Life & Death of a Lease

Main issues

How a lease is assigned, created and terminated (e.g., formality etc.)

Interrelation with semester 1 content

formality
 formal way of acquiring interests
 e.g., CPO s 4 deed
 s3 written agreement
 relevant in terms of acquisitions of easement, leases, mortgages

other informal way of obtaining interests also relevant

 proprietary estoppel, constructive trust, resulting trust
 can affect mortgagees’ rights to sell property with vacant possession
(covered later on)
 one of the remedies for mortgages = sell property
 sometimes necessary to have to be able to sell with vacant possession
 means selling property free of all other encumbrances
 so if there is existing interest (wife has beneficial interest because of
constructive/resulting trust), can bank sell property free of wife’s interest?
how did wife get her interest in the first place?

enforceability of rights
 easement, leases, mortgages, licenses…
 are they enforceable against 3rd parties? If yes, how can they be enforced
against 3rd parties
 these were covered in 1st sem

priority
___________________________________________________________________________

Types of leases
A/ Two types of lease are commonly granted: fixed term OR periodic
fixed VS periodic

fixed term → if given 2 years, 2 years, full stop

periodic tenancy → can grow

A1/ Fixed term leases

It can be for any fixed term (ie duration). The sample lease is for a fixed term of two years.
Government leases are commonly granted for a much longer period (eg 50 up to 999 years)

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 - The Government lessee may sell his Government lease by assignment
- Or he may decide to grant a sub-lease (ie, letting out his property) instead of
assigning the Government lease (ie, selling it). The sub-leases granted are normally
for a fixed term of two or three years

A2/ Periodic tenancies

This type of tenancy can be created expressly (eg from month to month) OR more often
arise by implication of law (eg when you move into possession and pay rent on a periodic
basis and the rent is accepted by the landlord)

Where periodic tenancy is expressly granted

- the grant will indicate the type of periodic tenancy being granted, eg yearly,
monthly, weekly, etc.
- Where no express period is indicated, it is determined by reference to the period for
which rent is due or calculated

Where periodic tenancy arises by implication of law  the tenant is in possession and is
paying rent which is calculated on a periodic basis
- The nature of the tenancy depends on the way in which the rent is calculated, not on
the way in which it is actually paid
o Example (agreed with a Mr. Foster to take a house at twenty guineas a year,
the rent to be paid weekly): a taking at an annual rent, though the rent is to
be paid weekly, is prima facie a yearly tenancy

Periodic tenancies continue automatically from period to period UNTIL they are determined
at the end of any period by a notice to quit given by one party to the other

- A periodic tenancy expires at the end of a period, but renews itself automatically for
another period
- Thus, it has the potential to go on for as long as the grantor holds a reversionary
interest in the land as, for example, in England, where the landlord has a fee simple,
the periodic tenancy has the potential to last forever

And if the landlord and tenant do not have the right to terminate by notice, the tenancy can
never end. This state of affairs would be undesirable. Thus, it is implicit that both the
landlord and tenant have the right to terminate the periodic tenancy by notice. (For the
period of notice required, see below)

- Any contractual provision which purports to take away the landlord or the
tenant’s right to give notice is likely to be held void hence unenforceable (see
Centaploy Ltd v Matlodge Ltd [1973] 2 All ER 720). Examples –

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 o a condition precluding the landlord from serving a notice to quit as long as
the tenant complies with the covenants, or a condition allowing only the
tenant to serve a notice to quit (as in Centaploy), is repugnant to the nature
of a periodic tenancy
o CF. an agreement by the landlord not to serve a notice to quit during the first
three years of the tenancy unless he requires the premises for his own
occupation is not repugnant, nor is an agreement precluding the landlord
from terminating the tenancy at any time unless he requires it for the
purposes of his own undertaking, even though it is unlikely that the landlord
will ever wish to terminate for that reason. This is because the landlord’s
right to give notice to quit is not permanently taken away

o Where the Government, as landlord, is given an additional right to resume

possession of all or any part of the Government land for a public purpose on
one month’s notice, the right does not deprive the Government of its right to
determine by an ordinary month’s notice and is therefore not inconsistent
with the Government lease being a monthly tenancy and is not repugnant to
the nature of the tenancy.
o Cf. If the resumption clause provides the only way the Government can
determine a periodic tenancy, then the limitation is repugnant and void

right to give notice in periodic tenancy cannot be taken away

 if there is a clause to this effect
 will be invalid
 because right to give notice is part and parcel of periodic tenancy
 this right renders periodic tenancy certain/when it will end; otherwise can go on
forever, no certainty
…………………..…………………..…………………..………………….

