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Hong Kong - Property Letting
If the property is mortgaged, it might be important to obtain mortgagee's consent since most mortgages have a restriction on letting without the consent of the bank. If you don’t obtain consent it might cause you to be in default and the tenant won’t have any security of tenure. All leases must be registered at the Land Registry under the Land Registration Ordinance.
Stamp duty is collected on properties that are rented. The rates are: 0.25% of the rent where the term is less than one year; 0.5% of the average annual rent where the term is between one and three years; and 1% of the average annual rent where the term is more than three years. This is normally shared between the landlord and tenant. It is advisable to check the current rates, however, since stamp duty has been changing in regards to foreigners.
In the past, rates and management charges are paid for by the tenant. If the property wasn’t assessed for rates, you might ask that payment is made on account of rates and an adjustment is made upon assessment by the Rating and Valuation Department. Management charges cover routine maintenance and repair, lighting, cleaning and air conditioning of common parts of buildings and the provision of security. Charges might also cover public areas such as play areas, gyms, tennis courts, and swimming pools.
Property Tax is paid for by the owner and is due every year. It is charged to the property owner or landlord on the rent received in the year of assessment. The Inland Revenue Department has to be informed of your rental income within 4 months after the end of the basis period for that year. The notification form for the letting of properties (I.R.6129) provided by the Department can be used for this. To read more about property tax, please visit: http://www.gov.hk/en/residents/taxes/property/.
Inland Revenue Department
Central Enquiry Counter
1/F, Revenue Tower
5 Gloucester Road, Wan Chai
Tel: 852 187 8088
As a landlord, it is your responsibility to do repairs on the unit, not interfere with the rights of the tenant under his or her lease, and pay the Government Rent and Property Tax. The tenant’s rights include paying rent; delivering the unit back in good condition at the end of the lease; paying the utilities; not to sublet the unit; and to observe the terms of the Deed of Mutual Covenant and Government Lease. If rent is not paid after a period of 15 days, the tenancy can be forfeited, according to the Landlord and Tenant (Consolidation) Ordinance.
If a lease needs to be broken early by the tenant, then you can request a penalty. Generally, in a residential agreement for a two year term the tenant may terminate after 12-16 months by giving two or three months notice. You might consider a clause in the lease regarding early termination. Deposits can vary but usually include the first and last month’s rent. Deposits do not include interest.
Most landlords find that working with an estate agent makes renting a property less of a hassle. Agents can help find tenants. You can, of course, search for a tenant on your own. An estate agent’s commission is normally half of one month's rent payable by each party although this can be negotiable.
You might also use a lawyer to help you draw up the lease. You and your tenant can, of course, decide upon the particulars of the lease on your own. It must not, however, contravene the Landlord and Tenant (Consolidation) Ordinance. Solicitors’ charges are governed by the Solicitors Costs Rules. They vary according to the price of the rent. However, a normal fee is around HK$750.00 plus 75% of 1% of the average annual rental.
A tenancy agreement has to be stamped within 30 days of execution. You can do this online, by post or in person at the Stamp Office of the Inland Revenue Department. The landlord and the tenant are accountable for paying stamp duty.
Upon the execution of a lease, the landlord should also submit a Notice of New Letting or Renewal Agreement to the Rating and Valuation Department. A fee of HK$310 is charged for late submission. If rent must be claimed, you can do this as long as you have a copy of the Notice returned after endorsement.