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Tenant, Commercial

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PART 1: Finding a Property

  • Property Search: Use ZAP's property search to find properties that meet your requirements. Contact Landlords directly to arrange viewings using ZAP's secure emailing system and wait for a reply.
  • Simple Tools: ZAP has a few simple tools to make your search and inspections easier. If you find multiple properties you are interested in, add them to your Interest Basket to view them later in one place (only registered users can use the Interest Basket, but registration is FREE and easy). Once in the Interest Basket you can then print inspection itineraries and comment forms for the properties you have selected, as well as see an auto-populated Google map view of those properties all together.
  • Do Your Homework: Caveat Emptor means that as a Tenant you accept the property as is when you rent it. ZAP recommends doing some basic due diligence once you are interested in a property including checking the building's notice boards or speaking to the building management company to ask if there's anything you should know about such as an upcoming renovation project.
  • Quick Tips When Negotiating and Viewing A Property:
    • Try and view the property more than once preferably in the day and possibly in the evening
    • Ask what is included in the rental price for example a car park, roof top etc
    • Look in the corners of the windows and the ceiling to see if there are any water marks or water damage?
    • Are you satisfied with noise levels for neighbours or the road?
    • Are pets allowed in the building?

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. 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 and peace of mind

Lawyer's fee, even if much less than agency fee. For more information click here.

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 users 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 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

Below is a free generic 'Offer Letter', which is the format most often used for the prospective tenant to submit their 'subject to contract' (i.e. non-binding) offer terms for the premises to the landlord of the property. A commercial landlord will normally then counter with their own terms using their own provisional or formal tenancy agreement.

Offer Letter

 

NOTES:

  • Land Search: The prospective Tenant should carry out a Land Search to verify that the Landlord is the owner of the property and therefore has the right to rent the property to the Tenant.
  • Agreeing on Principle Terms:
    1. Rent Inclusive or Exclusive of? Management fees, carpark etc?
    2. Duration of the Tenancy: A standard Commercial Tenancy in HK comprises 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: A Landlord will normally require a security deposit equivalent to one, two or three months rent which he will hold for the duration of the tenancy. Rent is ordinarily payable at the beginning of each rental month. Therefore, if a security deposit of two months has been agreed, the Tenant should pay the Landlord three 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 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 do 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 or not.

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 will 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 are HK$3,000+ for commercial transactions and often scale higher depending on the value of the transaction and the complexity of the lease. Expected services include:

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.

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 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