B/ Tenancies at will & tenancies at sufferance: NO certainty of term

Tenancies at will and Tenancies at sufferance are not tenancies in the full sense because
there is no certainty of term. But it is different from a licence in that it gives the tenant
overall control of the premises, and so the tenant can sue a third party for trespassing

B1/ Tenancies at will

A tenancy at will arises when you occupy land with the consent of the owner under a
tenancy (ie with exclusive possession) of uncertain duration where either party may at any
time terminate the arrangement at will

It usually happens when the tenant overstays with the landlord’s consent OR the tenant is
allowed to move into possession prior to the commencement of the lease

- It has no real significance in practice except that it provides the legitimacy for the
period of holding over and the ability to defend possession against a trespasser
- It is terminable at any notice to quit

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 - The Landlord and Tenant (Consolidation) Ordinance is inapplicable to a tenancy at
will; it is only applicable where a period of notice to quit is necessary
- Such a tenancy is not a legal estate because it is not a ‘term of years absolute’. Like
a licensee, the tenant at will has no estate in land
- However, a tenancy at will is different from a licence in that the tenant at will is in
‘possession’ of the land, and may bring an action in trespass against a stranger

Rent may be payable. But if the rent is calculated by reference to a period, paid and
accepted, then a periodic tenancy is created

Doll d Hull v Wood: it is further contended that the widow was tenant from year to year
to the administrator, and was entitled to six months' notice to quit; but there is no
evidence at all to shew an agreement for a tenancy from year to year to the
administrator: it only amounts to this,—that he allowed her to pay the rent for him to the
head landlord instead of to himself. We cannot infer a tenancy from year to year from a
simple payment by the occupier. A simple permission to occupy creates a tenancy at will,
unless there are circumstances to shew an intention to create a tenancy from year to
year; as, for instance, an agreement to pay rent by the quarter, or some other aliquot part
of a year. That was not so here, and I think there should be no rule

B2/ Tenancies at sufferance

A tenancy at sufferance usually also arises when the tenant overstays, but here, the tenant
overstays without consent
…………………..…………………..…………………..………………….

C/ Tenancy by estoppel

This refers to the tenancy which the landlord purports to grant you (whether it is a fixed
term or periodic) over premises which he does not own or does not have the right to let to
you. Having granted a tenancy to you, he cannot use the lack of ownership or the right to let
as a defence for any breach: he is estopped from denying that he has granted you a tenancy

If a person with no legal estate in land purports to grant a lease to a tenant, it is enforceable
between the parties and their assigns

- When the landlord subsequently acquires the legal estate out of which the
purported lease could have been granted, the estoppel is fed
- Likewise, where a landlord grants a tenancy in breach of a mortgage term, the
tenancy is good by estoppel as between the landlord and the tenant, but void
against the mortgagee. But once the mortgagee takes possession, the tenancy by
estoppel is fatally disturbed. But if the tenant is disturbed by being evicted by title
paramount or the equivalent of it, then he can dispute the landlord’s title
o Typhoon 8 Research Ltd: “Where, after a property was mortgaged, a tenancy
was created without the mortgagee's prior consent (if required), the tenancy

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 would be good by estoppel as between the mortgagor and tenant, but would
be void as between the mortgagee and the tenant. The lease, though not
binding on the mortgagee, would continue between mortgagor and tenant
until it was disturbed by the tenant being evicted by someone with a title
superior to that of the landlord”
o “When a mortgagee took possession and demanded payment of rent from
the tenant, as was the case here, that was equivalent to eviction by title
paramount by the mortgagee, the tenancy by estoppel was fatally disturbed
and the tenant was free to challenge and deny the landlord's title. What the
tenant did or did not do upon the demand for rent was irrelevant; the
tenancy had been fatally disturbed”
___________________________________________________________________________

Creation of leases
***In short

Fixed term
- not exceeding 3 years taking effective in possession at best rent without premium:
no formality required (s 4(2)(d) CPO)
o takes effect in possession = take effect immediately
 signing of agreement date MUST be the same as the day of
commencement of lease; if takes effect tomorrow/next week, won’t
fall under this exception
o premium different from deposit – premium won’t be returned to purchaser
o also have to be signed by party sued (not party suing; otherwise easy to
fabricate evidence)

