Tenancy of less than three years

Under Section 3(2) of the Land Registration Ordinance, a lease for a term not exceeding three years at rack rent is not required to be registered at the Land Registry. The legal effect or priority of such a lease will not be affected by non-registration.

Property must not be subject to any lease or tenancy agreement on completion if the terms of the agreement for sale and purchase require the vendor to deliver vacant possession of the property. A purchaser should ascertain whether the property is subject to any subsisting tenancy by inspecting the property and making enquiries with the occupiers.

Options for renewal

A lease/tenancy agreement may contain an option to renew which is a grant of right to the tenant to renew the tenancy on the expiration of the current term for a further fixed term. However, if the instrument containing such an option is not registered in the Land Registry, it may be void against subsequent purchasers.

An estate agent should therefore advise his tenant client to register a tenancy agreement which contains an option to renew in order to protect his rights and entitlement.

Licences

The rights of any licensee to occupy a property depend on the terms of the licence agreement between the owner of the property and the licensee.

If the owner is required by the terms of the agreement for sale and purchase to deliver vacant possession of the property to the purchaser on completion, a licence agreement to which the property is subject and which has not been terminated according to law and the terms of the licence agreement or failure to vacate the licensee from the property on completion renders the vendor in breach of the agreement for sale and purchase.