Tenants may be left out in cold

PUBLISHED : Wednesday, 28 June, 2006, 12:00am
UPDATED : Wednesday, 28 June, 2006, 12:00am

Leases could be affected by ambiguities over tenancy as landlords serve transitional termination notice

Ambiguities over transitional arrangements for existing tenancies may leave tenants out in the cold when they renew their leases this year, according to legal experts.

This summer, leases signed two years ago may be affected by the transitional termination notice (TTN), a provision under the Landlord and Tenant Ordinance (LTO) to give landlords greater powers to evict tenants when their leases expire.

The provision allows tenants, whose tenancy agreements are 'in existence' before the LTO amendment took effect on July9, 2004, the right to stay in their properties for a further 12 months at the same rent and landlords have to serve the TTN on the expiry of the leases.

However, many tenants have complained that they have no security of tenure although their two-year tenancy agreements were signed before July9, 2004.

'I signed a tenancy agreement on June25, 2004, commencing July 11 the same year for two years. My landlord is quoting the TTN does not apply to me because the commencement date was past the July9 deadline,' a reader wrote in an e-mail to the South China Morning Post.

'How come the TTN uses the commencement date and not the signing date of the tenancy agreement? It seems very unfair as the agreement was consummated prior to the new ordinance.'

The government holds the view that whether a tenancy is 'in existence' is determined by the commencement date of the tenancy and not by the date of the agreement.

Lawyers generally regard this interpretation as unacceptable and believe tenants would have a good chance of winning their argument against their landlords in court.

'The definition of 'tenancy' in Part IV [of the LTO] clearly includes 'an agreement for a tenancy'. Therefore, I fail to see how the government could take the view as it purports to,' said Angela Lee, a partner with law firm Baker & McKenzie.

'Tenancy' is defined in the ordinance to mean 'a tenancy entered into orally or in writing', she said.

'This is clear and unequivocal. In any event, the reader is right in that the interpretation of the law depends on the court and not on the administration. There would be a lot of unjust situations where tenants fall between the cracks [over] the commencement of the tenancy.'

The TTN was hailed by some as a measure to avoid overprotection of tenants, but some legal experts believe the ambiguity may put landlords on shaky ground when they face a legal challenge.

'From the moment you sign the leasing agreement, it becomes 'in existence' and the commencement date shouldn't matter,' said Ma Ho-fai, a property committee member with the Hong Kong Law Society.

Nonetheless, Mr Ma noted there had been no legal battle on the TTN ambiguity to date and it was also difficult to gauge how many tenants were affected by the provision.

'We are aware that there is some difference in views in the market regarding the TTN issue,' said Rating and Valuation Department senior rent officer Chan Kwok-fan.

'There might be concerns on some potential grey areas in the ordinance. The government's view is that a tenancy is 'in existence' when it commences. Whether other interpretations will be valid is a matter in the court of law.'

Harry Chan Kin-chu, Midland Holdings' in-house legal counsel, suggests tenants may not want to fight their landlords in court because it is not very cost-effective to do so.

As the TTN comes into play, tenants are expected to face a significant rental surge this year amid the growing demand in the leasing market, according to property consultants.

'It is definitely a landlords' market,' said Anton Eilers, Colliers International's regional residential director. 'With TTN, tenants would probably face between 60 and 70 per cent increases in their rentals if they signed their leases in the lows of 2003.'

Colliers estimated rents in the residential market will climb 10 per cent in the second half after seeing a 12 per cent growth so far this year.