6 items to scrutinize before signing a tenancy agreement

Are you ready to sign a new tenancy agreement? Or are you searching for your new home?

There are quite a few things you need to consider when signing an agreement. It’s too often that tenants get into agreements they do not fully understand. And if you’re one to browse through government websites to get a firm grasp of your rights, it can be frustrating – the information available is not very helpful because of the industry-speak and legal terminologies they use. We know. We’ve been there.

Flat-hunting is difficult as it is, so here are 6 items to look out for before signing a tenancy agreement. You can thank us later.

1. Fixed or flexible lease

Many, if not most, landlords prefer a fixed tenancy agreement.

This is to ensure they are earning off from their property and they don’t have to look for a new tenant too soon. A fixed lease means you are liable for monthly rental payments for the entire contract duration. So, for example, if you break your lease mid-contract, you must pay for the remaining months left in your agreement. It is worth noting some landlords may accept your early termination if you can find them a new tenant to take over your lease at the same terms (rent, duratiom, etc.).

Flexible lease agreements carry a one or two-year agreement where the landlord or tenant can give one to two months notice if they choose to break the contract. If you’re in Hong Kong for higher education or you’re in the city for a contract-job, flexible leases sound like a good option. The alternative for flexible lease flats would be serviced apartments.

2. The duration of the tenancy agreement

A standard tenancy agreement normally carries a two-year duration although there’s no harm in asking for a longer or shorter one. There are pros and cons for both landlords and tenants but you can ask your property agent to open the conversation to explore the best options for mutual benefit.

The most common term in Hong Kong is referred as “1+1”, indicating one year of fixed lease followed by one year of flexible lease with a total duration of two-year.

3. Tenancy agreement break clause

Break clauses can come in handy when you need to leave Hong Kong or you need to vacate your flat (i.e. moving in with a significant other, etc.)

And, sometimes landlords may choose to use the break clause when they want to increase rent. So, remember to check for a break clause in your tenancy agreement to understand your rights if you or your landlord decides to break your tenancy agreement.

4. Advanced payments, deposits, and other fees

It’s standard practice for landlords in Hong Kong to ask for a months’ worth of advanced rental payment and two months worth of security deposit.

Upon signing your tenancy agreement, you’ve also got your stamp duty payment which is equally split between yourself and your landlord. And, of course, there’s the commission payable to your property agent if you hired one.

You can find more details here: 4 immediate payments due after signing a tenancy agreement so you can ask the right questions before signing your agreement. This way, you can begin to understand who’s paying for what and how much it’ll cost.

5. Items included in your monthly rental payments

Utility bills, government rates, building management fees…you need to understand what you’re paying for. Most tenancy agreements do not have utility bills inclusive in your monthly payments unless you’re renting a serviced apartment. Otherwise, you’ll most likely have to pay for utilities and cable bills on top of your monthly rental payments.

6. Other conditions of your tenancy agreement

Keep a look out for other conditions of your tenancy agreement which may include a no-pet policy, a no-smoking policy or a no sub-leasing policy. For example, there are buildings that do not permit tenants to have pets, even if the landlord is indifferent to pet owners or non-pet owners. And vice-versa, some landlords do not permit their tenants to have pets, even if the building allows the housing of pets.

In Hong Kong, it’s illegal to smoke indoors, but, enforcing this law in residences can present challenges unless you’re living in a serviced apartment. Sub-leasing is an important one to take note of. If you’ve rented a flat with a few bedrooms with the intent to sub-lease, it’s worth understanding if your tenancy agreement allows this.

Conclusion

Knowledge is power.

The more you understand your tenancy agreement, the more likely you’ll be able to ask the right questions or negotiate a better deal for yourself.

Remember to check whether your lease is fixed or flexible, the duration of your lease, a break clause, payments due after signing your agreement, fixed monthly rental costs and other special conditions of your stay.

Don’t hesitate to ask questions if there are things you don’t fully understand.

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