I. Things that you need to know before signing a Tenancy Agreement or a Lease
The content of a Tenancy Agreement will normally include the period/length of the tenancy, rent, payment period, deposit, use (e.g. residence, office, or factory) and other usual terms that will be described in the other parts of this topic.
Depending on the period of the tenancy and the capacities of the parties entering into the agreement (whether a party to an agreement is an individual, partnership or a limited company, etc.), different formalities for execution are required.
While the terms “Tenancy Agreement” and “Lease” are often used as if they are synonyms, there are some technical differences between them.
Period/length of the tenancy
A Lease is generally a document that creates a tenancy for more than 3 years . It has to be executed in the form of a deed, meaning that it has to be signed, sealed and delivered by the parties. That is to say, the parties have to sign the Lease, affix a red seal (a small red wafer) next to their signatures and exchange copies of the lease.
A Tenancy Agreement is generally a document that creates a tenancy for a period not exceeding 3 years . The parties to a Tenancy Agreement only have to sign it, without needing to affix the red seal and exchanging the document. To protect the interests of both parties, however, it is recommended that the parties should exchange copies of the Tenancy Agreement.
Capacities of the parties
The capacities of the parties entering into the Lease/Tenancy Agreement also affect the formalities of execution.
An individual, sole proprietorship or a partnership entering into a Lease must affix a red seal next to the signature of each signing person. A limited company must affix its common seal next to the signature(s) of the person(s) authorised to sign the Lease. Furthermore, the Lease has to be executed in accordance with requirements stipulated under the company’s Articles of Association.
If the party to a Tenancy Agreement is a sole proprietorship, a partnership or a limited company, the chop or the rubber stamp (as the case may be) of the signing party also has to be affixed onto the Tenancy Agreement together with the signature of the signatory.
The following table summarises the wording that may be used for the execution clause in a Lease/Tenancy Agreement (i.e. the part of a Tenancy Agreement/Lease where you sign your name).
Capacity of parties
Wording commonly used for the execution clause
Signed, sealed and delivered by [name of party]
Signed by [name of party]
Signed, sealed and delivered by [name of the sole proprietor] trading as [trading name of the sole proprietorship]
CHOPPED WITH the chop of the [Landlord/Tenant] and signed by [name of the sole proprietor] trading as [trading name of the sole proprietorship]
Signed, sealed and delivered by [names of all partners of the partnership] trading as [trading name of the partnership]
CHOPPED WITH the chop of the [Landlord/Tenant] and signed by [names of all the partners] trading as [trading name of the partnership]
Sealed with the common seal of [name of the company] and signed by [name(s) of the signatory(ies)], duly authorised by its Board of Directors
Signed for and on behalf of the [Landlord/Tenant, with company chop] by [name of signatory], duly authorised by its Board of Directors
If the property has been mortgaged to a bank/financial institution, the landlord must obtain the prior consent from that company before leasing it out. For more information regarding this matter, please go to Properties Arrangements > Landlord and tenant > Properties with mortgages .
1. Is it necessary to have a solicitor to represent
No law requires a party to a contract to be represented by a solicitor. As a matter of fact, some people enter into standard form tenancy agreements without obtaining legal advice or even without examining the content of the agreements.
Parties that have the benefit of solicitors, however, have their legal interests better protected because their solicitors will draft or scrutinise a tenancy document from a legal perspective with the parties’ interests in mind.
A tenancy document prepared by solicitors typically covers more aspects than standard form agreements because the former tends to identify more issues that can potentially lead to disputes. By identifying and dealing with these issues before the parties commit themselves to the tenancy document, the chance of future disputes between the parties may be reduced.
2. I heard about someone who claimed that they were the owner of a property for let. After the potential tenant had paid the deposit and the rent in advance, the “landlord” disappeared with the money. If I am going to rent a property, then how can I be sure that
The Land Registry provides a “Land Search” service to the public. Any person can conduct a search at the Land Registry to ascertain the ownership particulars of any property in Hong Kong. A potential tenant should always conduct a land search before entering into a tenancy document.
If the potential tenant is renting the property through an estate agent or has retained a solicitor firm, then the agent and the firm are duty bound to conduct such a search to protect the tenant’s interests.
3. What major government departments are responsible for governing tenancy matters in Hong Kong? To which department(s) should a party go to if a tenancy dispute/problem arises?
