Leasing out a Domestic Property

Leasing out a domestic property involves a number of legal procedures and financial arrangements. You need to know your rights and responsibilities as a landlord and pay attention to the following points to ensure a smooth leasing experience.

Looking for a Tenant

You can look for a tenant on your own or appoint a licensed estate agent to handle the leasing of your property. In either case, you are required to provide accurate property information to your potential tenant before entering into a lease. If you choose to engage an agent, you should clarify with him or her details of the engagement such as the amount of commission and the time of payment before signing the estate agency agreement.

If your property is still under mortgage, you should seek the mortgagee’s prior consent to the letting of the property. Otherwise, you may be in breach of your mortgage agreement and your mortgagee could repossess the property.

Signing a Tenancy Agreement

You and your tenant can generally decide between yourselves the terms of the tenancy agreement, as long as they do not contravene the Landlord and Tenant (Consolidation) Ordinance.

Stamping of the Tenancy Document

A tenancy agreement must be stamped within 30 days of execution. You can stamp a tenancy agreement via the Internet, by post or in person at the Stamp Office of the Inland Revenue Department. Both the landlord and tenant are liable to pay stamp duty. Subject to individual arrangement, the stamp duty payment is usually shared between the landlord and the tenant.

Filing a Tax Return

Tax is charged to the property owner or landlord on the actual rent received in the year of assessment. Unless you have already received a tax return from the Inland Revenue Department to report the income, you must inform the Department in writing if you are liable for tax and supply the details within 4 months after the end of the basis period for that year (i.e. on or before 31 July, based on the basis period from 1 April every year to 31 March in the subsequent year). You can use the notification form for the letting of properties (I.R.6129) provided by the Department.

You will also have other obligations as a property owner or landlord, such as keeping sufficient rental records.

Registration of a Tenancy Agreement

According to the Land Registration Ordinance, a lease with a term of more than three years must be registered at the Land Registry within one month of execution. Other tenancy agreements, especially those with an option to renew the existing tenancy, can also be registered. Please note that a tenancy agreement must be stamped before it can be registered at the Land Registry and admitted as evidence in court, should the need arise.

Payment of Rates and Government Rent

You should submit a Notice of New Letting or Renewal Agreement to the Rating and Valuation Department for endorsement within one month of executing a tenancy agreement. A fee of HK$310 will be charged for late submission. With a copy of the Notice returned after endorsement, you will be eligible to take legal action to claim rent if needed.

Subject to the terms of your tenancy agreement, both you and your tenant can be liable for rates and Government rent. The Rating and Valuation Department and the Lands Department provide a number of online services to facilitate the payment.

Your Rights and Duties as a Landlord

A tenancy agreement should set out what you and your tenant have agreed to be your respective rights and duties. However, certain rights and duties are implied in a tenancy unless there are contrary provisions in the tenancy agreement. For example, your implied duties include ensuring your tenant’s enjoyment of the property and the property’s conditions during habitation.

According to the Landlord and Tenant (Consolidation) Ordinance, in the absence of any express agreement for the payment of rent and conditions for forfeiture if rent is not paid, your tenancy agreement implies that the tenant must pay the rent on the due date and that the tenancy will be forfeited after non-payment for 15 days.

Continuing a Tenancy

Under the Landlord and Tenant (Consolidation) (Amendment) Ordinance 2004, you and your tenant can decide whether to renew a tenancy created on or after 9 July 2004. However, if there is an option to renew clause in your existing tenancy agreement or another written agreement, your tenant’s right to renew the tenancy is preserved.

You should inform your tenant when you decide to sell your leased property. If no new agreement is made between your tenant and the new owner of the property, the terms of the existing tenancy will continue to apply. Remember to clarify with the tenant and the new landlord the liability for refunding the deposit to the tenant.

Terminating a Tenancy

A fixed-term tenancy created on or after 9 July 2004 will end at the expiry of its term. Both landlord and tenant need not to issue a termination notice. You or your tenant can also terminate the tenancy early through mutual agreement or if there is a break clause in the tenancy agreement.

Free Advice and Assistance

If you have questions about or need assistance with any tenancy matters, you can approach the Rating and Valuation Department (RVD) for its free enquiry, assistance and mediatory services. You can also obtain free legal advice from the Duty Lawyer Service.

Note: This article serves as a general guide only. In case of doubt, please refer to the relevant laws or seek advice from the legal profession.