I've not taken the handbrake boot off my X5, but every one of my other BMW's had the adjustment under the leather handbrake boot. There should be two 10mm double nuts (one on each side of the handbrake lever), simply loosen the outer nut, then tighten the inner nuts a few turns. This essentially shortens the handbrake cables. Test to make sure that there is no brake drag when the handle is all the way down. If all is good, then lock the outer nuts onto the inner nuts. Again, if the X is like other BMW's, the actual handbrakes are small brake shoes inside the rotor hub on the rear wheels, so the rear pads are not the parking brake, the shoes are.