- everything else: by deed (s 4 CPO), otherwise equitable if in writing or evidenced

in writing or partly performed (s 3 CPO)

Periodic tenancy
- by express agreement (no formality: s 4(2)(d) exception)
- by tenant moving in and paying rent on periodic basis: ALSO REQUIRES
EXCLUSIVE POSSESSION

***Takeaway
- If there is a deed for fixed term  legal tenancy for fixed term
- If no deed, but there is express written agreement or evidence in writing or part
performance, and no discretionary bar  equitable tenancy for fixed term
- If there is discretionary bar, but tenant has moved in and paid rent  implied legal
periodic tenancy

A/ Grant of a legal lease

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We have seen that a lease (a term of years absolute) is capable of being a legal estate. The
legal estate for a term of years must be granted by deed (Conveyancing and Property
Ordinance s 4(1))

A deed is a document “signed, sealed, and delivered” by the parties

It usually starts by saying “THIS INDENTURE (or THIS LEASE) made the ___day of ______
20__ (the date) Between (name and address of the landlord) of the one part and (name
and address of the tenant) of the other part WITNESSETH as follows:
(then follows the terms of the tenancy)”

and ends with “IN WITNESS whereof the parties hereto have hereunto set their hands
and seals the day and year first above written: SIGNED SEALED and DELIVERED by the
Landlord in the presence of: (then the signature of the Landlord and the witness) SIGNED
SEALED and DELIVERED by the Tenant in the presence of: (signature of the tenant and
witness)”.

However, if the tenancy is granted for a term not exceeding three years taking effect in
possession at the best rent reasonably obtainable without a premium, no deed is required
(CPO s 4(2)(d)). In other words, a legal lease for not more than three years taking effect
immediately at the best rent without a premium can be created orally or by written
agreement

- If it does not take effect immediately as at the date of the signing of the tenancy
agreement, it is equitable as the tenancy agreement is not in the form of a deed

- Where a lease not exceeding three years contains an option for renewal, the lease is
still governed by section 4(2)(d). Provided the renewed lease does not exceed three
years, no formality is required for the renewal
o The option for renewal, when exercised, merely creates a new lease, and
does not extend the initial lease beyond three years
- Conversely, where a determinable lease is granted for more than three years, it must
be granted by deed, even though it may be determined within the first three years

Periodic tenancy falls under s4(2)(d) exception

A periodic tenancy is a tenancy for a term not exceeding three years, therefore falls within
the section 4(2)(d) exception

- This is because although the periodic tenancy may extend beyond three years
eventually, the periodic tenant does not by virtue of the letting have an absolute
right as against his landlord to occupy the premises for more than three years;
where the tenancy may, at the option of the landlord, be determined at the end of
the second period, it is impossible to hold that the premises are let to the tenant for
a term exceeding three years
…………………..…………………..…………………..………………….
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B/ Contract to create a legal lease

Sometimes a long lease may be preceded by a contract for the grant of a legal lease (i.e.,
formal tenancy agreement may be preceded by a provisional agreement whereby the
landlord agrees to grant a lease on a future date)

B1/ If purported grant not made by deed, may be recognized by equity to be

a specifically enforceable contract for the grant of a legal lease if satisfies
CPO s3  result = equitable lease created

Such a contract to grant a lease must contain the essential terms such as the identity of the
parties, the premises, the commencement and duration of the term, and the rent or other
consideration to be paid

It must also satisfy section 3 of the Conveyancing and Property Ordinance, ie, to be
enforceable, it must be in writing, or evidenced by written memorandum, or supported by
sufficient act of part performance  See Chapter on Formalities for Acquisition of Interest

