For lots involving multiple ownership such as large estate development, it is often impossible to reach all the owners and have their unanimous consent on the arrangement for lease extension. Under the current practice, the Government will grant a new lease with a new lot number to the Financial Secretary Incorporated (“FSI”) after the expiry of the current lease. The FSI will then assign the undivided shares allocated to the individual premises to the registered owners concerned. Such arrangements could protect the interests of the majority of owners who have consented to the lease extension arrangement.

The lease renewal of Pokfulam Gardens, a residential estate containing more than 1,100 flats, more than a decade ago is a highly significant precedent. Valuable experience can be drawn from the case. Negotiations for renewal started in 2004, two years before the expiry of the original lease. Although the Government managed to grant a new lease before the expiry of the original one, the owners still suffered in the interim two years as the number of transactions, prices, and mortgage applications were severely affected before the lease extension was confirmed.

It can be expected that for buildings without owners committees or incorporated owners, the lease extension may prolong and cause more disruption.

The Government has gained some experience in the handling of lease extensions over the last two decades. It also promises to study streamlined procedures to tackle the upcoming challenges of over 30,000 land leases that are going to expire by 2047. Still no clear direction has been made known to the public on the prevalence of current polices. With the backdrop of the present tension worldwide and local economic, social and political situations, the certainty of how leases are to be extended is of paramount importance to providing confidence to investors and stability of the property market and ultimately the economy. It is high time the Government laid out clear guidelines and start the process of lease renewal to minimize negative impact to owners, investors and other stakeholders for the leases expiring from 2025 and beyond.

This article was originally published on the South China Morning Post on 7th October, 2020.