Updates on Hong Kong Tenancy Law

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Updates onHong Kong Tenancy Law
Raymond Wong Tel [phone] E-mail
raymond.wong_at_jsm-law.com 30 July 2003
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AGENDA

• LANDLORD AND TENANT
• (CONSLIDATION) (AMENDMENT) ORDINANCE 2002
• (THE AMENDMENT ORDINANCE)
• passed on 27th December 2002

• LANDLORD AND TENANT
• (CONSLIDATION) (AMENDMENT) BILL 2003
• gazetted on 30th May 2003

• Forfeiture and Repudiation and Acceptance
• common law position

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Amendment Ordinance

• Simpler and shortened domestic tenancy renewal
  procedures
• Implied Covenants and Forfeiture Clauses in
  domestic tenancies
• Restricted Relief against Forfeiture
• Rebuilding Compensation
• Increased penalty on harassment of tenants and
  unlawful eviction
• Miscellaneous amendments to LTO and Lands
  Tribunal Ordinance and Rules and other provisions

4
Simpler and shortened domestic tenancy renewal
procedures

Landlords Termination of Tenancy
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Simpler and shortened domestic tenancy renewal
procedures

Tenants request for new tenancy
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Simpler and shortened domestic tenancy renewal
procedures

• Landlord is no longer tied to the ground in
  CR101 CR104
• introductory words of Section 119E(1) has been
  removed
• But S.119 to S.119E are proposed to be repealed
  under the Amendment Bill

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Implied covenants and forfeiture clauses

• Implied terms (Section 117(3))
• pay rent on the due date and forfeiture if fails
  to pay rent within 15 days of the due date
• not to use for an immoral or illegal purpose
• not to cause unnecessary annoyance, inconvenience
  or disturbance to the Landlord or any other
  person
• persistent delay in paying rent is
  unnecessary annoyance, inconvenience or
  disturbance
• not to make any structural alteration
  
  
  
  
  
  
  
  

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Restricted Relief Against Forfeiture

• Section 21F of the High Court Ordinance (Cap.4)
• Section 69 of the District Court Ordinance
  (Cap.336)
• relief period is reduced from 4 weeks to not
  less than 7 days from the date of order during
  which T can pay up all rent in arrears and costs
• a new sub-section (1A) to restrict the tenant to
  one-time relief unless has good cause

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Rebuilding Compensation

• Section 119F(4) of the LTO
• sliding scale the lower the rateable value, the
  greater the multiplier
• rateable value of the part actually occupied by
  the tenant or sub-tenant
• higher payment because of the greater
  multiplier for the lower rateable value
• Section 119H(7) has now been repealed
  encourage settlement after notice of opposition
  but before tribunal decision
• no restriction on alienation for 24 months

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Rebuilding Compensation (contd)

• But S.119F, S119FA, S.119FB, S.119H are to be
  repealed under the Amendment Bill

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Increased penalty on harassment of tenants and
unlawful eviction

• S119V LTO
• Any person who unlawfully deprives T of
  occupation of any premises commits an offence

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Increased penalty on harassment of tenants and
unlawful eviction (contd)

• S119V LTO
• Any person who, without reasonable grounds,
• (i) does any act interfering with peace or
  comfort of T
• OR
• (ii) persistently withholds services
• reasonably required for occupation of the
  premises as a dwelling

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Increased penalty on harassment of tenants and
unlawful eviction (contd)

• AND (in either case of (i) or (ii) above)
• knows, or has reasonable cause to believe,
• conduct is likely to cause T to
• give up occupation or
• refrain from exercising any right or pursuing any
  remedy in respect of premises
• commits an offence

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Increased penalty on harassment of tenants and
unlawful eviction (contd)

• Consequence of breach
• first conviction, maximum fine of 500,000
• and imprisonment for maximum 12 months
• second or subsequent conviction,
• 1,000,000 and 3 years
• payment to
• (i) T by way of compensation
• (ii) Government a sum not exceeding the
• equivalent of difference between market value
  with vacant possession and market value with
  former T in possession

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Other miscellaneous amendments

• Section 129 of LTO
• District Court jurisdiction under Part VI of the
  LTO to order possession in summary manner
• annual rateable value of HK100,000 (formerly
  HK30,000)
• i.e. about HK8,000 rent a month and held for a
  term of not exceeding 7 years
• Section 86 of LTO
• distress after 9 a.m. and before 7 p.m.

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Other miscellaneous amendments (contd)

• Section 101 of LTO
• summary repossession of deserted premises and T
  is 2 months behind with the rent
• rateable value
• increased from HK30,000 to HK100,000

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Other miscellaneous amendments (contd)

• New Section 121(6)
• appeal against the Commissioners determination
  of whether a fixed term written tenancy not,
  exceeding 1 year fall within Part V

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Amendment Bill

• Gazetted on 30th May 2003
• operative on a date to be appointed by the
  Secretary for Housing, Planning and Lands
• expected to be 2 months after the passage of the
  Bill but, at the very latest June 2004
• removal of
• security of tenure under Part IV of the LTO
• notice of termination requirement under
• Part V of the LTO

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Amendment Bill Security of Tenure for Domestic
Tenancies

• The following provisions of Part IV are to be
• repealed
• statutory continuation of tenancies and grant of
  new tenancies by the Lands Tribunal
• Section 117 (1) and (2)
• provisions relating to Form CR 101 and Form CR
  102
• Section 119

