IV. Regulations on using or occupying a leased property
At first sight, a landlord should not have to bother with what the tenant is doing in the property as long as the tenant duly pays the rent and keeps the property in good condition. However, the issue is not as simple as that. A property used for a non-authorised purpose may create trouble for its owner.
1. Why is it necessary to ascertain the primary use, for example “domestic” or “non-domestic”, of a property?
A tenancy document usually contains a clause which specifies that the property is only to be used for domestic or non-domestic purposes. If a landlord believes that a tenant is in breach of this clause, such as running a shop in a residential property, the landlord must obtain proof of such a breach before proceeding with further action.
Where a question or dispute arises about whether a property is used for domestic or non-domestic purposes, one may ask the Rating and Valuation Department to issue a Certificate of Primary User of Premises for verification. If the dispute has been brought up to the Court, then you should submit Form TR4 to apply for the Certificate. If the dispute has not yet been brought up to the Court, then you should submit Form TR4D and pay the application fee of $3,850. Although the Certificate does not provide a conclusive answer to the issue, it will be persuasive when the issue is brought to Court.
For more details regarding the Certificate, please contact the Rating and Valuation Department at 21520111 or 21508229.
2. I have let a residential property to a tenant and I recently found that the tenant is using the property as an office. Will this affect my interests or cause any liability to me as a landlord? If my tenant conducts criminal activities there, what further problems will I face?
A property that is used for a non-authorised purpose may create trouble for its owner (the landlord) in the following ways.
Breach of Government Lease
An interesting phenomenon in Hong Kong is that property owners do not really own their properties. All lands in Hong Kong (except the piece on which St. John’s Cathedral is standing) are owned by the government, and landowners only lease their land (You may go to “Sale and Purchase of Property” under the CLIC website for more details). A typical owner of a flat in a building is therefore only a holder of shares in the land on which the building stands. When the government leases a piece of land to the “owner”, a contract is signed. The contract, generally called a Government Lease , imposes various conditions on the “owners” and their successor in title. One commonly found condition is that the “owners” have to comply with the land use purpose specified in the Government Lease. If there is a breach of this condition, for example conducting business activities at a property designated for residential use, then the government is entitled to re-enter and take back the possession of the property. Although such a drastic measure is seldom used, the Lands Department may require the “owner” to apply for a temporary waiver and pay a waiver fee, so that the government will temporarily waive its rights of re-entry.
Breach of the Deed of Mutual Covenant
A deed of mutual covenant is a contract that is binding on all owners of a multi-unit or multi-storey building. It basically sets out the rules for the management of the building.
A standard deed of mutual covenant will state that a unit owner must comply with the terms of the relevant Government Lease and will use the property only for the authorised purpose(s). A unit owner will usually also be required to prevent the tenant or occupiers from breaching the relevant terms. Therefore, even though it may be the tenant who is in breach of the Government Lease and the deed of mutual covenant, the landlord can still be liable to legal action by the management company or the other unit owners of the building.
Liability to a third party
If a residential property is used for business, then one can naturally expect that more visitors than originally anticipated will frequent the property. The chance of such visitors suffering from accidents related to the property and thus claiming against the landlord will also increase. A well-drafted tenancy document will contain a clause which specifies that the tenant indemnifies the landlord from and against all claims and liabilities caused by the tenant’s breach of any agreements. However, if the landlord does not have a well-drafted tenancy document, there may be a vacuum in the terms of liability to be borne by the landlord or tenant. In such circumstances, the landlord may be entangled in totally unanticipated litigation.
If the tenant is merely using the property for purpose(s) other than that authorised, then the worst that the landlord will face is monetary loss and damages. However, if the landlord knows that the tenant is using the property for criminal activities, e.g. as a gambling place or a vice establishment, and does nothing about it, the landlord could face criminal charges. The consequences will not be limited to monetary loss and damages, but may include a criminal record and imprisonment. Hence, a landlord who finds a tenant using the property for criminal activities should at once report the case to the police.
As a tenancy document is likely to contain a clause that designates the use of the property, e.g. residential, retail, or industrial, the tenant’s breach of this clause will give rise to the landlord’s right of forfeiture. The landlord may also want to seek professional legal advice about the landlord’s rights and liabilities, which may vary under different circumstances. For instance, a tenant who uses a residential property as a home office may simply be using it as a business correspondence address with all business done on a computer, i.e. without visitors to the property and without storing goods at the property. There may not be any actual harm to the property or any actual negative effects to the landlord. In such circumstances, even though the tenant is technically in breach of the term of the tenancy document, the Court probably will have much sympathy towards the tenant.
3. I am a tenant of an apartment unit who have been disturbed by my neighbour (since he habitually sings karoake at a high volume at night). I complained to the manager of the building and was told that as I was not the owner of the property. He further stated that I did not have any right under the deed of mutual covenant. What can I do?
A deed of mutual covenant is a contract binding on all owners of a multi-unit or multi-storey building. It basically sets out rules for the management and regulation of the building. A detailed deed of mutual covenant can run to over a hundred pages.
It may be technically correct that a tenant, not being the owner of the apartment unit, does not have any right under the deed of mutual covenant. Yet it does not preclude the building manager (or the owners-incorporation of the building) from exercising its power conferred by the deed of mutual covenant.
A typical deed of mutual covenant will state that a unit owner shall not cause or permit nuisance (either created by the owner or his/her tenant) to other occupiers of the same building. Therefore, subject to what the deed of mutual covenant exactly says, the building manager can do whatever it is empowered to do under the deed of mutual covenant to stop the singing neighbour, including taking legal action.
The tenancy document made between the tenant and the landlord may also contain a clause under which the landlord covenants to procure that all parties bound by any deed of mutual covenant observe and perform the deed. That is to say, even if the tenant indeed has no right under the deed of mutual covenant, the landlord has a duty to assist the tenant in stopping the singing neighbour by exercising the landlord’s right under the deed.
Eventually, if the tenant finds himself/herself facing with a deed of mutual covenant which is silent on the issue of nuisance, the only option is probably to sue the singing neighbour under the law of tort (one of the grounds for claiming monetary compensation via civil litigation ). While it may not be easy to quantify the monetary damages caused by the singing, the tenant may try to obtain a court order for an injunction which prohibits the neighbour from singing at night. As the relevant legal procedures are complicated, it is strongly recommended to obtain lawyer’s assistance.