Guide to renting

 If you are looking to rent an accommodation, you will find that prices in Discovery Bay are about 30% lower than on Hong Kong Island. You can get much more space and quality of accommodation in DB for your budget.

You will find in this section some information to guide you in the renting process.

 
(source: Savills)

1. Letter of Offer/Provisional Agreement & Holdings Deposit

 

Once you have verbally agreed the rental amount and the improvements needed to the property with the Landlord, he may want you to sign a Letter of Offer/Provisional Agreement and pay a holding deposit to indicate your initial acceptance. It is wise to only commit to an offer letter that is ‘subject to contract’ whereby this initial deposit is refundable.

 

You should avoid signing a binding provisional agreement at the time the landlord agrees to the offer. This ties you to the transaction without any right to negotiate on the terms of the tenancy.

 

A ‘legally binding’ offer is a Provisional Agreement stating all the material terms and conditions of the offer which once confirmed will bind both parties. This agreement however does not mention the conditions stated in the formal tenancy agreement containing the responsibilities of each party during the lease term. In addition the initial deposit paid to the landlord is non refundable once this agreement is executed.

 

In addition a “legally binding” offer letter eliminates your right to amend the formal tenancy agreement which in Hong Kong is normally more favorable to the landlord than the tenant and offers more protection to the landlord. In other words if you withdraw your offer after you have signed this agreement in addition to losing your initial deposit you may end up compensating the landlord for any loss which could mean having to pay rent for the complete term of the lease if the landlord cannot find a replacement tenant within the tenancy term of two years. You may also be liable for the real estate agency fee even though you did not eventually sign a formal tenancy agreement.

 

The initial holding deposit is paid as a sign of good intent for the Landlord to hold the property whilst awaiting preparation and completion of the contract documents. The amount of this deposit is usually one month of the agreed rent. Whenever a holding deposit is paid, a receipt should be obtained. Special attention should be paid to the deadline detailed in the Letter of Offer/Provisional Agreement, for accepting the offer as delay in confirming acceptance might result in forfeiture of the holding deposit paid. If you delay, you may also have to pay the agreed Agency Fee to your Estate Agent.

 

2. Proof of Ownership

 

Your estate agent should provide you with the latest land search confirming the party executing the tenancy agreement is the legal owner of the property.

 

3. Length of Lease

 

The general term in Hong Kong is for 2 years and subject to negotiations, after the first 12 months of the lease a 2 or 3 month written notice may be served to the landlord to early terminate the lease (break clause). We strongly advise you to include a break-clause in the tenancy agreement.

 

4. Mortgagee Consent

 

When the property is under mortgage it is advisable to request the landlord to confirm that they have acquired the consent of the bank to lease the property out. Without this the bank have the legally right to terminate the lease and request for vacation of the occupant should they discovered the existing of a tenant mainly because the mortgage payment can be substantially different between a self-use and investment property. For cases whereby the landlord is unable to get the consent and for your protection the landlord should give you an undertaking for all the expenses incurred by your relocation. A copy of the “Letter of Undertaking” is enclosed for your reference.

 

5. Tenancy Agreement

 

All residential leases are personal leases meaning that you will be responsible for agreeing on and signing the tenancy agreement. 

Acceptance of accommodation or other dwelling and the terms of the related Tenancy Agreement are your responsibility, as the Tenant. It is therefore advisable to obtain a copy of the draft Tenancy Agreement for inspection. You must satisfy yourself with the terms of the agreement before signing. It is legally binding.

 

6. What to expect when signing the Tenancy Agreement

 

If your landlord uses a solicitor to draw up the Tenancy Agreement, you are likely to attend the solicitor’s office in person for signing. You should take your passport of Hong Kong I.D. Card as proof of identity. The Tenancy Agreement is in duplicate and a third person must witness the signing. Check that the Tenancy Agreement and the duplicate are properly signed, witnessed and dated. The Landlord’s solicitor immediately upon signing of the agreement. Please note that it is customary for each party to be responsible for their own legal cost. Upon execution of the Tenancy Agreement. You will also be expected to pay the security deposit as well as your share of the stamp duty. 

If you used a Estate Agent to find the property, you will be expected to pay the agreed Agency Fee on signing the Tenancy Agreement.

 

7. Security Deposit

 

This is normally equivalent to two-month rent which the landlord will hold without interest throughout the lease term. This deposit is refundable and will be returned to the tenant at the expiration of the Tenancy Agreement provided that all the terms of the lease have been compiled with and all utility bills are fully settled.

