About Hong KongLeasing procedure

Following is the leasing procedure for Hong Kong property. All information regarding the property must be verified via official government sources and all commissions and interests must be disclosed upfront. For more detailed information on this please refer to the Estate Agents Authorityˇ¦s website: www.eaa.org.hk.

Viewing and Selection of Properties

There is no central listing system in Hong Kong. Therefore, most property agencies will have similar listings especially those belonging to major landlords. Your choice of agent should be one with a sound knowledge of the office leasing market and one which offers personalised service.

The Offer

An initial Letter of Offer will be presented to you for your endorsement (normally subject to contract) prior to submission to the landlord for acceptance.

Holding Deposit

Upon the acceptance of the terms and conditions of the lease, the tenant is required to issue an initial deposit cheque to the landlord to secure the premises. Sometimes the holding deposit is non-refundable as required by the landlord thus making the contract binding upon acceptance of the offer. In this instance a draft Tenancy Agreement should be requested for your perusal prior to issuance of the non-refundable deposit.

Lease Term

Standard practice has been to take a two or three-year lease at an agreed rent, with options to renew being available from time to time from certain landlords. For the larger space user seeking accommodation in an investment portfolio, leases of six years or longer are available with market rent reviews after three years.

Rent-Free Period

This is the period allowed after lease commencement to allow for the fitting-out of the premises. The period will depend on prevailing market conditions and the size of the tenancy. However, during the rent-free period, tenants are required to pay for service charges and government rates.

Security Deposit

It is general practice for the tenant to lodge a deposit with the landlord equivalent to two or three months' rental, service charges and estimated rates. The current market practice is generally based on three months. The deposit is held by the landlord until expiry of the lease and is non-interest bearing. In cases where a company's background is to not the total satisfaction of the landlord i.e. a shelf-company or overseas registered company, it is common for some landlords to request personal guarantees in addition to the three months' security deposit.

Government Rates

The Government sets government rates as a percentage of the rateable value, currently set at 5.0%. (Subject to adjustments based on Government Budget announcement). Typically the tenant either pays directly to the Government or to the landlord who in turns pay these charges.

Stamp Duty

Under the Stamp Duty Ordinance, the rate on a lease depends on the rent payable and the length of term. For a tenancy from one to three years it is based on (annual rent x 0.5% + $5) and for those over three years it is (annual rent x 1% + $5). It is common for the stamp duty to be borne by the landlord and the tenant in equal shares.

Agency Fees

Normally, an agency fee equivalent to half a monthˇ¦s rental is payable by the tenant to the agent.

Legal Fees

Usual practice is that each party bears its own legal costs in a property transaction.

Property Management Service Charges

Payable monthly in advance by the tenant based on the landlord's stated area. Service charges are normally quoted in Hong Kong Dollars per square foot per month, additional to the rental charge. It is normal to find provision for the landlords to increase these charges during the term of the lease to reflect increases in costs and inflation. Furthermore, most buildings are managed by a separate entity to the landlord. There is a wide variation in the extent of services provided and the standards of management and so charges will vary accordingly.


Provisions covering the tenantˇ¦s insurance liabilities will be contained in the Tenancy Agreement. Additional coverage, for contents, fire and theft, and public liability are usually taken at the tenant's cost.

Car Parking

Allocated car parking in commercial buildings in Hong Kong is in short supply. Where space is made available, it is usual practice for the landlord to licence the space to the tenant on a monthly basis for a consideration.

An Example Of Cost Breakdown For a Lease Situation

Tenancy (1000 sq. ft.) Rate per sq. ft. Sum Notes
Rent HK$50 HK$50,000  
Service Charge HK$5 HK$5,000 (1)
Cleaning HK$0.90 HK$900  
Registration HK$0.30 HK$300  
Deposit 3 months' rent and service charge    
Stamp Duty 0.5% of Annual Rental + $5 divided by 2  
Water normally covered under Service Charge
Government Rates approx. 5% of Rateable Value   (2)
Electricity varies but for a 1,000 s.f. office, this could amount to approx. $1,000 pm (3)
Legal Fees Annual Rental - $12,000 x 1% divided by 2 if tenant and landlord are using the same solicitor

Notes :
(1)Service Charge : The majority of landlords exclude internal tenancy cleaning from the service charge.
(2)Government Rates : For estimating purposes, you can use 5% of the Annual Rental even though this might differ a little from the rateable value.
(3)Electricity : Metered separately and charged direct by the utility company. A deposit payable to the Electric Company is required.

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