LCQ13: Regulation of tenancies of subdivided units
26.4.2023

Following is a question by the Hon Rock Chen and a written reply by the Secretary for Housing, Ms Winnie Ho, in the Legislative Council today (April 26): Question: Part IVA of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) (the Ordinance), which came into force on January 22 last year, seeks to regulate tenancies of subdivided units (SDUs). It has been reported that at present, many SDUs in Hong Kong are not installed with individual electricity meters. Regarding strengthening the protection for the rights and interests of tenants of SDUs, will the Government inform this Council: (1) as it is learnt that some landlords with SDU tenancy agreements signed before the commencement of the Ordinance have failed to sign a new tenancy agreement with their SDU tenants upon the expiry of the relevant tenancy agreements, but only let the tenants continue to reside in the units on the terms of the original tenancy agreements, resulting in the tenants not being protected by the Ordinance, and the findings of a survey published by the Hong Kong Subdivided Flats Concerning Platform in November last year indicated that only 23 per cent of the SDU tenants surveyed have signed a new tenancy agreement with their landlords after the commencement of the Ordinance, whether the authorities have assessed the implementation effectiveness of the Ordinance; if so, of the details (including improvement measures); if not, the reasons for that; (2) given that landlords of regulated tenancies must submit, within 60 days after the term of the relevant tenancy commences, a duly completed Notice of Tenancy (the Notice) to the Commissioner of Rating and Valuation, of the number of the Notices received by the Rating and Valuation Department so far and its percentage in the number of SDUs across the territory, and set out the following details in accordance with the information in the received Notices: (i) the numbers of various types of SDUs (e.g. externally accessible room, cubicle, rooftop house, podium house, loft, bedspace and space capsule), (ii) the average rent of SDUs, (iii) the average area of SDUs, as well as the number of SDUs which have (iv) an independent toilet and (v) an independent kitchen; and (3) of the authorities' estimated number of SDUs not yet installed with individual electricity meters; the measures or methods in place to assist SDU tenants in getting their independent electricity meters installed, and whether it will consider making it mandatory for the landlords to install individual electricity meters for SDU tenants; if so, of the details; if not, the reasons for that? Reply: President, Part IVA of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) (the Ordinance), which implements tenancy control on subdivided units (SDUs), came into force on January 22, 2022. The Ordinance aims to regulate SDU tenancies and provide protection to SDU tenants in various aspects, which include four-year security of tenure (i.e. first term of two years and second term of two years); restricting the rate of rent increase on tenancy renewal, which must not exceed the percentage change of the territory-wide rental index for all classes of private domestic properties compiled and published by the Rating and Valuation Department (RVD) during the relevant period, and is capped at 10 per cent; and prohibiting landlords from overcharging tenants on utilities and services (such as water and electricity), etc. After consulting the Environment and Ecology Bureau (EEB) as well as the RVD, the reply to various parts of the question raised by the Hon Rock Chen is as follows: (1) and (2) A tenancy which fulfills all of the following conditions is a "regulated tenancy" and is regulated under the Ordinance: (a) the tenancy commences on or after January 22, 2022; (b) the tenancy is a domestic tenancy; (c) the subject premises of the tenancy are an SDU; (d) the tenant is a natural person; (e) the purpose of the tenancy is for the tenant's own dwelling; and (f) the tenancy is not an excluded tenancy specified in the Ordinance (such as a tenancy held from the Hong Kong Housing Authority). After the expiry of a tenancy, if the SDU landlord only enters into a new tenancy with the tenant orally without signing a new written tenancy agreement, and the oral tenancy fulfils all of the conditions for a "regulated tenancy" under the Ordinance (i.e. conditions (a) to (f) above), the oral tenancy of the SDU is also regulated under the Ordinance. The relevant statutory requirements and mandatory terms are to be implied into the oral tenancy of the SDU. In other words, regardless of the content of the oral tenancy, all the statutory requirements and mandatory terms of "regulated tenancy" under the Ordinance will automatically take effect. Pursuant to the Ordinance, a landlord must, within 60 days after the term of a "regulated