Many malls getting away with costly land lease breaches

Top News | Michael Shum 15 Jan 2020

The Ombudsman slammed the Lands Department for allowing shopping malls to use public spaces for commercial activities - a contravention of land leases.

The watchdog said the department is slow in following up on breaches and charging mall owners for using the space without making prior applications.

Such fees could run up to hundreds of millions of Hong Kong dollars, said Ombudsman Winnie Chiu Wai-yin, referencing one case where the department charged a landlord HK$24 million for a breach lasting five and a half years.

In a press conference yesterday, Chiu lashed out at the department, criticizing officials for insufficient, delayed or even no enforcement action for unauthorized use of public passages and atria in private malls to conduct business, which constitutes a breach of the land lease.

"A case shows that a District Lands Office found a mall using public spaces for commercial use during an annual inspection, but did not take any enforcement action," she said.

"The office only issued a warning letter to the owner of the mall upon finding the same problem 10 months later during the annual inspection for the following year."

The department found 65 malls breaching their land leases and among those only two applied for a short-term waiver from the District Lands Office after the breach was found.

"In only one of those two cases did the District Lands Office take action to recover from the owner of the mall the waiver fee, which exceeded HK$24 million for a breach that had persisted for as long as five-and-a-half years," Chiu said.

The owner must pay an administration fee and a waiver fee to the department if the waiver is approved, and if the owner only applies for the waiver after the breach has been discovered, the waiver fee payable will usually be backdated to the first day the breach was found.

But the Lands Department was found to not have proactively recovered waiver fees from owners who contravened their lease.

"We consider the department to have failed to make good use of its enforcement power," Chiu said.

"In the 60 remaining cases where no applications for a waiver were ever submitted and the department took no action to recover waiver fees, the fees involved could easily be in the hundreds of millions of dollars."

The probe also said the department failed to register warning letters with the Land Registry, after which it could take further lease enforcement action, including reentry of the lot or vesting of the relevant interest to the government.

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