According to the “Trend of Rents” published by Midland Realty, the rent has been increasing since March and the rents in April hit 6-month high. Currently the house price of Hong Kong still remains stable although the China-US trade war escalated in May. The rental market is booming as some potential buyers might change to rent a house at the moment and the peak rental season during summer months is near. If you would like to rent out your property and receive stable rental income, you have to pay attention to the following items:
- Understand Mortgage Regulations
Not all properties can be rented out. If the property has been mortgaged to a bank, the mortgagor has to obtain the mortgagee’s consent before renting out the property. A lot of banks issue mortgage restrictions on non-owner occupied properties or rented out properties. If one rents out the property without the consent of the bank, the mortgagor might be demanded to pay additional loan interest to the bank, or repay the loan immediately, or even have to face legal consequences.
- Tenant Background Check
It is important to understand the background of the tenant before signing a tenancy agreement. The landlord is advised to request the tenant to provide ID card, income proof, etc. and keep a copy of the documents. The landlord could also call the tenant’s office to verify his/her identity.
- Setting the Rent
The landlord could take reference from the recent rental transactions of the same building before setting the rent for the property. The rent difference depends on the home decoration, furniture, parking space, etc. The landlord should also state it clear whether the rent includes rates, government rent, and management fee. Most of the landlords would include the above items.
- Request Rent Allowance to be Paid directly to the Landlord if the Tenant is a CSSA Recipient
If the tenant is a recipient of Comprehensive Social Security Assistance (CSSA), the landlord is advised to request the tenant to sign an agreement agreeing the rent allowance to be deposited directly into the landlord’s bank account by the Social Welfare Department. The landlord could report to department if the tenant is in arrears of rent.
- Tenancy Agreement and Deposit
A tenancy agreement has to stipulate clearly the responsibilities and obligations of both the landlord and tenant, especially the liability of the tenant in the event of damage to the property and items in the property caused by the tenant or his/her guests, so as to prevent loss during the tenancy. The tenant has to pay a deposit equals to two months of the rent and also pay the rent of the first month. Tenancies normally last for 2 years, in which both sides must complete the first year tenancy and the tenancy could be terminated with a notice period as stipulated in the agreement in the second year of the tenancy.
- Avoid Receiving Cheque and Handing over keys in the Evening
Some “rouge tenants” may choose to pay the cheque in the evening or during weekends. The landlord might find it a bad cheque only after handing over the keys and the “rouge tenant” has already moved in. The landlord is advised to hand over the keys after depositing the cheque successfully.
- Submit the Form CR109 to the Rating and Valuation Department (RVD)
The landlord is advised to submit Form CR109 (Notice of New Letting or Renewal Agreement) to RVD within 1 month from the date on which the parties entered into a tenancy. Otherwise the court may not deal with the case of a rental dispute. If the tenant is late in paying the rent for over 15 days, the landlord is entitled to obtain an order for possession from the Lands Tribunal. It normally takes about 3 to 4 months to recover vacant possession of the property.
- Take Photos of the Property before Renting It out
The landlord is advised to take photos of the property before renting it out for record. The landlord could request the tenant to ensure the property to be returned in the same condition as when delivered.
- Buy a Landlord Protection Insurance
Some insurance companies offer “landlord protection insurance” which covers the insured against legal costs, arrears of rent, and bodily injury or death and property damage to third parties. This can provide protection to the landlord.
You could actually seek help from real estate agents with good reputation if you find the above items too complicated. Real estate agents have better client network and can provide all-rounded and professional guidance on tenancy transactions, solving the landlord’s problems.