SDU Tenancy Agreement HK: Cap. 7 Part IVA Template

A subdivided unit tenancy agreement is a domestic tenancy over premises that form part of a flat rather than the whole of it. The statutory definition is deliberately wide: a room, a cubicle, a loft, a bedspace, a rooftop house and even a space capsule all qualify, provided the premises are let to a natural person as that person's own dwelling. Most Notices of Tenancy processed by the Rating and Valuation Department concern rooms, which is why the market calls this a room rental agreement although the Ordinance never uses the phrase.

Two documents get confused constantly. An ordinary tenancy over a whole flat is a creature of contract, and the parties are broadly free to fix the term, the rent and the exit. A regulated tenancy is not. Six conditions must be satisfied: the tenancy commences on or after 22 January 2022, it is a domestic tenancy, the premises are a subdivided unit, the tenant is a natural person, the letting is for the tenant's own dwelling, and the tenancy is not excluded by Schedule 6. Where all six are met, the statutory terms apply whether or not anything is signed. An oral letting of a room is still a regulated tenancy, and the mandatory terms are read into it by force of law.

Part IVA was inserted into Cap. 7 by the Landlord and Tenant (Consolidation) (Amendment) Ordinance 2021 and took effect on 22 January 2022. It builds a regulated cycle of two consecutive tenancies of two years each, so a first term tenant enjoys four years of security of tenure. The landlord cannot terminate before expiry except in the narrow circumstances the Ordinance specifies, and must make the second term offer on Form AR1 within the offering period. Rent is frozen during a term, and the second term increase cannot exceed the change in the rental index for private domestic properties compiled by the Rating and Valuation Department, capped at 10 per cent.

Money is where prosecutions cluster. Section 120AAZL permits three payments only: the specified rent, a deposit not exceeding two months' rent, and reimbursement of specified utilities and services, meaning water, electricity, gas and communication services. Where those are not independently billed, the landlord must be the payer named on the bill, produce copies, and give the tenant a written apportionment account. The Notice of Tenancy (Form AR2) must reach the Commissioner of Rating and Valuation within 60 days of commencement, and no action to recover rent can be brought until the Commissioner has endorsed it. Section 5 of Schedule 7 imposes repair duties over drains, pipes, wiring and windows, and stamp duty under the Stamp Duty Ordinance (Cap. 117) falls on the landlord alone. The Rating and Valuation Department guidance on regulated tenancies of subdivided units sets out the forms and the offence schedule in full, and our Hong Kong tenancy and property documents follow the same structure.

A second regime runs alongside the first. The Basic Housing Units Ordinance (Cap. 658) took effect on 1 March 2026 and requires subdivided units in residential buildings, and in the residential parts of composite buildings, to meet minimum standards on floor area, ceiling height, safety, sanitation, ventilation and metering, then obtain Basic Housing Unit recognition before they can lawfully be let. Section 8, the offence of letting a subdivided unit with neither registration nor recognition, takes effect on 1 March 2027.

The ordinary case is a fresh letting of a room in a subdivided flat, where the landlord needs a first term tenancy that will survive scrutiny and produce a clean Form AR2. Close behind sits the regularisation of a handshake arrangement: a tenant paying rent without paperwork can demand a written agreement, and the landlord then has 30 days to serve one, failing which the tenant may withhold rent or terminate on notice. Documenting the second term tenancy is the third scenario, and it is more technical than it looks, because the terms must mirror the first term in everything but the period and the rent.

Two situations reward attention. Subdivided units in industrial and commercial buildings fall within Part IVA whenever the letting is genuinely domestic, and where the parties disagree, either can apply to the Lands Tribunal or seek a certificate of primary user under section 120AAZQ. The other is the company letting. An employer housing a staff member in a room it holds should paper the accommodation separately from the employment contracts and HR letters drafted for the Employment Ordinance, because a tenancy that dies with the job is not how a regulated tenancy behaves.

