Property and Leasing

‍Purpose

The deposit serves as security and earnest of performance for obligations under the tenancy (rent payment, repair obligations, handover condition).

It is the landlord’s money in both legal and beneficial terms during the tenancy.

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Forfeiture

Landlord cannot forfeit absolutely regardless of breach severity unless expressly agreed.

Forfeiture is usually tied to early termination by tenant or material breach (e.g., non‑payment of rent).

Leung Wai Ling Isewesg v Success Base Engineering Ltd: deposit forfeiture and outstanding rent serve different purposes — deposit covers losses from premature termination; outstanding rent covers past arrears.

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Damages & Liability

Misconception: liability ends with forfeiture. 

In fact, landlord may claim additional consequential losses (e.g., rent for remaining term if tenant leaves early), subject to mitigation duty (Goldon Investment Ltd v NPH International Holdings Ltd — tenant liable HK$17M for unpaid rent).

Deposit is not liquidated damages unless agreement says so; landlord can sue for further losses.

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Return of Deposit

Normally returned after lease ends, once tenant has complied with all obligations and landlord has assessed any deductions (repair, cleaning, unpaid utilities).

If disputes exist, landlord may hold deposit until resolution; but cannot unilaterally apply it to rent unless agreed.

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Disputes & Recovery

If landlord withholds deposit without proper basis:

Small Claims Tribunal — for claims ≤ HK$75,000.

District Court — > HK$75,000 ≤ HK$3M.

Court of First Instance — > HK$3M.

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Definition

“Structural alteration” means changing the building’s form or framework in a way that affects structural integrity.

Examples:

• Demolishing a load‑bearing wall
• Making an opening in an external wall
• Altering beams, columns, slabs
• Removing mezzanine floors (AFH Hong Kong Stores Ltd v Fulton Corporation Ltd [2022] HKCA 1243 — “bare shell” reinstatement included replacing demolished floors).

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Contractual Restrictions

Most tenancy agreements expressly prohibit structural alterations without landlord’s prior written consent.

Breach can give landlord a right of forfeiture.

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Landlord and Tenant (Consolidation) Ordinance (Cap. 7)

For domestic premises tenancies, section 117(3) implies:

“The tenant will not make any structural alterations without the landlord’s written consent.”

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This applies even if the tenancy agreement is silent.

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Buildings Ordinance (Cap. 123)

Under the Buildings Ordinance, structural works require prior approval from the Building Authority.

Works without approval may trigger enforcement orders, fines, or even demolition orders.

Tenants must notify the landlord and obtain both landlord’s written consent and government approval before starting such works.

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Consequences of Breach

Tenancy Forfeiture — landlord may terminate tenancy under forfeiture clause or statutory right.

Damages — landlord can claim cost of reinstatement and consequential losses.

Government Enforcement — fines, removal orders, possible prosecution.

DMC Breach — in multi‑storey buildings, breach of deed of mutual covenant can lead to legal action by management company or other owners.

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An option to renew in a tenancy agreement is a contractual right granted to the tenant to extend the lease for a further term after the current one expires.

It is a legal interest in land under Hong Kong law and has important implications for registration, enforceability, and priority.

Nature

• An option to renew is not automatic continuation; it is a right for the tenant to request a new term under agreed conditions.
• It must be exercised in accordance with the tenancy agreement — usually by written notice within a specified period before expiry.
• It is treated as a legal interest in land and therefore registrable.

Registration

• Under s.3(1) Land Registration Ordinance, an option to renew in a written tenancy agreement is registrable even if the tenancy term does not exceed 3 years.
• If registered, it enjoys priority over subsequent dealings and binds future purchasers.

Effect on New Owners

• If registered, a purchaser of the property takes subject to the option.
• If not registered, s.3(2) provides that the option is “absolutely null and void” against a subsequent bona fide purchaser for value whose agreement for sale was registered first — even if the purchaser knew of the option.
• Chan Yiu Tong v Wellmake Investments Ltd — purchaser not bound by unregistered option where sale agreement was registered before tenancy agreement.

Terms of Renewal

• For enforceability, key terms must be certain — rent, duration, premises, parties.
• If rent is to be “mutually agreed” later, disputes may arise; without certainty, option may be unenforceable.

Consequences of Non‑Registration

• Tenant may lose the right to enforce renewal against a new owner.
• Option remains enforceable between original landlord and tenant, but not against third parties without registration.

 Yes — there is no law in Hong Kong that prohibits foreigners from renting residential or commercial property.

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Hong Kong law does not restrict tenancy agreements by nationality or residency status.

Foreigners can enter into tenancy agreements like any other person, provided they have legal capacity (i.e., age 18+, sound mind).

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However, landlords may apply practical screening measures before agreeing to rent.

