, restaurants, religious gathering places, and the like.
 
(2) In the past five years (i.e. from 2011 to 2015), a total of four industrial building units with lease breaches involving the change of uses were re-entered and vested in the Government by LandsD under the Government Rights (Re-entry and Vesting Remedies) Ordinance (Cap 126). Among them, three units were used as retail shops, while one was used for children's interest class purpose, all breaching the relevant lease conditions.
 
The former owners in these four cases all petitioned the Chief Executive for relief against the vesting of property under Section 8 of the above-mentioned ordinance. Of these four petition cases, three were granted relief and the former owners got back the properties vested in the Government as they had purged the breaches and paid all relevant fees, expenses, fines and/or complied with additional terms in other aspects, while the remaining case is being handled by LandsD.
 
LandsD conducted a one-off survey on the number of temporary waivers in February 2015. It was found that there were approximately 1 000 valid temporary waivers applicable to industrial building units. LandsD does not have readily available information on the breakdown of these temporary waivers as requested.

Ends/Wednesday, November 30, 2016
Issued at HKT 15:43

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