On last Sunday it was reported in the foreign press that tension has been bubbling in two western mainland cities as opposition grows against planned industrial facilities. The reason is growing public concern over the environment that threatens to derail projects that central government officials say are needed for economic growth. On the same day in Hong Kong, we had concerns over the Urban Renewal Authority taking action in West Kowloon to recover possession of land-using powers under the Land Resumption Ordinance.

The Urban Renewal Authority and its predecessor, the Land Development Corporation was set up to expedite urban renewal. It is a statutory body vested with powers to resume private land under the Land Resumption Ordinance. Under the statutory regime, compensation was to be paid to the private owners of the land resumed and it can be a judicial process. It appears that the Lands Tribunal has more than 20 years' experience in dealing with land compensation cases.

Prior to the 1980s, Hong Kong had relied mostly on private redevelopment efforts to regenerate urban areas. They were piecemeal and profit-driven. Only in the late 1980s had the government begun to, systematically, intervene in urban renewal through the formation of the Land Development Corporation (LDC) to prevent urban dilapidation in older districts. By the mid-1990s, the LDC was considered to have been too weak and too slow in renewing the urban fabric. Supply of residential flats through redevelopment continued to decline throughout the 1980s and 1990s, and was exacerbated by the Asian financial crisis in 1997. The Urban Renewal Authority was therefore created with broader powers and a somewhat more flexible financing model.

There is no doubt that urban renewal is in the public interest. Urban renewal addresses problems of overcrowding, fire hazards, inadequate transport infrastructure, and a lack of public amenities in older districts.

Somehow, the involvement of major property developers has led some landowners to think they should be entitled to a proportionate share of the profit that might be generated by redevelopment. The argument tends to forget about the inability of small land owners to redevelop large projects and the risks involved in any development when a major financial crisis emerges. However, the problem has been that major financial crises are few and far between. Experience has shown that private developers in joint venture with the Urban Renewal Authority were able to acquire highly profitable developments. Further, investors willing to take more risks would often be happy to be the last unit for resumption so as to extract the highest return. There is no shortage of such cases that went to the Lands Tribunal. But against the high profits made in redevelopment, it is difficult to take a moral judgment and suggest the actions of those investors willing to take a higher risk is somehow wrong.

Valuation is often an art and not a science. Different valuation experts take singular views on valuation of the same property and sometimes the disparity can be substantial.

This brings me to the question of what is the best way of resolving the problem. Litigation is of course one solution. The drawback is the time and cost involved. However, the properties may be valuable, especially if the one in question is a retail store. Litigation however, can only resolve the level of compensation. Litigation does not allow flexibility, for example, in terms of participation by landowners in the proposed development.

Mediation would appear the more suitable alternative solution. So far we do not have a compulsory mediation regime in Hong Kong for land compensation cases. This idea should be considered seriously. However, more efforts from all sides, including the government and the Urban Renewal Authority, are required to provide the solutions in resolving the land-supply shortage in older districts, and the more glamorous goal of urban renewal.

The author is a barrister and chairman of the Hong Kong Bar's Special Committee on Planning and Policy.

(HK Edition 05/14/2013 page1)