IN THESE days of escalating residential rents it is important tenants know their rights to protect themselves from unscrupulous landlords. There are two popular misconceptions in Hong Kong regarding rent increases when a tenancy is renewed. One is that rents can only be increased 30 per cent and the other is that landlords can charge whatever they like. Both are wrong. Most residential tenancies are protected by the Landlord and Tenant (Consolidation) Ordinance and are subject to either part I, II or IV. Briefly, part I applies to pre-war premises (those built before August 17, 1945), part II applies to post-war premises, except those completed on or after June 19, 1981, or those with a rateable value of $30,000 or more as at June 10, 1983. Part II does not apply to tenancies created on or after June 10, 1983, relating to a fresh letting. Part IV applies to all residential tenancies, with some minor exceptions, excluded from parts I and II; i.e. to premises completed on or after June 19, 1981; or premises with a rateable value of $30,000 or more as at June 10, 1983; or tenancies created on or after June 10, 1983, relating to a fresh letting of post-war premises irrespective of their age. Rentals of part I tenancies can be increased to the ''permitted rent'' which is currently the greater of 55 times the rent payable on December 25, 1941, or 60 per cent of the prevailing market rent. The significance of December 25, 1941, is that it was on this Christmas Day the Japanese occupied Hong Kong. If you don't know the rent payable on this day, and you probably don't, then you can apply to the Commissioner of Rating and Valuation for an assessment. If the landlord and tenant cannot agree a new rent for a part II tenancy, then the landlord may make an application to the Commissioner of Rating and Valuation for a certificate of increase in rent. The permitted increase is currently 30 per cent, or if this results in a sum less than 75 per cent of the prevailing market rent the rental may be increased by up to 75 per cent of the prevailing market rent. These provisions, however, only apply to partII tenancies and not to the majority of tenancies which now fall under part IV of the ordinance. More and more tenancies will come under the provisions of part IV, particularly since the enactment in July of the Landlord and Tenant (Consolidation) (Amendment) Ordinance which phases out parts I and II by 1996. Under part IV, the landlord and tenant may freely agree on the renewal of the tenancy, but if they fail to agree on the new rent then application may be made to the Lands Tribunal for determination. The tribunal is the major judicial body dealing with landlord and tenant matters and will fix the prevailing market rent of the property after listening to evidence from both sides. Prevailing market rent is defined in the ordinance as the rental at which the premises might reasonably be expected to let. Before an application can be made to the Lands Tribunal, however, a series of notices and counter notices have to be served by the parties and they must comply with the time limits in serving these notices. These time limits are strictly enforced by the tribunal. For instance, proceedings are normally initiated by the landlord who would serve a notice of termination (form CR101) on the tenant not more than seven nor less than six months before the end of the tenancy. In a recent case a CR101 form had been received by the tenant on October 2, 1992, and provided for a termination date of March 31, 1993. The tribunal ruled that less than six months' notice had been given and the notice was, therefore, invalid. The tenant was entitled to remain in possession at the current rent. The Landlord and Tenant (Consolidation) Ordinance and the Landlord and Tenant (Consolidation) (Amendment) Ordinance are complex pieces of legislation. It would be advisable to appoint a professional valuation surveyor to carry out a valuation and prepare a report on the prevailing market rent for submission to the Lands Tribunal. The surveyor will inspect the property and prepare a report based on that inspection and his knowledge of recently agreed rentals. In arriving at the assessment, the surveyor will also have regard to such factors as condition, facilities, view, location,size and any special terms of the lease such as break clauses. With his thorough knowledge of the valuation, tenancy law and past tribunal decisions, the surveyor will make the appropriate adjustments to take account of all relevant factors and explain his reasons in the report. At the court hearing the surveyor will appear as expert witness. If the landlord and tenant appoint surveyors then the reports will be exchanged before the hearing and this will encourage a settlement thus avoiding the costs of going to court. This is only a simplified outline and not intended to provide an interpretation of the law, but to make tenants and landlords aware they do have rights and obligations. A lawyer should be consulted on the application of the law having regard to the circumstances of any particular case. David Forshaw is a chartered surveyor with Association Surveyors & Auctioneers
