PROPERTIES ACQUIRED FOR NORTH-EAST MRT LINE (Revision of market rental)

[Mr Speaker in the Chair]

Dr Lau Teik Soon asked the Minister for Law, in view of the Government's decision not to grant nominal rental to landowners of properties for the North-East MRT line who wish to rent them back, whether he will consider revising the method of determining market rental so as to alleviate possible hardship caused to such landowners.

The Senior Parliamentary Secretary to the Minister for Law (Assoc. Prof. Ho Peng Kee) (for the Minister for Law): Mr Speaker, Sir, as I explained in the last sitting of Parliament, the Government has already made a concession, by allowing former owners of acquired properties to remain on the premises after the Government has paid them full compensation. The Government will allow them to continue to occupy the premises up to the scheduled date for Land Office to take over the land, provided they pay market rental to Land Office as assessed by the Chief Valuer.

Land Office has a simple formula for assessing the market rental for letting out vacant land on short-term Temporary Occupation Licences (TOL). It is 6% per annum of the freehold value of the land. However, this formula is not appropriate for assessing the rentals on the different types of built-up properties acquired for the North-East Line. Yields on residential and commercial properties are typically much lower than 6%. Furthermore, unlike in previous acquisitions, when the Government would take over the land soon after the acquisition, this time the owners may opt to remain on site, even after receiving full compensation, and then stay on for several years in the acquired property on tenancy agreements of up to three years, and not just for a short term TOL, provided they pay market rentals.

My Ministry has received numerous appeals from the Member for Thomson GRC, Dr Lau Teik Soon, and others to alleviate the hardships faced by the affected owners as much as possible. The Government sympathises with these appeals.

I believe some of the concerns arise because the owners believe that Land Office will fix rentals on the acquired properties at 6% of freehold value. This worry is misplaced, because this was never Land Office's intention.

Arising from these appeals, my Ministry asked Land Office and Chief Valuer to clarify their basis for assessing market rentals on acquired properties. Land Office has recommended pegging rentals to the likely yields of the different types of properties. The Chief Valuer has advised that under present market conditions, in the case of freehold properties, the annual market rentals of the acquired properties amount to about 1.5% of the statutory compensation award for landed properties, 2.5% for flats, 2.8% for shophouses and 3% for shops. Rentals on other types of property will be determined on a case-by-case basis. These are substantially lower than the 6% formula used for vacant land on TOL. The Government has accepted these recommendations.

In addition, the Government will make a further concession to ex-owners who were occupying the properties when they were acquired. These owner-occupiers may need to stay on at the acquired properties for an interim period after receiving their full compensation, pending their final relocation. Therefore, for these owner-occupiers, the Government will phase in the assessed market rental over three years. Eligible owners will thus pay one-third of the full assessed rental in the first year, two-thirds in the second year, and the full assessed rental only in the third year. From the fourth year onwards, the rental will be subject to revision to reflect market conditions then prevailing.

Take, for example, an acquired terrace house with a statutory compensation award of $1.2 million. The assessed rental will be typically $1,500 per month. If the owner is an owner-occupier, after the property has been acquired he will pay only $500 per month in the first year, $1,000 per month in the second year, and the full amount of $1,500 per month only in the third year.

Dr Lau Teik Soon (Thomson GRC): Sir, first, I would like to thank the Senior Parliamentary Secretary and the Minister for reviewing the basis for the market rentals which in my view is very favourable to the residents and I am sure they will receive the new basis favourably. My supplementary question is whether or not, in view of the revised basis for the market rentals, the Ministry will consider expediting the payment of full compensation if the occupiers have given up vacant possession.

Assoc. Prof. Ho Peng Kee: Sir, I have asked Land Office to, as far as possible, expedite payment. Of course, the Commissioner of Lands has the duty to ensure that the titles are good and the payments are made to the right parties. But certainly the Land Office would expedite payment and, in fact, they have beefed up their manpower. Once verification of title is complete, payment can be made expeditiously.