B2/ What counts as sufficient acts of part performance? Extra case

below

Moving into possession and paying rent are typical acts of part performance

The World Food Fair Ltd v HK Island Development Ltd – Payment of a deposit and
giving access for fitting out works have been regarded as generally equivocal acts
which are consistent with the existence of a concluded agreement, but DO NOT prove
its existence, and are acts done IN ANTICIPATION of a legally binding agreement
 Facts: Oral contract allegedly made around 27 January 1997 for a 3-year lease to
start on 8 March 1997.
o In 1996, P2 began negotiations to lease units at D’s shopping mall for use as a
restaurant and food court. The parties orally reached agreement on the
monthly rent, management fees and air-conditioning charges
o On 27 January 1997, P2 paid D a cheque for $200,000, describing it as "an
initial deposit" (the Deposit). At the time, no design work had been done. P2,
who did not have experience in the food and beverage business, had not yet
started advertising for sub-tenants or licensees for the food court nor
brought in investors as partners in the venture. No steps had yet been taken
towards hiring staff, or provisioning the restaurant.
o On 5 July 1997, D gave P2 possession of the units to enable its contractors to
commence work. On 9 July 1997, agreement was reached on the kitchen
facilities to be provided at D's cost, but no tenancy agreement was signed.

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 o In late July 1997, D informed P2 that it was now against having a food court in
the mall. By then, P2 had incurred substantial expenses. D purported to
forfeit the Deposit and Ps brought an action against D for breach of
agreement to grant them the tenancy.
 The Judge dismissed Ps' action on the basis that the parties had not proceeded
beyond the stage of negotiation so there was no concluded contract.
 CoA found that a contract for the tenancy was orally concluded, and that the
absence of formality was met by part performance.
 Held (CFA): D’s appeal allowed. No oral agreement in the first place and payment of
initial deposit and giving of possession for fitting out work were equivocal acts and
did not establish the existence of any concluded contract if they were done in
anticipation of a concluded contract.
 The terms which must be agreed for there to be a concluded agreement for any
lease were those dealing with the identity of the parties, the premises, the
commencement and duration of the term, and the rent or other consideration. In
addition, for there to be a concluded contract for the grant of a particular lease,
the parties had to reach unconditional agreement on all the terms that they
intended to have in their particular lease: it is a necessary part of the plaintiff's case
to shew that the two parties had come to a final and complete agreement, for, if not,
there was no contract. So long as they are only in negotiation either party may
retract; and though the parties may have agreed on all the cardinal points of the
intended contract, yet, if some particulars essential to the agreement still remain to
be settled afterwards, there is no contract. The parties, in such a case, are still only in
negotiation.
o Whether the parties intended to enter into a concluded contract was a
matter to be looked at objectively. Here, there was no concluded contract
because final agreement had not been reached on the commencement date,
on what should be the period of the rent free period, and on an option to
renew, all being matters which the parties had plainly intended to be
regulated by their contract. The commencement date as at 27 January 1997
of 8 March 1997 was a tentative date, not a binding commencement date
stipulated in a concluded contract, and it was quickly overtaken by events.
Given the circumstances, it was inherently unlikely that the parties would
have felt ready to go firm on a March start date at the end of January.
 The payment of a deposit and the giving of access for fitting out works were
generally equivocal acts. Such acts were consistent with: (a) the existence of a
concluded agreement, but did not prove its existence; and (b) also being acts done
in anticipation of a legally binding agreement.
 It was not uncommon for parties in the course of negotiations which were still
incomplete or subject to contract to pay deposits or to allow builders access to the
premises. Here, the "initial deposit" and the giving of possession for fitting out
works, did not establish the existence of a concluded contract. Indeed, the request
for the "initial deposit" might suggest that the parties had not yet reached final
agreement, as there would have been no need to seek such comfort if the parties
were already legally bound.
o Such acts are no doubt consistent with the existence of a concluded
contract but they do not prove its existence. They are NO LESS consistent

