As per the Landlord and Tenant (Consolidation) (Amendment) Ordinance 2004, the tenant does not have a right to continue to occupy the property after the expiry of a commercial lease.
Returning the property
At the end of the lease, a tenant should return the property to the landlord in the original handover condition at the tenant’s own cost.
Whilst a tenant is under no obligation to ‘improve’ the property into a better state than what was given to him at the commencement of the tenancy, the tenant is expected to return the property to its “original state”.
For commercial premises, it is common for lease/ tenancy agreements to include an express obligation to return the premises at a ‘bare-shell’ state to the reasonable satisfaction of the landlord (i.e. removal of all fixtures and leaving behind only the plastering/concrete surfaces). The landlord should reasonably accept that at the time of handover, the property will inevitably suffer from some wear and tear due to ageing and normal use.
Additionally, ‘landlord’s fixtures’, as listed out in the lease/ tenancy agreement, should be handed back to the landlord at the handover of the property at a reasonable status. For example, the air-conditioners should be functional when the property is handed back to the landlord.
To avoid unnecessary disputes about the state of the property at handover, it is advised for both parties to sign a written acknowledgement after inspecting the property.
Collecting security deposit
When the lease comes to an end, the tenant will be entitled to the return of the deposit, less any sums that the landlord has properly withheld.
Terms on which the deposit will be refunded are stated in the lease/tenancy agreement, and if satisfied, the landlord should return the security deposit in full to the tenant. The agreement should also stipulate when the security deposit will be returned (usually within fourteen days to one month after the tenant moves out), to give the landlord time to check the condition of the property and verify that all bills have been settled. The security deposit is repaid without interest.
The landlord might forfeit the return of the security deposit in full or partially if they believe the tenant had breached the tenancy/ lease agreement. For example, if the tenant has damaged the property beyond reasonable wear and tear, the landlord may deduct the cost used to fix the damage from the deposit. When a landlord could forfeit the return of the security deposit should be clearly stated in the tenancy agreement to avoid unnecessary disputes.
If you believe you are entitled to the security deposit, per the terms of the lease/tenancy agreement, yet have not received it, you may make a claim against the landlord in the Small Claims Tribunal. To prevent such from happening in the very first place, you should ensure that you have not breached any of your obligations under the tenancy agreement and have evidence of such.
Key Takeaways
- You should hand over the property in the condition specified in the lease. This will usually mean returning the property at a ‘bare-shell’ state
- Your lease should specify clearly when you would or would not be entitled to a full refund of the security deposit
- You should communicate with your landlord to ensure a timely and fair refund of the deposit