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Amendment Bill Security of Tenure for Domestic
Tenancies (contd)

• provisions relating to Form CR103 and Form CR104
• Section 119A
• notice of termination by tenant of tenancy for
  fixed term
• Section 119B

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Amendment Bill

• Renewal of tenancies by agreement
• Section 119C
• Order by Tribunal for grant of a new tenancy
• Section 119D
• Grounds of opposition by landlord to application
  for new tenancies
• Section 119E
• On ground of rebuilding
• Section 119F
• matters on Lands Tribunals order for new tenancy
• Section 119FA, Section 119FB, Section 119G,
  Section 119H

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Amendment Bill (contd)

• Provisions relating to the terms of the new
  tenancy granted by the Lands Tribunal
• Section 119I duration
• Section 119J other terms
• Section 119K new rent
• Section 119M carrying out of order for new
• tenancy
• Section 119N interim continuation of tenancy
• pending determination by
• Tribunal

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Amendment Bill (contd)

• Section 119NA
• rent where new tenancy refused etc.
• Section 119O
• short tenancies
• Section 119P
• sub-tenancies
• Section 119Q
• Appeals

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Amendment Bill (contd)

• The following provisions of Part IV will remain
• Implied covenants and forfeiture clauses
• Section 117(3) (see above)
• CR109
• Section 119L
• Harassment
• Section 119V (see above)

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Amendment BillSavings in respect of Part IV

• From the appointed commencement date onward, the
  security of tenure provisions under LTO will no
  longer be applicable to any tenancies except
  tenancies which were in force immediately prior
  to the appointed date
• where landlord has served a notice of tenancy
  termination (Form CR101) on the tenant before the
  appointed date. If tenant succeeds in opposing
  the landlords request for termination, the
  tenant will be entitled to one more tenancy
  renewal

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Amendment BillSavings in respect of Part IV
(contd)

• where tenant has served a notice of tenancy
  renewal (Form CR103) before the appointed date.
  If tenants request is successful, he will be
  entitled to one more tenancy renewal.

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Amendment BillRepeal of Minimum Notice
requirement for Non-Domestic Tenancies

• Notice of Termination by the landlord not less
  than six months OR
• by the tenant no less than one month
• freedom to specify mutually agreed tenancy term
• The following provisions of Part V are to be
• repealed
• Notice of Termination Section 122
• Landlord may substitute notice Section 124
• Saving of rights arising out of breach of
• tenancy Section 127

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Amendment BillSavings in respect of Part V

• Notice of termination served before the appointed
  date will continue to have effect
• Proceedings which are pending in the Lands
  Tribunal on the appointed date will not be
  affected by the Amendment Bill

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Case Study

• Forfeiture
• Repudiation (by tenant) and acceptance (of
  tenants repudiation by landlord)

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Case Study (contd)

• Distinction between Forfeiture and Repudiation
  and Acceptance
• whether L can claim T for damages for unexpired
  term of tenancy if tenancy is terminated before
  original contractual expiry date
• what amounts to Repudiation By T

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Case Study (contd)

• Case A
• L let a shop to T under a tenancy agreement for 3
  years. After 1 year, T stopped paying rent and
  other charges. T indicated to L that T had
  financial difficulty as his business was not
  good.
• Question 1
• What are the options available to L?

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Case Study (contd)

• Answer
• 1 Distress
• Consequence tenancy keeps alive

2 Negotiate an early surrender of tenancy with
or without compensation to L Consequence
tenancy terminated by mutual agreement
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Case Study (contd)

• 3 Sue for arrears of rent but not
  recover possession of the premises
• Consequence tenancy keeps alive
• 4 Sue for arrears of rent and claim for
  repossession of the premises by
  exercising its right of forfeiture under an
  express clause in the tenancy agreement (or under
  any statutory implied forfeiture clauses)

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Case Study (contd)

• Consequences
• tenancy terminated by forfeiture
• L can only claim arrears of rent up to the date
  of termination of tenancy and mesne profits up to
  the date of repossession by L but not damages for
  the unexpired term of the tenancy

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Case Study (contd)

• Case B
• The business of T continued to deteriorate. 1
• month later T returned keys to L and T was trying
• to terminate the tenancy unilaterally. The
• market rent of the shop has fallen from 100,000
• per month to 80,000 per month
• Question 2
• What options are available to L?
• Distress and negotiation for early surrender are
  inappropriate

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Case Study (contd)

• Answer
• 1 L can write to T stating that Ts abandonment
  of the premises is unacceptable to L and will
  continue to claim T arrears of rent
• Consequence tenancy keeps alive

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Case Study (contd)

• 2 L can treat T in repudiation of tenancy
• T has evinced an intention not to be bound
• by the tenancy agreement
• L can accept Ts repudiation and claim
• damages in respect of the unexpired term of
  the tenancy
• duty to mitigate his loss by finding a
  substitute tenant in the market as soon as
  possible

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Case Study (contd)

• Consequences
• tenancy terminated according to common law
• L can claim damages for unexpired term of
  tenancy
• duty to mitigate loss arises
• Care should be taken by the Landlord in stating
  his intention in his demand letters or notices
  to the tenant as well as the pleadings in any
  legal proceedings

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Case Study (contd)

• Further Reference
• Bonny Ace Limited v. Elanby Nominees Limited
• CACV 285/2000

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Thank You and