IX. Landlord sells the property with existing tenancy
When a landlord intends to sell a property that is let to a tenant, the landlord should make it clear to the estate agent, the solicitors and the potential purchaser that the property will be sold subject to a tenancy. The landlord should also notify the tenant about the intended sale and properly deal with the deposit paid by the tenant.
To get more information about sale and purchase of property, please go to "Sale and Purchase of Property" under the CLIC website.
1. My property, which is currently let to a tenant, has risen in value and I intend to sell it. What do I need to do to discharge myself from any liability under the tenancy before selling the property?
The landlord should make it clear to the estate agent, the solicitors and the potential purchaser that the property will be sold subject to a tenancy. The landlord’s solicitors will be responsible for putting relevant provisions in the agreement for sale and purchase to be made between the landlord and the potential purchaser, so that the landlord will be discharged from any liability under the tenancy. Typical provisions include declaring that the landlord has fully disclosed the particulars of the tenancy, reserving the landlord’s rights to claim against the tenant arrears of rent that were incurred before the completion of the sale, and excluding liabilities under the tenancy document on the landlord’s part incurred subsequent to the completion of the sale.
The landlord should also notify the tenant about the intended sale and properly deal with the deposit paid by the tenant. Simply transferring the deposit to the new owner will not exempt the landlord from being held liable for returning the deposit to the tenant. Upon such transferral, the landlord should, in exchange, obtain from the new owner an indemnity against claims on the deposit by the tenant (i.e. the landlord will be free from any future deposit claim by the tenant). Alternatively, the landlord may refund the deposit to the tenant and asked the tenant to lodge the same deposit with the new owner.
2. My landlord has informed me that the property I am renting was sold recently. I was also told to pay rent to the new landlord on the next due date. Can I object? Will my interests under the "old" tenancy be protected?
The landlord, as the owner of the property, is fully entitled to sell the property. If there is a tenancy subsisting at the property, it is likely that the property will be sold subject to the tenancy. That is to say, the new owner will be aware of the tenancy and will expect to collect rent from the tenant. The agreement for sale and purchase made between the old owner and the new owner should also have specified that the new owner will inherit from the old owner all of the rights and liabilities under the tenancy. Therefore, a tenant’s rights and liabilities under the existing tenancy will generally remain unchanged.
However, the deposit paid by the tenant deserves particular attention. According to a judgment made by the Privy Council (the final appellant court for Hong Kong before 1 July 1997) in 1986, the covenant made by a landlord to return the deposit to a tenant is a personal promise, and is thus enforceable only against the landlord personally but not against the new owner. Therefore, unless there are some other arrangements or agreements, the new landlord is not liable to the tenant in respect of the deposit paid to the old landlord. The tenant should make sure that the old landlord has transferred the deposit to the new landlord so that the tenant can recover the deposit from the new landlord.