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6. Costs Incurred During Tenancy

6.1 Rental Payment
6.2 Government Rates
6.3 Management Fees
6.4 Utility Charges
6.5 Telephone Charges
6.6 Maintenance and Repairs
6.7 Stamp Duty
6.8 Solicitor's Fees

6.1 Rental Payment

Rent is usually paid in advance on the first day of each month. It is normal for the first month’s rent to be paid to the Landlord before releasing the keys to you, the Tenant. Rental assistance is credited to salary accounts in arrears.

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6.2 Government Rates

These taxes are payable quarterly in advance to the Government and will become due by the end of the first month of the quarter (i.e. January, April, July and October). It is very important for Tenants to settle their rates on time as late payment will result in penalty up to 5% over the rates in arrears. It is recommended that you settle these taxes by auto-pay facility.

For new building, rates could be imposed by the Government of the Hong Kong Special Administrative Region a number of years late retrospectively from the occupation date of the premises. It is therefore important to be aware and prepared for the possible lump sum payment especially when the rent exclusive of rates is up to or above the rental ceiling.

It is not uncommon that some landlords levy provisional rates to avoid a huge accumulated payment.

Note:
Privately owned land in Hong Kong is normally held from the Government by way of a ‘land grant’ known as a Government lease (formerly called a Crown lease) under which a rent is payable. Government rent (formerly Crown rent) is paid by the Government lessee (the ‘owner’) to the Government in return for the right to hold and occupy the land for the term (i.e. duration) specified in the lease document. Please be aware that the Government Rent is NOT covered by the Housing Assistance Scheme.

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6.3 Management Fees

Management fees are charges to the company who is looking after the upkeep of the common area and the facitilities of the building payable monthly or in some instances quarterly. Management fees are usually subject to periodic revision. Statements of account or a proposed budget should normally substantiate any increase in the Management Fees. Accrued deficit in management fees of a non-capital nature will be for the tenant’s account.

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6.4 Utility charges

Electricity and gas charges are payable monthly to the relevant Services Company. A water charge is payable quarterly to the Hong Kong Government. It is important to settle your utility and telephone bills promptly. Any delay in settlement of accounts may result in disconnection of services and payment of a penalty for resuming such services. It is recommended that an autopay facility be adopted.

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6.5 Telephone charges

Telephone charges for a direct line are generally payable quarterly in advance.

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6.6 Maintenance and Repairs

The standard Hong Kong Tenancy Agreement provides that all maintenance of a ‘non-capital’ nature shall be the responsibility of the Tenant. This includes minor interior defects, electrical and plumbing malfunctions, paint peeling off walls, corrosion on window frames etc.

The Landlord usually accepts responsibility for any maintenance that is of a ‘capital nature’ , e.g. external walls, roof, main structural members, external drains, pumps, tanks etc. Therefore, Tenants should ensure that premises are in a tenantable condition before any lease is signed. Once premises are occupied, there is little chance of the landlord providing any interior maintenance unless it can be proved that structural defects or some external cause causes such maintenance.

Any household problems such as termite infestation, defective toilet flushing, leaking taps, faulty hot water system etc is your responsibility as Tenant.

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6.7 Stamp Duty

This is shared equally between the Landlord and Tenant and is paid to the Government of the Hong Kong Special Administrative Region for the stamping of the Lease Agreement after it is signed. The duty on a lease must be paid within 30 days of its execution, failing which the contractual parties are liable to a penalty for lateness. If the stamping is more than two months late, the penalty is ten times the amount of duty, though the collector has power to remit some or the entire penalty.

Your agent, landlord, solicitor or yourself will need to present the signed tenancy agreement for stamping. The duty incurred will be shared equally between you and your landlord . A separate cheque should be made payable for the duty to 'The Government of HKSAR’.

Time for Stamping is within 30 days after the date of execution (note : this is the Date of tenancy not the commencement day).

How to Calculate Stamp Duty

A. 0.25% of the total annual rent where the length of lease is unspecified or is one year or shorter;
B. 0.5% of the annual rent where the lease is for between one and three years;
C. 1% of annual rent where the lease is for three years or longer.

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6.8 Solicitor's Fees

Under a leasing arrangement, the tenancy agreement is typically provided by the landlord with an initial draft for the tenant's review and approval. The tenant may also use a solicitor to review the lease draft at his or her discretion. Each party is responsible for their own legal fees. For sale and purchase agreements, the purchaser is responsible for their own legal fees.

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