My tenant has breached the lease by subletting part of the premises without permission. Can I forfeit the lease and keep their deposit?
Yes, you may be able to forfeit the lease and retain the deposit if your lease agreement expressly grants you that right and the tenant has breached the subletting clause.
Does Your Lease Allow Forfeiture?
Most private leases in Hong Kong include a clause allowing landlords to re-enter or forfeit the lease if the tenant breaches key terms, such as subletting without permission. Check your lease carefully for a clause on forfeiture or re-entry rights related to unauthorised subletting.
Under the Landlord and Tenant (Consolidation) Ordinance (Cap. 7), the implied right of forfeiture applies mainly to residential leases. For commercial leases, unless explicitly included, a landlord cannot forfeit the lease for reasons like unauthorised subletting.
How to Exercise the Right of Re-Entry
Serve a written notice under section 58(1) of the Conveyancing and Property Ordinance (Cap. 219), specifying:
- The breach (subletting without permission)
- If possible, remedy options (though often not applicable for breach of covenants like subletting)
Usually, a breach of the covenant not to sublet is considered non-remediable, so the landlord can apply for a writ of possession without waiting.
Can I Keep the Tenant’s Deposit?
Forfeiture of deposit is another common remedy for landlords in private leases. Whether you are entitled to keep their entire deposit is very case-specific and depends on the construction of the contract. Typically, there are two types of deposit forfeiture clauses:
- Absolute forfeiture: The landlord may forfeit the deposit without giving the tenant any credit. The deposit is not recoverable and therefore cannot be used as a set-off against the landlord’s claim for damages
- Non-absolute forfeiture: Credit must be given for the forfeiture of the deposit. The deposit may be set off against the landlord’s claim for damages.
In either case, legal advice is recommended to ensure compliance with the contractual and legal requirements.
Final Tips:
- Always review your lease for specific forfeiture and deposit clauses.
- Consult a lawyer for complex cases or disputes to ensure proper legal procedures.
For further guidance on lease enforcement and tenant disputes, see our Ultimate Guide to Commercial Lease Agreements in Hong Kong.
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