Before deciding to rent a property, a prospective tenant should pay attention to whether it is being leased by the landlord or sublet by the principal tenant, as subletting may involve complicated issues and a subtenant’s rights might not be protected.
According to a circular about tenancy matters issued by the Estate Agents Authority (EAA), agents handling the subletting of properties should review the principal tenancy agreement between the landlord and the principal tenant to see if there is any restriction on subletting and whether prior consent for subletting has to be obtained from the landlord.
I would like to share a case in which an estate agent did not fulfil his duties in this regard and was sanctioned by the EAA, while his clients were evicted from the rented property.
In a leasing transaction of a residential property, an estate agent arranged for the principal tenant to sublet the property to a subtenant and also arranged for both parties to sign a tenancy agreement. The agent, however, had not ascertained whether there was any restriction on subletting and whether the principal tenant had obtained consent from the landlord for the subletting.
It transpired that there were restrictions on subletting in the principal tenancy agreement between the landlord and the principal tenant. Later, the landlord discovered that the property had been sublet. He then applied to the Lands Tribunal for the recovery of the exclusive possession of the property from the principal tenant as the latter had breached the tenancy agreement signed between both parties.
As a result, both the principal tenant and subtenant were evicted from the property before the expiry of the principal tenancy agreement and the subtenancy agreement. The subtenant later lodged a complaint with the EAA against the agent who had arranged the subletting.
In the above case, the estate agent concerned was disciplined by the EAA for failing to comply with the code of ethics, which states that estate agents and salespeople should be fully conversant with the Estate Agents Ordinance, its subsidiary legislation, the code of ethics, and other guidelines issued by the EAA from time to time and shall observe and comply with them in the course of their practice.
The estate agent was reprimanded, fined HK$1,000 and a condition was attached to his licence, requiring him to obtain 12 points from the continuing professional development scheme of the EAA within 24 months.
The above case shows the importance of ascertaining from the principal tenancy agreement whether there is any restriction against subletting.
If the principal tenancy agreement contains restrictions against subletting, the tenant has to obtain written consent from the landlord before he/she can sublet the property. In addition, the term (or rental period) of the subtenancy agreement must not exceed that under the principal tenancy agreement.
In handling such cases, estate agents should provide the prospective subtenant with the particulars of the principal tenancy agreement, such as the parties thereto, the period of tenancy, and any other information the subtenant should know in the prescribed leasing information form; and provide the completed form to the subtenant.
At the same time, when issuing advertisements for subletting properties, estate agents must state expressly in the advertisement that the property is to be sublet.
I would like to remind prospective tenants once again that, if the principal tenant sublets the property without the landlord’s consent where the tenancy agreement states that the tenant shall not sublet the whole or any part of the property, the landlord may apply to the Lands Tribunal for a possession order. Under such circumstances, the principal tenant and subtenant may lose security of tenure, as happened in the case above.
(23 July 2019)