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Landlords, Commercial

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Step 1: Put Your Property On The Market With ZAP

  • Advertise / Post Your Property on ZAP for FREE: Simply upload your property details, a brief description and photos on ZAP for FREE by clicking here. Tenants will contact you via ZAP's secure email portal without seeing your email address and it's your choice to reply.

    Deciding on your Rental Price? A good start is to find out what similar properties in your building or estate have recently been rented for in order to give you a more realistic price. . If you cannot find any information on the particular building ZAP suggests you look at rental price per square foot in the surrounding area.

    Inclusive/Exclusive Rent: Once you have decided what your asking rent is going to be, you need to decide whether that rent is inclusive or exclusive of management fees, government rent or rates. N.B. Inclusive rental agreements are the norm nowadays.
  • Quick Tips When Showing Your Property:
    • Make sure your property is clean and tidy
    • Have an asking rent price in mind and also a bottom price in mind
    • Highlight to potential tenants what is included and what is not included in the price e.g. car park
    • Introduce the benefits of the area and the building
    • Highlight the advantages of your property for example storage space, new fittings etc
  • Improve Your Chances of Being Contacted By Potential Tenants:
    • After you have advertised your property on ZAP select the link to your property and copy & paste it in your Facebook status
    • "Like" your property on Facebook
    • Use ZAP's "Send To Friend" function to email your property

Commercial Tenancy Agreements (less than 3 years in duration) are not required to be legally registered as a charge on your property. If it is less than 3 years you can in theory do without legal assistance, however there are still missteps that can be made and as always the safest way to proceed is by seeking legal advice and paying a lawyer to handle the transaction. After all one of the benefits of a non-agent transaction is that you may feel more able to direct a portion of what you have saved to having a lawyer look after your interests. If the Tenancy is 3 years in duration or more, you will need a lawyer to legally register the charge in any event.

Advantage of using a Lawyer for Rental

Disadvantage of using a Lawyer for Rentals

Safer transaction

Even if much less than agency fees you have to pay lawyers' fees

All the process will be taken care of on your behalf including processing the Stamp Duty

You have to visit the Revenue Department to pay Stamp Duty and finalize contract - This is not difficult

Option A: Use a Lawyer

If you have limited experience in property then ZAP advocates introducing a lawyer to the process and centralizing the transaction around a lawyer who will handle the entire transaction at a fraction of the cost compared to agents and provide unbiased advice! That's right a person with years of legal training and an oath to uphold will advise and take you through all the steps for a lot less than an agent.

Option B: Proceed Without Using A Lawyer

If you have experience or have a limited budget rental transactions (less than 3 years in duration) in Hong Kong can and do take place without formal legal assistance. However, there are a number of things you need to be aware of if you do. ZAP highlights the key points below but for official information please visit HK Government or the Estate Agent Authority websites

  • Agreeing on Principle Terms:
    1. Rent Inclusive or Exclusive of? Management fees, carpark etc?
    2. Duration of the Tenancy: A Commercial Residential Tenancy in HK comprises of a two year term, and often (but not always) contains an option to break after 14 months by giving at least two months advance written notice (ie a two month notices given at the end of the 12th month of the tenancy). However, the parties are at liberty to agree on whatever tenancy duration they see fit, with or without a break clause. See our FAQ for Tenancies of three years or more.
  • Rent free periods: Are always subject to negotiation, but it is not uncommon for a Tenancy Agreement to include a few days to a week to allow for a moving-in period for the Tenant. Rent free periods can be longer than this depending on what the parties negotiate.
  • Deposit: It is common for the future tenant to provide consideration upon entering a Tenancy Agreement, usually in the region of one month. A Landlord will also normally require a security deposit equivalent to 1, 2 or 3 months rent which he will hold for the duration of the tenancy. Rent is ordinarily payable at the beginning of each month, therefore if I security deposit of 2 months has been agreed, the Tenant should pay the Landlord 3 months rent in total (inclusive of any initial deposit paid upon entering into the Tenancy Agreement) before taking possession of the property.
  • Other terms to consider:

    Who is responsible for upkeep of the property? - An occasional grey or unattended to area. Parties may agree however they desire on these issues, but ZAP's opinion is as follows:
    • External condition: Such as building issues, common areas, and structural issues should always be the responsibility of the Landlord or Building Management (supported by common law).
    • Internal condition: ZAP suggests that it is equitable for the Landlord to be responsible for the internal condition as well e.g. plumbing, appliances and fixtures that would be expected to outlast the duration of the Tenancy, unless it is due to the Tenant's own negligence or being the direct cause of the damage.
    • Inventory List: To protect both parties it is advisable to in a comprehensive list of the fittings, electrical appliances and furniture if any that are supplied with the property
    • Subletting: The Tenancy Agreement should clearly state whether the Landlord will allow the tenant to sublet the rental property.

If you plan to appoint a lawyer, they will be able to provide you with a Tenancy Agreement. ZAP also provides a free standard Tenancy Agreement that endeavours to be equitable and fair to both parties. In the absence of a mutual Formal Tenancy Agreement, the Landlord should normally provide the Formal Tenancy Agreement.

Transaction using a Lawyer for Rental

Transaction NOT using a Lawyer for Rentals

Lawyer's fees for processing Tenancy Agreements start at $2~$3,000 and often scale higher depending on the value of the transaction. Expected services:

The steps required to successfully execute a Rental Transaction on your own are:

Carry out the Land Search

Sign a Formal Tenancy Agreement after carrying out a Land Search and agreeing on terms.

Execute the agreement and advise on terms

After signing a Tenancy Agreement the agreement must be 'stamped'. Stamp duty is a one-time tax payable to HK's Inland Revenue Department and is required by law. The cost of Stamp Duty is usually split equally between both parties, therefore it only requires one party to carry it out. ZAP suggests the Landlord may be most suited to handling this. Go to the Government guidelines on Stamp Duty in HK including how to handle them online.

Process and pay the Stamp Duty for the agreement (referred to as 'stamping' the agreement), CR 109 form if required, and other matters.

If your property is subject to a mortgage loan, most mortgage contracts require that you seek approval from the mortgage bank for approval to let the property. Not all agreements necessarily have this, so it is up to the Landlord / Tenant to decide whether that is required

Notes:

  • Stamp Duty: If the Stamp Duty is not paid, the document cannot be registered in the Land Registry, nor can it be received in evidence in any court proceedings (except criminal proceedings and civil proceedings taken by the Collector of Stamp Revenue to recover Stamp Duty). There is also a late payment penalty for failing to pay the stamp duty on the due date.
  • FORM CR 109: The Landlord of a commercial tenancy is required to lodge a Form CR 109 (Notice of New Letting or Renewal Agreement) with the Commissioner of the Rating and Valuation within one month of the execution of the Tenancy Agreement for his endorsement. Without a Form CR 109 endorsed by the Commissioner of Rating and Valuation, a Landlord is not entitled to maintain an action to recover rent from the Tenant. It is therefore important for the Landlord that a Form CR 109 is lodged with the Commissioner of the Rating and Valuation within one month of the execution of a Tenancy Agreement. The form requires the Landlord to supply information on: term of the tenancy, the monthly rental, whether any rent-free period has been given, who will pay the rates, government rent, management fees of the property etc. After endorsement by the Commissioner of Rating and Valuation one copy of the form will be returned to each of the Landlord and the Tenant. If it is submitted after one month, a penalty of $310 will be payable by the landlord.
  • Things to consider before choosing your Tenant: A Landlord should make sure the tenant has the financial means to fulfill the Tenancy Agreement. The Landlord has the right to ask the Tenant about their occupation or financial means, and may go as far as to ask the tenant to provide proof in this regard.

N.B. These guidelines are for reference only and should not be relied upon as legal advice.
Check out the Government's official guide for comparison: Leasing out a Commercial Property

Once all legal formalities have been completed the next step is arrange for keys to be exchanged. This can either be done in person or via either the Landlord's or Tenant's lawyer.

TIP: If you're too busy to read this remember one thing - Use a lawyer to help you through the transactions. They are cheaper than agency fees and provide safer transaction click here to find out more