I want to lease out a residential property

Generally, the landlord will require the tenant to pay a deposit equivalent to one to three months’ rent as a security deposit. Unless the landlord has agreed beforehand, the deposit cannot be used to offset rental payments. Upon termination of the tenancy agreement, the landlord is entitled to deduct from the deposit the amount of rent and fees in arrears.

Consumers should pay the commission to their agent according to the agreement between the consumers and the agent and the terms specified in the prescribed Estate Agency Agreement: namely, upon signing of the agreement for sale and purchase or upon completion of the transaction in a sale and purchase situation; or upon signing of the lease or commencement of the tenancy as specified in the binding lease in a leasing situation. However, the client shall have no obligation to pay any commission to the agent if completion of the property transaction/commencement of a binding lease falls through without fault on the part of the client. The commission shall become payable to the agent in the case of mutual cancellation of a binding agreement for sale and purchase/binding lease of the concerned property between the vendor and purchaser/landlord and tenant not arising from any provisions of the agreement for sale and purchase/lease.

If the term of tenancy exceeds three years, a lease is required in accordance with the Conveyancing and Property Ordinance and it has to be created by a deed and the formal procedure for execution of a deed must be followed. Moreover, the lease has to be registered at the Land Registry in accordance with the Land Registration Ordinance. After the lease has been registered, the rights of the lessee will be protected. If the lessor sells the property, the lessee will be able to enforce the lease against the new owner. If the tenancy agreement contains a clause giving the tenant the option to renew upon its expiry, the tenancy agreement should also be registered at the Land Registry for protection.

According to the Stamp Duty Ordinance, stamp duty is payable on a tenancy agreement or lease of residential properties. The amount of the stamp duty payable depends on the current rates of stamp duty, the term of the lease and the rent payable by the tenant under the lease. Generally speaking, the total stamp duty payable is borne by the landlord and the tenant in equal shares.

If the tenancy or lease involves a residential property — meaning the property is primarily used by the tenant for dwelling purposes — The landlord must file Form CR 109 to the Rating and Valuation Department.

The landlord is required to pay taxes based on the actual rental income received during the relevant tax year.