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 with being acts done in anticipation of a legally binding agreement which
the parties confidently expected to enter into but which never materialised
- which is what the Judge found was the position in the present case.
o It is not uncommon for parties in the course of negotiations which are still
incomplete or subject to contract to pay deposits or to allow builders access
to the premises. Such acts are no doubt done with a view to commercial
advantage but they involve the risk that the other party may decide to
withdraw from the deal without any contract coming into being. Many
examples of such conduct can be found, for instance, in textbooks on the law
of restitution regarding claims for recovery of expenses incurred or in respect
of benefits conferred where anticipated contracts do not materialise
o A deposit paid pursuant to a concluded contract will generally be intended to
secure performance of the contract and be subject to forfeiture. But, as the
authorities show, the parties may intend a different role for a deposit. If
pre-contractual negotiations are lengthy, a deposit may be sought, not as
an earnest of completion and performance, but as signifying serious intent
on the part of the potential tenant or purchaser. Indeed, the request for an
"initial deposit" rather than demanding execution of a tenancy agreement
and the full deposit in the present case may suggest that the parties had not
yet reached final agreement, since there would have been no need for the
landlord to seek the comfort of an initial deposit if the parties were already
legally bound
o A dramatic example involving handing over possession and effecting works
on the site pursuant to an agreement subject to contract can be found in A-G
& Another v Humphreys Estate (Queen's Gardens) Ltd [1987] HKLR 427 (PC).
Lord Templeman described the steps taken as follows: A major part of this
agreement, as subsequently modified and expanded, was carried out. In
particular the government took possession of the Tregunter flats and fitted
them out, and moved in senior civil servants to that accommodation by
August 1981. The government disposed of the residences formerly occupied
by those servants. HKL [Hongkong Land] took possession of Queen's Gardens
by November 1981 and demolished the existing buildings on the Queen's
Gardens and adjoining sites by May 1982 with a view to redevelopment. HKL
paid to the government by August 1982 the full sum of $103,865,608, the
agreed difference between the value of the Tregunter premises and the value
of Queen's Gardens. (at pp.428-429) Yet it was not in doubt that there was
no concluded contract and that those drastic steps had been taken merely in
the confident hope and expectation of a final agreement being executed,
which in the event never materialised. The government's arguments based
on proprietary estoppel having failed, it was held that Hongkong Land were
entitled to withdraw
o The payment of a deposit and the giving of access for fitting out works are
therefore generally equivocal acts. Contrary to what the Court of Appeal
held, such conduct does not establish the existence of any concluded
contract

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NB: The requirement of section 3 does not apply to a contract to grant a lease taking effect
in possession for a term not exceeding three years (whether or not the lessee is given power
to extend the term) at the best rent which can be reasonably obtained without a premium.
A contract to grant such a lease can be made orally  because of exception in s 6(2)
…………………..…………………..…………………..………………….

C/ Implied periodic tenancy

Usually a tenancy is expressly granted

But sometimes a tenant may be allowed to move into possession with the landlord’s
consent without specific or clear agreement as to the length and other terms of the
occupation. A tenancy at will arises at law at this stage

When the tenant later pays rent and rent is accepted by the landlord, the relationship need
to be regularized. Common law would recognize an implied periodic tenancy in such
circumstances

- At common law, where the tenant is orally allowed to move into possession by the
landlord, and pays rent on a periodic basis which is accepted by the landlord, a
periodic tenancy is implied by law
- Similarly, if a tenant moves into possession with the landlord’s consent under a
purported formal legal lease for a fixed term but the formal lease is later found to be
void (for example, it is not by deed), the tenant may get an equitable lease
o However if equity refuses to assist, then as mentioned above, the tenant is
a tenant at will
o But ONCE he pays a periodic rent and the payment is accepted by the
landlord, the tenancy at will is converted by implication of law into a
periodic tenancy
 This type of implied periodic tenancy, long recognised by common
law, is not affected by the formal requirements mentioned above as it
often falls within the exception1
…………………..…………………..…………………..………………….

D/ Informal and equitable leases

D1/ An oral agreement which is partly performed is recognized by BOTH

common law AND equity
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The terms of the lease contained in the contract or defective demise are incorporated into the implied
periodic tenancy insofar as they are compatible with the implied periodic tenancy. Thus, restrictive covenants
in the contract or defective demise, or covenants reserving the landlord’s right of entry will form part of the
periodic tenancy. On the other hand, in Martin v Smith, a term requiring the tenant to redecorate the premises
at the end of the seventh year could not form part of the periodic tenancy because the periodic tenancy could
be no more than a yearly tenancy and may be terminated before the seventh year expires. However, if the
tenant has enjoyed the periodic tenancy for the full seven years, he is bound to repair as agreed under the
abortive agreement

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Usually a tenancy for longer than 3 years (eg for 7 years) is granted by deed so that the
tenant gets a legal lease. But sometimes it is not granted by deed, but merely by a written
agreement (taking effect from the date of the agreement), or even orally  in such a case,
no legal estate for a 7 year term is granted

