TNAG-0753-FCO40-957-Future-of-Hong-Kong-1978 — Page 115

SECRET

2.

3.

4.

5.

HONG KONG: CROWN LEASES IN THE TERRITORIES ACQUIRED

BY THE 1898 CONVENTION

My following observations on your note of 17th August are personal and quite unofficial; they are based on English land law.

If you are correct in asserting that the territories acquired under the 1898 Convention ("the territories") are not held by the Crown on a strict leasehold basis and that the Crown exercises full sovereign rights thereover, I would agree that the Crown is free to grant leases of the territories for any duration recognised by law and I am surprised that leases in perpetuity and leases "for the duration" are under serious consideration, particularly as both types of lease would have to be validated by statute. I would have thought that a straight 99 year term or a 75 year term renewable for a further 75 years (which I understand is usual for Hong Kong Island) would suffice, provided that the Crown is not anxious to ensure that the leasehold interest determines if and when the Republic of China takeŝover the territories.

However, I was originally under the impression that the Crown wished to make certain that any leases granted would determine on Chinese re-occupation of the territories. In these circumstances, the leases mentioned at 4(a) and (b) and (with legislative backing) 6(a) of your note would be feasible. A straight lease expiring at the end of June 1997 or a lease until June 1996 and thereafter from year to year until determined by say 6 months notice by either side would also be feasible. A further possibility would be a lease until 1996 or 1997 with an option for the tenant to renew if the Crown can then grant a renewal.

You mention perpetual leases. I am not sure whether you mean leases in perpetuity or leases for a fixed term with a provision for perpetual renewal. Leases in perpetuity cannot be granted under English law except by statute, and even then, for all practical purposes they would operate as conveyances of the freehold subject to rentcharges. Leases for fixed terms with provision for perpetual renewal operate under English law as leases for 2000 years. If the Government is inhibited about the grant of freeholds or long leaseholds (beyond 1997), I cannot see that leases in perpetuity or perpetually renewable leases will solve your problems.

I myself still favour a straight grant for a term of 75 years (if the Government can grant the same) or a grant for a term of 75 or 99 years "if the Crown shall so long occupy the territories".

SECRET

2.6. Barcher.

22nd

Ind (ingart 1975