The Rating and Valuation Department is responsible for administering the Landlord and Tenant (Consolidation) Ordinance ( Cap.7 of the Laws of Hong Kong). Regarding tenancy matters, it also provides such services as endorsement of Notice of New Letting or Renewal Agreement , issuance of Certificate of Rateable Value and determination of the primary use of a property (i.e. whether it is used as a domestic or business/non-domestic premises). The Rent Officers of the Rating and Valuation Department will also answer public queries on tenancy matters through a telephone hotline at 21508229.
The Lands Tribunal is the major body responsible for handling tenancy disputes. Unlike the Court, a tribunal is characterized by informality. For example, the judge sitting at the Tribunal is called a presiding officer. The lawyer and the presiding officer do not have to wear court dress. The presiding officer plays a more intervening role and is more ready to discuss the issues with the parties.
If the dispute is purely about a monetary claim of $50,000 or less, then the claimant can make the claims at the Small Claims Tribunal . If the amount of the claim is higher or the relevant legal issue is more complex, then the parties can also bring the case to the District Court or the Court of First Instance of the High Court (please refer to Properties Arrangements > Landlord and tenant > How to recover the outstanding rent and get back the property? for more details).
4. How can I obtain tenancy information concerning the Government properties (such as public rental housing or shopping centres run by the Government)?
If you want to obtain tenancy information on public rental housing, please visit the Housing Authority and the Housing Department’s webpage .
If you want to know more about the tenancy matters on Government shopping centres, please visit the Housing Authority and the Housing Department’s webpage .
5. What is the difference between a tenancy and a licence?
A tenancy has the legal effect of passing an interest in land from the landlord to the tenant. It means that the tenant is given the right of occupation. If a landlord is in breach of a tenancy document, then the tenant can claim damages (compensation) against the landlord and continue to occupy the property in question.
In contrast, a licence creates no interest in land. The licensor only allows the licensee to use the land, not to exclusively occupy it. The licensee’s remedy against the licensor’s breach of the licence may lie only in claiming damages, but not in occupation of the property. Therefore, a licence is typically used for short-term occupation (e.g. for several weeks or months) or where the licensee does not have exclusive occupation of the property, e.g. a car parking space , a newsstand or a “kiosk” in a shopping mall.
To demonstrate the concept of “interest in land”, it is worth noting that there is no interest in land in the external walls of a building because a wall, being a vertical surface, is not land. Therefore, the owner of the rights and interests in the external walls of a building cannot let the walls to another party, but can only license the rights to use the walls.
It should also be noted that as a licence does not transfer any interest in land, it is not liable to stamp duty. However, it would be futile to label a document as a licence just to avoid stamp duty. Whether a document creates a tenancy or a licence does not depend on the name of the document, but on the factual circumstances evidenced by the document. A major factor in differentiating between a tenancy and a licence is to see whether the user has exclusive occupation or possession of the property. Subject to facts that will vary from case to case, the law generally accepts that a grant of exclusive occupation (the user can occupy the property solely and privately) for a term at periodic payments creates a tenancy.
The above matter involves complex legal arguments. You must consult a lawyer if you have further queries.
6. Before signing the formal tenancy agreement or lease, a tenant may sometimes be asked by a landlord to sign a document called “agreement for lease” or “provisional tenancy agreement”. What are the consequences of signing this document?
An intending landlord and an intending tenant may enter into an agreement for lease prior to the execution of the lease/tenancy agreement itself. By signing this agreement, the intending landlord agrees to give, and the intending tenant agrees to take, a lease in the future.
The agreement for lease/provisional tenancy agreement is a contract. It must, therefore, satisfy the requirements of a contract. There must be offer from one party, acceptance from the other party, consideration, intention to create legal relations and so forth. The terms of the agreement must be sufficiently certain, including:
- the name of the parties;
- the name and address of the premises;
- the commencement date of the lease;
- duration of the lease;
- the rent, and other consideration.
An agreement for lease/provisional tenancy agreement is legally binding upon the parties to the agreement. If such an agreement is signed and one party subsequently refuses to sign the formal lease or tenancy agreement, the other party can apply to the court for an order of specific performance. That is, to apply for a court order to compel the defaulting party to fulfil the obligations as stipulated on the agreement.
Instead of signing an agreement for lease/provisional tenancy agreement, another possible scenario is that the tenant may be required to sign a document titled “offer to lease”. This document will then be signed (i.e. accepted) by the landlord. In practice, the consequences of signing an offer to lease are similar to that of signing an agreement for lease.
For more about basic requirements of a contract, please go to “Business and Commerce” under the CLIC website.