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Things you need to note before signing a tenancy agreement or a lease
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Failure to pay rent
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Changes on tenancy legislations on 9th July, 2004
Case illustration
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2. How am I, as a tenant, affected by the changes in July 2004?

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The laws on tenancy in Hong Kong are largely governed by the Landlord and Tenant (Consolidation) Ordinance. Before 9 July 2004, the Ordinance provided tenants, particularly those of domestic property, with security of tenure, which meant that as long as the tenant was ready to pay the prevailing market rent, the landlord had to continue to let the property to the tenant. The idea itself seems to be fair and attractive, but the procedure required to implement the idea was too cumbersome. On 9 July 2004, the Ordinance underwent a substantial amendment with the removal of the security of tenure provisions.

Tenancies of domestic properties

For tenancies of domestic properties that were created on or after 9 July 2004, the parties can freely negotiate and agree between themselves on how the tenancy will be terminated. In the absence of any contractual agreement, a fixed term domestic tenancy will end upon expiry, and a periodic tenancy will be terminated by a notice to quit at the length of a full tenancy period.

In cases of tenancies of domestic properties that were in existence before 9 July 2004 , such tenancies can only be terminated by mutual agreement or by a Transitional Termination Notice (TTN) . For a TTN to be issued by the landlord, it must be served on the tenant not less than 12 months before the intended date of termination. For a TTN to be issued by the tenant, it must be served on the landlord not less than one month before the intended date of termination. That is to say, the tenant is in effect granted security of tenure of another 12 months. However, a landlord who requires a property for self-occupation may apply to the Land Tribunal for possession of it upon expiry of the existing tenancy whether or not the TTN has been served (see the judgment from the case of Simon John Cox v Paul Desmond Scanlon ) . An important note is that a person who has successfully obtained an order for possession on the ground of self-occupation cannot let, sell, transfer, or part with possession of the premises with others (except for that person's immediate family members such as his/her spouse and children) within 24 months from the date of the order unless the Lands Tribunal has given its prior consent.

It should also be noted that a TTN is not required in the following cases:

(a) there was a change of any terms of the tenancy on or after 9 July 2004(see the court judgment below);
(b) the landlord and tenant, on or after 9 July 2004, agreed on another period of notice of termination; or
(c) the tenancy was assigned to a new tenant on or after 9 July 2004.

The judgment for the case of Fubon Bank (Hong Kong) Ltd v Welform Ltd may help illustrate item (a) above. In this case, the subject tenancy commenced on 1 December 2002 and expired on 30 November 2004 . The Lands Tribunal found out that there was an agreement for a 3-month extension period from the original expiry of the written tenancy agreement ( 30 November 204 ). Such an alteration to the original term of the expired tenancy was made after 9 July 2004 . On this basis, and having regard to Section 5(4) of the Landlord and Tenant (Consolidation) Ordinance (please refer to the "note" under section 115 of the Ordinance ), the landlord was therefore no longer required to serve onto the tenant a Transitional Termination Notice upon expiration of the extension period. Also, since the extension period was for a period of a fixed term of 3-month but with no specific provision on the service of notice to quit, the court held that the fixed term should end upon expiry on the last day of the 3-month period and no further notice to quit from the landlord was required.

Tenancies of non-domestic properties

For tenancies of non-domestic properties that were created on or after 9 July 2004, the parties can freely negotiate and agree between themselves on how the tenancy will be terminated. In the absence of any contractual agreement, a fixed term tenancy will end upon expiry, and a periodic tenancy will be terminated by a notice to quit issued by the landlord at the length of a full tenancy period.

In cases of tenancies of non-domestic properties that were in existence before 9 July 2004, the parties can terminate the tenancy in accordance with the agreements that are stipulated in the tenancy document or as agreed between themselves. In the absence of any mutual agreement, a fixed term tenancy will end upon expiry, and a periodic tenancy will be terminated by a notice to quit issued by landlord at the length of a full tenancy period (but normally not more than 6 months).

From the tenant's perspective, the amendment to the Landlord and Tenant (Consolidation) Ordinance seems to have deprived them of the statutory right to continue to rent the same property after the expiry of the original tenancy (i.e. security of tenure). However, such apparent deprivation may be more theoretical than practical. After all, which landlord will refuse to renew an existing tenancy with a tenant who is punctual in paying rent?

If you have further questions regarding the above changes, please contact the Rating and Valuation Department.