Hong Kong Properties – A Step by Step Guide to Renting / Cost Breakdown
1) Submitting an offer
Upon locating a property of choice, the first step in the process of securing the rental is for the tenant to instruct their appointed agent to submit an offer to the landlord.
The tenant will need to outline the following terms of the offer:
- The tenant’s background in terms of company name, job title and nationality
- Rental price
- Lease term: the standard lease term in Hong Kong is 2 years
- Break lease clause: 12 + 1 or 12 + 2 months’ notice is typical
In simple terms, the Landlord and the Tenant shall have the right to early terminate this Tenancy Agreement after the first 12 months by giving not less than 1 or 2 months prior notice to the other in writing to terminate the Tenancy Agreement (i.e. the minimum stay is either 13 or 14 months).
- Rent free period (if any)
- Special requests (e.g. cleaning, maintenance or pet friendly requirements)
2) Signing of the Provisional Tenancy Agreement
Upon the landlord’s acceptance of the tenant’s offer, the agent will assist with drafting a Provisional Tenancy Agreement, which is the first of two contracts that you will need to sign. This is a binding legal document entered into between all parties, including the agent, landlord and tenant.
Before entering into the agreement, the agent must provide an updated Land Search of the property to the Tenant. The Land Search is a document stored with the government’s Land Registry department. It indicates the registered owner of the property and incumbrances (if any) that are registered against it. The Tenant should request for the agent to explain the information shown on the Land Search.
At this stage, the tenant will need to provide the following items / supporting documents to your agent:
- HKID and/or Passport copy
- Initial Deposit: an amount equivalent to one month’s rent, which will act as the first month’s rent paid in advance (In Hong Kong, cheque payment is the widely preferred payment method by landlords.)
The tenant will need to confirm the date of signing the Formal Tenancy Agreement. Read more about what the Formal Tenancy Agreement entails below.
3) Signing of the Formal Tenancy Agreement
The Formal Tenancy Agreement is the final agreement entered into directly between the landlord and the tenant. Your agent or the landlord’s solicitor will assist in providing this. This contract outlines further details of the lease including responsibilities of both the landlord and tenant and a furniture inventory list. To avoid disputes, both parties should take pictures of the furniture and electrical appliances including in the tenancy as a record. Stamped copies of the Formal Tenancy Agreement is typically signed in duplicate and kept by the landlord and tenant. Once the agreement is signed, any amendment should be agreed by all contracting parties and cannot be amended unilaterally.
At this stage, the tenant will need to provide the following:
- Security Deposit: an amount equivalent to two month’s rent. This amount will be retained with the landlord throughout the lease term. Upon lease termination in the future, the security deposit will be refunded to the tenant (typically within 7 days – subject to contract). The Landlord is entitled to deduct any loss or damage suffered by the Landlord as a result of the Tenant’s breach from the Security Deposit. Unless the landlord has agreed beforehand, the deposit cannot be used to offset rental payments.
- Agency fee: an amount equivalent to half months’ rent is payable to the agent. If either the landlord or tenant decides to cancel the transaction before entering into the formal tenancy agreement, the party in default will not only have the deposit forfeited to the other party, but also needs to pay the estate agent’s commission. The defaulting party will also need to pay the estate agent’s commission for the other party (subject to contract).
- Stamp duty fee: the stamp duty payable to The Government of the HKSAR is shared between the landlord and tenant in equal portions. The stamp duty amount is equivalent to 6% of the monthly rental + $5 administration fee divided by 2. Calculation: (Monthly Rental x 0.06 + 5) / 2
The landlord must file Form CR109 at the government’s Rating and Valuation Department. Failure to file the Form CR109 will render the landlord unable to take legal action for recovery of the rent in court or in the Lands Tribunal. This form needs to be filed within 1 month from the date of signing the Formal Tenancy Agreement. If not, a $310 late penalty payment will need to be paid.
4) Key Handover Appointment
The handover appointment involves receiving of the keys by the tenant from the landlord/agent. It takes place on the first day of the rent free period or start lease date, and it will typically take place at the property itself.
On the day, the tenant should remember to cross check the inventory list in the Formal Tenancy Agreement once more. If the inventory list does not match the actual furniture in the property, the tenant should negotiate with the landlord and request for the landlord to follow up as soon as possible.
Normally, your agent will assist with setting up your utility accounts (e.g. water, gas & electricity) to begin on this day.
Other Frequently Asked Questions
If the tenant sublets the property without the landlord’s consent when the tenancy agreement states that subletting is not allowed, the landlord can apply to the court/Land Tribunal for a possession order. In this case, the tenant and sub-tenant may lose tenure.
Terminating the tenancy agreement
Fixed term tenancies will terminate when the lease term expires.