Rates, Management Fees and other charges

IV. Rates, Management Fees and other charges

A better drafted lease/tenancy agreement shall also deal with the issues as to whether the tenant shall be responsible for payment of management fees, rates, government rent or other charges (such as utilities and telecommunication services).

In the absence of any express provision in dealing with such matters, it may generally mean that the ‘rent’ payable by a tenant covers all existing or ongoing expenses of the unit to be borne by the landlord and the tenant may not be liable to pay anything further.

Therefore, if the landlord so wishes, it would be a better practice to expressly set out under a lease/tenancy agreement as to the following areas:-

1. Who shall be responsible for payment of rates, government rent, management fees and/or other charges;
2. Whether the tenant shall open and/or maintain an account with the utility/service company themselves for the unit (e.g. water supplies department, drainage services department, sewage scavenger services (applicable to village houses), electricity, telephone, towngas, internet services andTV subscription) until the termination of the lease;
3. Who shall be responsible for payment of any deposits and their return upon termination of the lease/tenancy agreement;
4. When such payment shall be effected (i.e. pre-payment or when the fall due) and how tenant shall be given notice about the amount due;
5. How such payment shall be made (i.e. directly to the payee (i.e. the Government, Management Office or utility company) and whether such payment obligation shall form (or be separated from) part of the rent;
6. The consequences for non-payment of such fees/charges.

If existing utility account(s) are maintained by the landlord in respect of the unit, the landlord should make arrangements as to whether such accounts shall be transferred or replaced by another account under the tenant’s name. The tenancy agreement should also state as to upon termination of the lease (1) how outstanding amount(s) due should be paid, such as deduction from the rental deposit; and (2) if the tenant has paid any ‘deposit’ to such accounts maintained by the landlord, when and how such deposit shall be returned.

Landlords should note that, as the registered owner of the property, he/she remains to be primarily liable to the Government for any default on payment of government rent/rates.

The same also applies to management fees or other forms of contributions (e.g. renovation costs and contribution to litigation funds) to be made pursuant to the Deed of Mutual Covenant (“DMC”) or the Building Management Ordinance (Cap. 344) (the “BMO”).

Notwithstanding that a lease/tenancy agreement may provide that a tenant shall be liable to effect payment of management fees directly to the management office, such payment obligation is only privy between the landlord and tenant and is not binding on the manager or other co-owners. Moreover, since an obligation to pay money under the DMC/BMO is ‘positive’ in nature, by the effect of section 41(5) and (6) of the Conveyancing and Property Ordinance (Cap. 219), it is prima facie not directly enforceable by the manager/incorporated owners against a tenant so that the landlord remains to be liable for any tenant’s default on payments.