Handling Rental Arrears and Executing Evictions in Hong Kong

In the Hong Kong rental market, identifying rent arrears is an essential skill for every landlord. Rent arrears often employ various methods to evade responsibilities, delay rent payments, and even intentionally damage rental properties, causing significant financial loss and stress for landlords.

Common Characteristics and Typical Tactics of Rent Defaulter

Rent defaulters may use shell companies for leases, making it hard to recover delayed payments. They often significantly delay rent, intentionally damage properties, and may execute retaliatory damages if faced with eviction. They might provide insufficient proof of income, avoid involving third parties in renting, offer above-market rent to secure leases quickly, and can exhibit threatening behavior towards landlords over unpaid rent. Some demand excessive repairs or appliance replacements and may deduct such costs from the rent illegally, complicating recovery efforts for landlords.

Tenant Screening: Select Ideal Tenants

To assist landlords in finding ideal tenants and avoiding rent arrears, LetsGetHome offers more detailed and practical strategies.

• Financial Capability Checks: Evaluate tenants' financial health and rent payment ability by requesting recent pay slips, employment verification, and bank statements from the last 3-6 months. For deeper insights, consider obtaining a credit report with the tenant's consent, mindful of privacy concerns.
• Background and Reliability Assessment: Engage in discussions with potential tenants to uncover their rental history, employment status, and lifestyle, looking for red flags like previous landlord disputes or dishonesty.
• Lease Agreement Protocol: Only hand over keys after signing and stamping a formal lease agreement, legally solidifying the arrangement and preventing premature occupation.
• Social Media Screening: Use landlord groups on platforms like Facebook and Telegram to identify known rent arrears, ensuring to cross-verify any findings with tangible proof of income or employment.
• Detailed Lease Terms: Ensure the lease comprehensively covers rent, duration, deposits, maintenance, and other key terms, with verbal agreements formally documented. Adopt a "two deposits plus first month's rent" policy for financial security.
• Selective Platform Use: Opt for listing platforms like LetsGetHome that offer vetted services and transparent dealings in the Hong Kong rental market, enhancing safety and reliability in tenant selection.

Key Tactics for Landlords to Prevent Rent Defaults

• Keep records of rent transactions and communications as evidence.
• Consider rent reduction: Negotiate rent relief with tenants facing difficulties to avoid long-term vacancy losses.
• Act promptly: Once rent is overdue, take legal action immediately after the lease's grace period.
• Ensure notification to the Rating and Valuation Department: After renting out the property, submit the “Notice of New Letting or Renewed Agreement (CR109)” to the Rating and Valuation Department within a month, or the Small Claims Tribunal may not accept overdue rent claims.
• Consider purchasing landlord insurance covering rent defaulter protection: Landlords might consider “Landlord Insurance (Rental Property Coverage) ,” which not only serves some home insurance functions, protecting rental property finances but also offers rent loss and landlord legal liability protection.

How Should Landlords Reclaim Their Property from Rent Defaulters?

In Hong Kong, landlords can appeal to the Lands Tribunal for eviction orders. Once a tenant is over 15 days overdue on rent, according to Landlord and Tenant (Consolidation) Ordinance (Cap.7), landlords have the right to take the following steps to pursue rent and potentially terminate the lease and reclaim the property.

• Verify Lease Legality: First, landlords must ensure the lease has been officially stamped to confirm its legal validity. If the lease has not been stamped, landlords need to do so and may face a penalty of up to ten times the stamp duty, plus a HK$310 additional fee. These expenses can be recovered later from the Lands Tribunal or Small Claims Tribunal.
• Submit Application Documents: Landlords must submit a series of documents to the tribunal, including identity proof, stamped lease copies, property ownership proof, and completed “Application Notice” Form 22 and “Notice to the Actual Possessor or Resident”, along with the corresponding fees.
• Notify the Tenant: Within 7 days of submitting the “Application Notice,” landlords must provide tenants with copies of the relevant documents and post a copy of the “Notice to the Actual Possessor or Resident” on the property unit's door for 3 consecutive days. If the tenant does not object within 7 days, landlords can request the tribunal to issue a direct judgment.
• Reclamation Process: Once a judgment is obtained from the tribunal, landlords can apply for a reclamation order, assisted by enforcement officers. Landlords need to pay relevant deposits, and after successful reclamation, they can deduct related expenses and retrieve the remaining funds.