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Leasing terminology

Advance Payment

It includes the first month's rent, service charges, government rates & rents Tenancy Agreement.

 

Agency Fee

It is a normal practice to charge the tenant a half (0.5) month's new rent as agency fee in Hong Kong

 

Air-conditioning Charges

A standard charges for building which provides central air conditioning systems.

 

Area definition

Gross, Lettable and Net area are commonly being used in Office Premises.

 

Gross Area (G)

The total area of all floors of a building as measured to the outside surfaces of exterior walls. It includes toilets, lift lobbies, columns, staircases, smoke lobbies, plant rooms, and risers but excludes lift shafts.

 

Lettable Area (L)

The area of a building as measured to the available space for rent to tenants including toilets, lift lobbies and columns. It excludes staircases, smoke lobbies, lift shafts, plant rooms, and risers.

 

Net Area (N)

The area included in surrounding walls of a building including lift lobbies. It excludes toilets, columns, staircases, smoke lobbies, lift shafts, plant rooms, and risers.

 

Break Clause

Tenant may request a Break Clause to have subletting right or to terminate the lease early. Single landlords in Hong Kong usually request a Break Clause to terminate the lease for either Sale or redevelopment purposes.

 

Bare-shell

Single Landlord usually provide in bare-shell conditions, and negotiable with fully integrated ceiling system.

 

Decoration

Nominated and Individual contractor are to be used for office decoration.

 

Effective Rental

The average monthly cost of office premises with consideration of rent free period.

 

Face Rental

Monthly cost of office premises.

 

Government Rates

It is usually at tenant's account. It pays to the government at a rate of 5% of the annual rental. It charges at a quarterly basis.

 

Government Rents

It is usually at landlord's account. It pays to the government at a rate of 3% of the annual rental. It charges at a quarterly basis.

 

Individual Contractor

It is to be assigned by the tenant for office internal decoration.

 

Lease Term

Two or Three years with fixed rent are usually offered to tenants of office premises.

 

Legal Costs

It is normal practice that single landlord will pay the solicitor for drafting the Tenant Agreement, while tenant should pay for legal charge on his own.

 

Management Fee

A normal charge for maintaining the building facilities and securities in a monthly basis

 

Nominated Contractor

Electricity, Air-conditioning, and Fire facilities in common area are normally assigned to nominated contractor in most prime office buildings in Hong Kong

 

Office Conditions

Landlord usually provides Bare-shell or fitted conditions

 

Options to Renew

It gives the tenant the right to extend the term of a lease, usually for a stated period of Two to Three years upon expiry and at the prevailing market rental.

 

Rental

Rental is normally offered in a monthly basis.

 

Rent Free Period

Rent Free Period are usually offered during the Lease. The tenant will not pay the rent during the rent free period; Service charges, government rate and rents and other outgoing charges are in Tenant's account during the rent free period.

 

Reinstatement

It is normal practice to have reinstatement clause in the lease. The tenant shall be responsible to reinstate the premises to Bare-shell condition with stand landlord provision at its own costs before termination of the lease.

 

Rent Review

Tenant in Larger spaces usually enter a lease for 6 years or more with the option to review the rent every three years based on the current market situation.

 

Security Deposit

Most landlords require Three (3) months' rent, service charges, government rates & rents as Security deposit. The landlord will release the security deposit upon the termination of lease.

Landlord may require Four (4) to Six (6) months' rent, service charges, government rates & rents as Security deposit in the event the tenant is either a new setup company or insufficient in capital.

 

Service Charges

It normally includes Management Fee and Air-conditioning charges (only for the buildings with Central Air-conditioning System). Different building varies its service charges depending on the management company and the facilities of the Air-conditioning system.

 

Stamp Duty

It is normal to be borne by the landlord and the tenant in equal share.

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