Points to note for entering into the second term tenancies of subdivided units


Following the implementation of the tenancy control regime for subdivided units (“SDU”) under Part IVA of the Landlord and Tenant (Consolidation) Ordinance (“Ordinance”) in 2022, the Estate Agents Authority issued a relevant practice circular last year providing guidelines for estate agents and salespersons to follow when handling SDU tenancies, among which they are required to inform clients about the security of tenure and rent regulation as stipulated in the Ordinance, including the two terms of two-year tenancy.

As the first batch of those regulated tenancies under the Ordinance is about to approach their second term in 2024, both landlords and tenants need to follow specific procedures prior to the commencement of the purported second term tenancy. I would like to share with the public the essences regarding the second term tenancies.

Landlord’s Responsibility

  • The landlord must complete and sign Form AR1, and make a second term offer to the tenant within the offer period.
  • Upon the tenant’s acceptance of the offer, the landlord has to stamp the Form AR1 at his/her own cost and return a copy to the tenant within 30 days.
  • The landlord must then submit Form AR2 to the Rating and Valuation Department (“RVD”) in 60 days after the tenancy commences.

Tenant’s Responsibility

  • The tenant should sign and return the Form AR1 received to the landlord before the expiry of the first term tenancy. Failure to do so will be considered a refusal of the offer.

Rent Control

  • The increment of the proposed rent shall not exceed the percentage permitted by the Ordinance.
  • The online calculator developed by the RVD can help determine the maximum percentage for the rent increment and the offer period.

It is not uncommon to read media reports about court cases in which landlords (and even agents) were prosecuted for violating the Ordinance. If you are a landlord of an SDU, you should familiarise yourself with the necessary procedures for the second term tenancies of an SDU, and you are advised to refer to the following materials produced by the RVD below for a better understanding.

RVD’s dedicated page for the second term tenancies of SDU:

Key Points of Second Term Offer:

Applicable documents and information:

Channels to obtain Form AR1:

Ruby Hon
Chief Executive Officer
Estate Agents Authority