XN000022-1995-06-07 — Page 45

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First, the Bill provides for the automatic renewal and extension of sub-leases. All sub-leases which expire before the commencement of the legislation, provided that they have at some time in the past been registered in the Land Registry, will be deemed to have been renewed from a date of expiry to the day immediately before the commencement of the legislation. New sub-leases will be deemed to be granted from a date of commencement of the legislation. These new sub-leases will expire on 27 June 2047.

When sub-leases registered in the Land Registry expire after the commencement of the legislation but before 1 July 1997, they will be deemed to be granted upon their expiry as sub-leases which will end on 27 June 2047.

Second, the Bill proposes that Government rent will be payable directly to Government by the sub-lessees whose sub-leases are renewed under clauses 4 and 5 of the Bill. From 1 July 1997, Government rent will be set at 3% of the rateable value of the property as provided in Annex III to the Sino-British Joint Declaration. These amounts will be payable by the sub-lessees direct to Government from 1 July 1997.

There is one exception to the renewal and payment of Government rent provisions. These are sub-leases which have been granted or renewed for terms extending beyond 9 November 1994 and under which the Tong and the sub-lessee have agreed on the amount of rent payable to the Tong after 30 June 1997. These sub- leases are excluded because they result from agreements freely entered into and it is Government's intention to keep its interference with private contracts to the minimum.

The Bill also proposes that unless the Tong satisfies the Director of Lands that it has reasonable grounds for objecting to a modification or exchange, or the Director of Lands considers that the application should be refused for other reasons, the Director may approve the modification or exchange applied for. Upon such approval and tendering of the specified amount to the Tong, the Tong will be deemed to have agreed to the modification or exchange and will be obliged to execute the necessary documentation for the modification or exchange.

The Tong will be entitled to charge sub-lessees an amount equal to 10 per cent of the premium payable to Government in respect of the modifications and exchanges. This is to recognise the Tong's status as the lessee under the Block Crown Lease and the fact that, but for the legislation, the Tong would not have been obliged to agree to enter into any modifications and exchanges of land sub-leased.

If the Bill is enacted, sub-lessees will have certainty as to their sub-leases through to 27 June 2047. They will pay Government rent direct to Government. The Tong will not be able to delay redevelopment proposals requiring modifications and exchanges. As a result, the sources of much of the friction between the sub-lessees and the Tong should be removed.