tenancy" commences, submit a Notice of Tenancy (Form AR2) to the RVD to provide the particulars of the tenancy. Since the commencement of the Ordinance and up to March 14, 2023, the RVD had processed a total of 13 391 Forms AR2. The RVD analysed 10 211 of them which carry valid tenancy information belonging to SDUs that are classified as "room" and with tenancy period starting between January 22, 2022 and January 31, 2023. As SDUs that are cubicles, rooftop houses, podium houses, lofts, bedspaces and space capsules are rather different from "room" and their quantity is relatively insignificant (only 294), the analysis by the RVD did not include the relevant information to avoid complicating the analysis. According to the information analysis by the RVD, the median monthly rent and median unit rent (per square metre) of SDUs that are classified as "room" during January 2022 to January 2023 were $5,000 and $431 respectively; while the median floor area was 11.5 square metres. The vast majority of these SDUs were equipped with independent toilets (98.7 per cent) and windows (98.8 per cent), and most of them had independent kitchens (76.4 per cent). Since the Ordinance has come into force for just slightly more than a year, some landlords may not clearly understand the relevant requirements, including the statutory requirement of submitting Form AR2. In this regard, the Government will continue promoting the Ordinance to remind landlords that they must comply with the relevant requirements. The RVD has been proactively identifying breaches and strengthening enforcement and promotion. The specific measures include (a) proactively visiting SDUs in various districts; (b) setting up an enforcement and investigation task force comprising RVD staff and retired police officers to follow up on cases involving suspected breach of the provisions of the Ordinance and actively explore more ways to proactively identify suspected offence cases, with a view to enhancing the enforcement and prosecution efficiency; and (c) strengthening the promotion of the Ordinance through different channels and means, such as advertising on public transport; publicising promotional messages, videos and audio clips on news websites, TV and radio; and issuing letters to buildings wherein more SDUs are expected, with a view to reminding landlords and tenants of the relevant requirements, etc. Apart from the RVD being responsible for the implementation of the Ordinance, the Government has also engaged non-governmental organisations (NGOs) to set up six District Service Teams (DSTs), which have been reaching out to the grassroots. Since early January 2022, DSTs have been promoting the Ordinance at district level, raising public awareness of the new regulatory regime, as well as handling enquiries and referral cases, etc, through various publicity activities such as street counters, home visits, talks and briefing sessions as well as their networks. In addition, the Government has also engaged an NGO to establish and manage an information portal on tenancy control on SDUs ( www.sdu-info.org.hk ) for publicity and education purposes. The portal was launched on March 21, 2022. The Government will continue to closely monitor the implementation of the Ordinance and follow up as appropriate. (3) Currently, any users can apply for electricity supply from the two power companies in Hong Kong (i.e. CLP Power Hong Kong Limited and The Hongkong Electric Company, Limited). The power companies will install individual electricity meters for households living in the SDU if consent from the landlord and building management has been obtained, and that the SDU meets relevant prerequisites and safety standards. The two power companies have been working with social welfare organisations to actively provide appropriate support measures to vulnerable groups under their respective Community Energy Saving Funds. The support measures include providing subsidies for the SDU landlords to carry out rewiring works required for the installation of individual electricity meters, and installing individual electricity meters free of charge for SDU households with the consent of landlords and meeting the required standards. The two power companies do not have the statistics of SDUs, including the number of SDUs with no independent electricity meters installed. Since many SDUs are located in old buildings, some of which are dilapidated or have cramped common areas, there are technical and safety restrictions on the installation of independent electricity meters. Furthermore, some SDUs are located in buildings without any management company, rendering it very difficult to carry out various works in relevant buildings. Taking into account the actual environmental constraints and safety concerns, the EEB considers that it is not appropriate to mandate the installation of independent electricity meters for SDU tenants.