I verbally agreed with a landlord on the rent and some lease terms for a shop space and even paid a deposit. The landlord allowed me to start fitting out the space, but we never signed a formal lease. Later, the landlord changed their mind and refused to rent to me. Can I enforce our oral agreement or recover my deposit and expenses?
Yes, it is possible to enforce the oral agreement or recover your deposit and expenses if certain legal conditions are met.
Is an Oral Agreement Legally Enforceable?
In Hong Kong, the law recognises both oral and written tenancies. A valid lease (whether oral or written) must contain the following essential terms:
- Identity of the parties
- The premises
- Commencement date and duration of the term
- Rent or other consideration
In addition, for an oral lease to be enforceable (i.e., a legal action can be brought on it), one of these must apply:
- There is some memorandum or note in writing evidencing the tenancy agreement and signed by the parties; or
- The parties have performed sufficient acts pursuant to the oral agreement between them (e.g., paying rent).
Alternatively, Can I Recover My Deposit and Expenses?
Yes. If the landlord changed their mind without justification after you paid a deposit and incurred expenses, and if a binding agreement is found, you may claim for return of the deposit and compensation for your actual losses (such as fitting-out costs).
Conclusion
If you are able to prove a binding oral tenancy agreement and that all essential terms are agreed, the lease is likely to be enforceable as the payment of deposit and fitting out works constitute sufficient part performance. Alternatively, you may also recover your deposit and expenses.
For further guidance on lease enforcement and tenant disputes, see our Ultimate Guide to Commercial Lease Agreements in Hong Kong.
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