• The parties and the premises are identified with the precision the Ordinance expects, naming the individual tenant rather than a household and describing the unit by its position within the principal flat. Loose wording such as "the middle room" carries across into Form AR2 and causes arguments later.
• The term and the regulated cycle are stated as a two year first term, with the tenant's entitlement to a second term offer recorded expressly. The clause preserves the tenant's right to terminate early on not less than 30 days' written notice, provided the termination date falls no earlier than the last day of the first year. The landlord has no equivalent break right.
• The rent, receipts and re-entry provisions fix a rent that cannot vary during the term, oblige the landlord to issue a receipt for every payment, and record the fifteen day window after which the right of re-entry arises.
• The utilities and apportionment schedule identifies which specified services are separately metered, names the bill payer and commits the landlord to producing bills and a written account. This is the clause that keeps landlords out of the Eastern Magistrates' Courts.
• The maintenance and covenant terms reproduce the mandatory obligations over drains, pipes, wiring, windows and fittings, alongside the tenant's undertakings on lawful use, alterations and subletting. Where a landlord signs through a relative or agent, use one of the powers of attorney and authorisation letters for Hong Kong.

Sham Shui Po carries the densest concentration of subdivided units in the territory, and it is where the Basic Housing Unit regime bit first. Owners wanting flats empty for alteration works moved early, which produced a wave of terminations and much confusion about what a landlord may actually do. The position is simple: a regulated tenancy cannot be ended mid term because the owner intends to renovate. Registration secures time, not vacant possession.

Yau Tsim Mong is dominated by tenement stock and composite buildings with shops at street level. That matters, because the Basic Housing Unit regime reaches the residential parts of composite buildings and measures compliance against the reference building plan, generally the approved plan under which the Occupation Permit was issued.

Kowloon City and Kwun Tong produce the rooftop and podium lettings. These structures are subdivided units for Part IVA purposes, so the two year term, the deposit ceiling and the Form AR2 duty apply. They also attract the Buildings Department, and any outstanding order about unauthorised building works must be cleared before recognition is granted.

Industrial and commercial buildings sit in the gap between the two regimes. A domestic letting of partitioned space there is regulated under Part IVA yet falls outside the Basic Housing Unit framework, and it may breach the occupation permit or the lease independently of Cap. 7. Operators holding units across several districts usually run the portfolio through a company, in which case the corporate paperwork sits with the commercial contracts and company documents under the Companies Ordinance.

You begin by confirming that the letting really is a regulated tenancy, because the answer shapes the whole document. The form asks whether the premises form part of a larger flat, whether the tenant is an individual taking the unit as a home, and whether any Schedule 6 exclusion applies. You then enter the parties, the address of the principal flat, the unit identifier and the commencement date, which drives both the two year term and the 60 day filing deadline.

The utilities section is where care pays. You indicate which services are separately metered, name the account holder on each bill and choose an apportionment basis you can defend on paper. The deposit field is capped so that no figure above two months' rent can be entered. Both counterparts are then signed, the landlord stamps at the Inland Revenue Department and returns the stamped counterpart within 30 days, then files Form AR2.

The most expensive error is treating Form AR2 as administrative housekeeping. Landlords who file late, or who file for the first term and forget the second, cannot sue for arrears until the Commissioner endorses the notice, and every unfiled tenancy is a separate charge. The second recurring failure is the flat rate utility charge: a fixed monthly sum for water and electricity is an offence unless it is a genuine reimbursement of an apportioned bill the landlord can evidence.

Three quieter mistakes cause almost as much damage. Landlords write a one year term because that is what the market did for decades, when the statutory term is two years. They take a three month deposit, which exceeds the ceiling. And they assume a break clause of the kind used in a "1+1" whole flat letting will let them exit at twelve months, when the right to terminate early belongs to the tenant alone. If the relationship breaks down, the route is the statutory right of re-entry or a properly drafted notice from our landlord and tenant notices for Hong Kong lettings, never a self help eviction.