- If the purported grant nevertheless satisfies the requirement of section 3 of CPO and
the tenant has given valuable consideration, it will be recognised by equity as a
specifically enforceable contract for the grant of a legal lease, provided that there is
no discretionary bar, where for example, the tenant is guilty of a breach of the
tenancy agreement, unconscionable conduct or long delay, or a bona fide third party
has acquired an interest in the demised premises
o Thus, the agreement would create an equitable lease

Thus, an oral agreement which is partly performed is recognized both by common law (as
creating a periodic tenancy) and equity (as creating an equitable lease)

D2/ Conflict between implied periodic tenancy VS equitable lease

Scenario: where a tenant, having signed a contract for the grant of a legal lease, say for
seven years, moves into possession with the landlord’s consent and starts to pay rent
periodically, say monthly, the tenant may have an implied monthly tenancy at common
law for up to seven years, or a lease for a fixed term of seven years in equity

As mentioned earlier, the terms of the contract or defective demise will be incorporated
into the implied legal periodic tenancy, insofar as they are compatible with the periodic
tenancy

But there may be cases where the terms of the contract or the defective demise are in
conflict with the terms of an implied periodic tenancy. How is this conflict resolved?

There may be circumstances when the obligations at common law differs from their
obligation in equity: the common law periodic tenancy can be terminated by notice,
whereas the equitable lease only comes to an end on the expiry date unless there is a break
clause

Another example is the rent for an implied periodic tenancy is payable in arrears as a matter
of law, but the rent for an equitable lease is often payable in advance under the agreement

When there is a conflict between the common law obligation and the
equitable obligation, equity prevails (High Court Ordinance (Cap 4) s
16(1))

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So since the fusion of common law and equity, an enforceable oral agreement would give
rise to an equitable lease, not a common law implied periodic tenancy (Walsh v Lonsdale).
Of course, if equity refuses to assist, common law would always spring up to fill the gap

Walsh v Lonsdale (1882) – Such a conflict arose in this case

 Facts: D granted P a lease for seven years in writing. One of the terms required rent
to be paid one year in advance. The plaintiff entered into possession but paid rent in
arrears. Later, the defendant demanded that the plaintiff should pay rent in advance
in accordance with the term in the written lease granted. The plaintiff refused to pay
rent in advance.
 The defendant proceeded to distrain for the rent by seizing the plaintiff’s goods. The
plaintiff sought damages for trespass and a decree of specific performance of the
written lease.
 Issue: Under the periodic tenancy, as a matter of law, rent was payable in arrears.
But under the equitable lease, the rent was payable in advance. The defendant’s
liability in trespass therefore depended on whether the parties’ obligations were
governed by the periodic tenancy or the equitable lease.
 Held (CoA): As a result of the Judicature Acts 1873–1875, where there was a conflict
between common law rules and equitable principles, the rules of equity prevailed. In
Hong Kong, this rule is now contained in the High Court Ordinance (Cap 4), section
16(1).
 Thus, the defendant’s action in distraining upon the plaintiff’s goods was perfectly
lawful in accordance with the term of the equitable lease.
 Jessel MR: There is an agreement for a lease under which possession has been given.
Now since the Judicature Act the possession is held under the agreement. There are
not two estates as there were formerly, one estate at common law by reason of the
payment of the rent from year to year, and an estate in equity under the agreement.
 There is only one Court, and the equity rules prevail in it. The tenant holds under an
agreement for a lease. He holds, therefore, under the same terms in equity as if a
lease had been granted, it being a case in which both parties admit that relief is
capable of being given by specific performance.
 That being so, he cannot complain of the exercise by the landlord of the same rights
as the landlord would have had if a lease had been granted. On the other hand, he is
protected in the same way as if a lease had been granted; he cannot be turned out
by six months’ notice as a tenant from year to year. He has a right to say, ‘I have a
lease in equity, and you can only re-enter if I have committed such a breach of
covenant as would if a lease had been granted have entitled you to re-enter
according to the terms of a proper proviso for re-entry’. That being so, it appears to
me that being a lessee in equity he cannot complain of the exercise of the right of
distress merely because the actual parchment has not been signed and sealed.