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Landlords often request:

• Proof of employment or steady income (e.g., employment contract, salary slips).
• Proof of identity (passport, Hong Kong ID if applicable).
• References from previous landlords or employers.
• Some landlords may prefer tenants with stable local employment to reduce risk of default.

Contractual Obligations

• The tenancy agreement usually specifies which party is responsible for repairs and maintenance.
• Common approach:
  
  • Landlord handles external and structural repairs.
  • Tenant handles internal and non‑structural repairs.
• Ambiguities can cause disputes — clear drafting is essential.

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No General Implied Duty

Under common law, landlords do not have an implied duty to keep premises in repair or fit for habitation unless:

• The tenancy is for a furnished letting (e.g., serviced apartment) — then there is an implied duty to maintain the property fit for habitation.
• It is a necessary term for the tenancy to have commercial or practical coherence at the time of contracting (per Leung Wai Ling Isewesg v Success Base Engineering Ltd).

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Statutory Obligations

• Landlords may be required by government departments to carry out repairs (e.g., under the Buildings Ordinance (Cap. 123) for dangerous structures, water seepage).
• Failure to comply can lead to penalties, enforcement action, or even prosecution.

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Practical Enforcement

• Tenants should notify landlords in writing of defects.
• If repairs are not carried out and cause substantial interference, tenants may seek:
  
  • Damages for breach of covenant (if applicable).
  • Injunctions in urgent cases.
• Tenants still have to pay rent unless the tenancy agreement says otherwise — rent obligations are independent of repair duties.

Breach of Tenancy Agreement

• Tenancy documents often specify domestic or non-domestic use.
• Example: using a residential flat as a shop or Airbnb without consent breaches the agreement.
• Landlord may issue written notice requiring remedy or compensation before termination.

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Breach of Government Lease

• All land in Hong Kong is leased from the Government (except St. John’s Cathedral).
• Government Leases set out permitted uses; breach allows the Government to re-enter and repossess the property under the Government Rights (Re-entry and Vesting Remedies) Ordinance (Cap. 126).
• Once a memorial of re-entry is registered, the owner loses title unless relief is granted under section 8.

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Breach of Deed of Mutual Covenant (DMC)

• DMC binds all owners and occupiers in a multi-unit building.
• Usually requires compliance with the Government Lease and prohibits unauthorized uses.
• Breach can lead to legal action by the management company, incorporated owners, or other unit owners.

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Liability to Third Parties

• Unauthorized use (e.g., running a business in a residential flat) can increase accident risks and lead to claims against the landlord.
• Without an indemnity clause, landlords may face unexpected litigation.

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Criminal Liability

• If the landlord knows of criminal activities (e.g., gambling, vice) and does nothing, they may face prosecution.
• Illegal use can also trigger lease enforcement by the Government.

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Landlord’s Right of Forfeiture

• Breach of the use clause may allow the landlord to forfeit the tenancy.
• Injunctions may be sought to stop the unauthorized use.
• Minor breaches (e.g., “home office” without actual harm) may not justify injunctive relief but still be technically a breach.

Generally agreed between parties, but rights are implied under the law:

Rent is agreed between parties. Upon non-payment of rent, parties shall follow the clause regarding forfeiture of tenancy in case the tenant fails to duly pay rent. Even if such a clause is not found in the tenancy agreement, the law generally implies a right of forfeiture. 

For both domestic properties and non-domestic properties, if a tenant is late in paying rent for 15 days, the landlord is entitled to terminate the tenancy. They can also obtain an order for possession from the court to recover the rent. 

Tenants can choose to: 

Tenants are allowed to take “relief against forfeiture”, where they still have a chance to keep the tenancy if it is only their first time failing to pay rent. The tenant can do this by paying all the unpaid rent and the landlord’s legal costs within a time period set by the court. If the tenant pays within that period, the landlord cannot take back the property. 

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A tenancy agreement must include the following essential terms to be legally binding:

1. Full names and identification details of the landlord and tenant.
2. Description of the premises – Clear address and boundaries of the property being let.
3. Commencement date and duration of the term – The start date and length of the tenancy, or a method to determine it.
4. Rent or other consideration – The amount of rent, payment frequency, and any other agreed consideration.

If any of these essential terms are missing, the tenancy agreement may be regarded as incomplete and unenforceable. Oral agreements can be valid, but they pose evidential risks.

A tenancy grants the tenant exclusive possession of the premises for a fixed or periodic term, creating an interest in land under Hong Kong law. During the fixed term of the tenancy, a tenant may generally occupy the property without the need of being worried that they might get evicted by the landlord. 

A licence on the other hand, only grants permission to occupy without exclusive possession, and does not create an interest in land. The licensee is thus only allowed to use the land. 

To differentiate the two, the court will examine the substance of the agreement, not just its label. For example in some cases, documents were labeled as a licence just to avoid stamp duty. This may be ultimately rejected by the court, because whether or not the document is a license or lease does not depend on its name, but on the true nature of rights and obligations.