Hong Kong Orientation Guide

Property FAQ’s

Letter of Offer

Disclaimer

Information contained herein is intended solely to provide a broad description of the general property letting process. This information should not be relied upon or consideredasasubstitutefortheadviceof a solicitor.

The Letter of Offer is drawn up to indicate the tenant’s initial offer upon a property, at this point themain termsof the leaseareoutlined fromthemoregeneral commercial terms through to the agreed pre-move in decoration requests.Once both parties agree to the terms of the Letter of Offer,theyare requiredtosign thedocumentand the tenantwill release to the landlordaholding deposit equal to one month’s rent as a sign of his good intent to take up a lease agreement on theseconditions.The landlordwilldrawuphisTenancyAgreement formbasedon the termsof theLetterofOffer.

WARNING

Ensure that the Letter of Offer has the words “Subject to Offer” clearly stated at the top of the offer.Without this being included, should the negotiations fail and the formal Tenancy Agreement not be signed, the Letter of Offer could be argued to be a “binding offer letter” and effectively formacontractualobligationontheparties inabsenceofaformallease.

Holding Deposit

Whenyouhavefoundaflatyouwanttomakeanofferon,youragentwillpreparea“letterofoffer” outlining the basic leasing terms between you and the landlord. This letter is simply an offer made subjecttocontract,andistypicallynotbindingonanyone.Uponthelandlord’sacceptanceofthe offer,a holding deposit equivalent to one month’s rent is normally required. This deposit is used to reserve the apartment, and subsequently becomes the first month’s rent payment upon the signing of the tenancy agreement. A holding deposit, in most cases, is refundable in full should either party for any reason decide not to go ahead with the signing of the formal tenancy agreement. In some cases,a “binding offer” is signed.This allows the landlord to keep the holding deposit should the tenant decide not to proceed with the leasing of the premises. All contracts pertaining to the lease of the property needs to be approved and agreed prior to releasing deposits. ThecommencementdateofaTenancyAgreement typically isexpectedwithin two tosixweeks after the Letter of Offer has been submitted. If the property is in ‘move in condition’ the landlord is likely to requestanearlier start date.Clearly,anyadditional lead time the landlordwill inevitably factorthisintothe rental somehow,sobeingactive in themarketlongbeforeyouexpected lease commencement may not prove advantageous to the lease negotiation. Typically, the landlord will table the form for the TenancyAgreement, but it is ultimately the tenant’sresponsibilitytoreviewtheTenancyAgreementpriortosigning.Boththetenantand landlord must be satisfied with the terms of agreement before signing; the tenancy agreement is legally binding. The Tenancy Agreement engrossments are prepared in duplicate and a third person must witness the signing. Tenancy Agreement

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