Be a smart tenant

2017-07

In recent years, many people have chosen to rent instead of purchase a property. In order to rent their favourite units as soon as possible, prospective tenants may overlook some potential risks in their selection of properties. To strengthen the protection of consumers, I would like to remind prospective tenants of some important points to note in renting properties.

First of all, when selecting a property, the prospective tenant should note that there are leasing restrictions for certain types of residential properties. For example, subletting is not allowed in public rental housing, while the renting of flats under subsidised housing schemes, such as the Home Ownership Scheme (“HOS”) is subject to the Housing Ordinance. Renting HOS flats is only permissible after the alienation restriction has been removed.

When a potential property is identified, the prospective tenant should ascertain whether the property is subject to any building orders for the demolition or rectification of unauthorised building works (“UBWs”). UBWs are commonly seen in subdivided flats or old properties. If tenants live in a property with UBWs, there might be potential safety issues. The government may also exercise its right of re-entry or closure of the property, etc.

In addition, the prospective tenant should also pay attention to whether an undischarged mortgage is registered against the property. A mortgage deed will usually stipulate that the mortgaged property cannot be leased out, unless the landlord has obtained the bank’s consent, otherwise the bank will not acknowledge the tenant’s tenure. If the landlord lets the property out without the bank’s approval and then defaults in repaying the mortgage, the tenant will lose his right to continue renting the property when the bank takes possession, and may also be unable to get his deposit back.

Not only the prospective tenant should take note of the potential risks mentioned above, estate agents should also be alerted to the potential risks and problems that may arise when handling property transactions, and they should take appropriate steps to protect their clients’ interests, which include carrying out a land search of the property immediately before a tenancy agreement is entered into. Through the land search, both the prospective tenant and the estate agent will know if there are any undischarged mortgages or other types of encumbrances, like building orders, leasing restrictions, etc. The land search records will also show the owners and title information of the property.

As well as the points above, consumers can also refer to the EAA booklet “A Guide to Tenancy” to help themselves make the right decisions.

Ruby Hon Yuen-ping
Chief Executive Officer
Estate Agents Authority