 

8. Stamp Duty

 

This is shared equally between the Landlord and Tenant and is paid to the Government of the Hong Kong Special Administrative Region for the stamping of the Lease Agreement after it is signed. The duty on a lease must be paid within 30 days of its execution, failing which the contractual parties are liable to a penalty for lateness. If the stamping is more than two months late, the penalty is ten times the amount of duty, though the collector has power to remit some or the entire penalty. Your agent, landlord, solicitor or yourself will need to present the signed tenancy agreement for stamping. The duty incurred will be shared equally between you and your landlord . A separate cheque should be made payable for the duty to 'The Government of HKSAR’. Time for Stamping is within 30 days after the date of execution (note : this is the Date of tenancy not the commencement day).

 

 

9. Penalty

 

Length of Delay Penalty

Penalty

Not exceeding one month

Double the amount of stamp duty

Exceeding one month but not exceeding two months

Four times the amount of stamp duty

In any case

Ten times the amount of stamp duty

 

 

10. Stamping Arrangement

 

Stamp Duty Office

Submit an application for stamping in paper form at Stamp Office Counter:

3/F, Revenue Tower, 5 Gloucester Road, Wanchai (near Grand Hyatt Hotel)

(Tel.: 2594 3201/2)

 

e-Stamping Service

May use the 24 hours e-Stamping service (details) at the Hong Kong government’s site ( http://www.ird.gov.hk/eng/tax/e_stamp.htm) to submit electronic stamping applications. For details, please refer to the government web site http://www.gov.hk

 

How to Calculate Stamp Duty

A. 0.25% of the total annual rent where the length of lease is unspecified or is one year or shorter;

B. 0.5% of the annual rent where the lease is for between one and three years;

C. 1% of annual rent where the lease is for three years or longer.

 

11. Cost incurred when starting of Tenancy

 

Housing Assistance:

A. Rental deposit (normally equivalent to 2-months rent)

B. 1st month advance rent

 

Personal Account:

A. Stamp duty

B. Agency fees (if applicable)

C. Solicitor’s fee (if applicable)

D. Utility deposits

12. Renewal & Termination

-          Renewal & Termination of Tenancy Agreement Procedures

It is very important to be aware of the Government Ordinances and common procedures of renewal or termination of Tenancy Agreements so as to avoid any problems or misunderstandings at the end of your current Tenancy Agreement. The following information should act as a guide.

-          Renewal of Tenancy

Discussion on the terms and conditions for a lease renewal should commence no later than two to three months prior to the end of your lease. You should use your best endeavour to negotiate with your landlord to achieve the stipulated rent. Should negotiation on the lease renewal fails then you might have to look for an alternate residence.

-          Early Termination of Tenancy

The period of tenancy in Hong Kong is normally two years, during which the rent is fixed. Should an early termination of the tenancy, or change of tenant be required, the Landlord’s agreement must be obtained.

-          Termination Notice

Notice of termination should be made in writing with reference to the related tenancy agreement. It is necessary to allow 7 working days for postal delivery in order that the notice reaches the landlord on time. A written acknowledgement by the landlord that the property has been returned in an acceptable condition avoids disputes over defects, which may subsequently be found. In order to get the refund of Rental Deposit, it is essential for you to settle the final bills for utilities and rates and produce evidence of payment if required.

-          Yielding up of the Premises

All tenancy agreements state that when the tenant moves out of a property, it should be in the same condition as it was at the commencement of the tenancy. Fair wear and tear is accepted. At the end of the tenancy, all costs associated with any additional reinstatement work, which is necessary as a result of alterations, which were made or caused by you during your occupancy, will have to be rectified prior to the handing over of the premises back to the landlord. Examples of such defects are:* Removal of picture hooks and filling in holes on walls * Removal of curtain rails so installed by you* Any additional wiring installed or sockets moved for internet, cable or satellite TV wiring* The re-painting of walls of the premises back to the original colour* The erection or removal of partitions or walls* The removal of carpets* The removal of external structures, e.g. awnings* Stains, burns or marks on carpet(s) which cannot be removed by professional cleaning* Stains or marks on wallpaper/paintwork which cannot be removed by professional cleaning* Pins, hooks or the like onto wall tiles* Malfunction of appliances due to neglect* Damage caused by pets* The removal of additional fitted wardrobes All your own furniture and personal belongings will need to be removed from the property prior to the property being handed back to the landlord. If any such defects or any other damage you have made to the property are not rectified by the time of lease handover, you will be entirely responsible for reimbursement of reinstatement costs to the landlord. You may also be liable to payment of rent to your landlord until vacant possession of the property is delivered up.