Takeaway from Walsh

A tenant who enters into possession under a specifically enforceable contract for a lease
or under an abortive demise, and pays rent periodically, holds not a legal periodic
tenancy, but an equitable tenancy

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 **But in order for there to be a tenancy in equity under the doctrine in Walsh v Lonsdale
the agreement must be one in respect of which specific performance would be granted
- If the contract is not specifically enforceable, for example, if the contract does not
satisfy section 3 of the Conveyancing and Property Ordinance, or where the tenant
has not given valuable consideration, or where there is a discretionary bar, then
the tenant will have an implied legal periodic tenancy

D3/ Generally speaking, equitable lease gives tenant more protection

vis-à-vis the landlord, compared to implied periodic tenancy

From the tenant’s point of view, with the exception of the circumstances in Walsh v
Lonsdale where the terms in the equitable lease were least favourable to the tenant, the
equitable lease gives him more protection vis-à-vis the landlord

- This is because a periodic tenancy can be terminated by an appropriate notice by the

landlord, whereas the landlord is bound by the equitable lease for the full term
unless there is a break clause

On the other hand, the tenant’s position vis-à-vis the landlord’s

successors in title is less certain

Where he has an implied legal periodic tenancy, it is unregistrable under the Land
Registration Ordinance and so it binds the world including the landlord’s successors in title
- But as mentioned, the landlord’s successors in title may give an appropriate notice to
terminate the tenancy

On the other hand, if the tenant has a written equitable lease exceeding three years, it has
to be registered under the Land Registration Ordinance to bind the landlord’s successors in
title
- If the tenant fails to protect his equitable lease
o the successor in title of the landlord who is a bona fide purchaser or
mortgagee for valuable consideration will not be bound by the equitable
lease

If the equitable lease is created orally  it is not registrable and is void vis-à-vis Equity’s
Darling
- But once the equitable lease binds the landlord’s successors in title, it binds for the
full term

In Walsh v Lonsdale, the tenant could not rely on his implied tenancy as against the
landlord. What is not clear, however, is whether a tenant can rely on an implied
periodic tenancy to gain priority against a third party

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 Where a tenant who enters into possession under a specifically enforceable contract for a
lease, and pays rent periodically, has failed to protect his equitable lease, and the
landlord has now assigned the reversion to a purchaser for monetary consideration, as
mentioned earlier, the purchaser will take free of the equitable lease. Alternatively, if the
tenant can claim a legal periodic tenancy, the tenancy will bind the purchaser. Even
though the purchaser may then give the tenant an appropriate notice to quit, the tenant
can at least remain in possession until the notice expires. On these issues some questions
arise. Can the tenant choose to rely on an implied periodic tenancy? Likewise, if there is a
prior competing unregistrable equitable interest, the equitable interest (being the first in
time) will have priority over the equitable lease, but not over the implied periodic tenancy
provided the tenant has no notice of the former. Can the tenant choose to rely on the
implied periodic tenancy to take free of the prior unprotected equitable interest? Since
equity prevails over law, the answer appears to be in the negative, unless for some
reason, equity refuses to intervene

Self-assessed questions

1. Which clause in the Sample Tenancy Agreement tell you about the duration
of the tenancy?
2. Is the sample tenancy agreement legal or equitable? Explain
o My thoughts: duration = 2 years, s4(2)(d) exception doesn’t apply because
doesn’t take effect in possession, so has to be by deed
o Prima facie can be equitable lease (specifically enforceable contract); but
also can be legal periodic tenancy implied by law (monthly)  but
AGREEMENT ITSELF is equitable
o When there’s conflict between the two, equity prevails
___________________________________________________________________________

Assignment of leases and reversion

A/ Lease can be assigned UNLESS prohibited by agreement

The tenant who has the leasehold interest may assign OR sublet unless prohibited by the
lease

- Thus, a Government lessee (for example a developer) may assign the remainder of
his Government lease to a purchaser after the Government lease is issued or
deemed issued to him under section 14 of the Conveyancing and Property Ordinance
when he has complied with the Conditions of Sale in the agreement for the
Government lease
- Or he may grant a sub-lease for a term shorter than his own
- A tenant of a short-term lease granted by a Government lessee is often prohibited to
assign or sublet
…………………..…………………..…………………..………………….

14
B/ Dispose of reversion by assignment

The landlord who has a reversion can dispose of his reversion by a simple assignment
subject to the lease

- Thus, a Government lessee (for example the owner of an apartment) who has
granted a sub-lease, and therefore becomes a landlord himself, holds the
Government lease in reversion, and may assign his reversion subject to the sub-lease
o The transferee of the reversion may likewise dispose of the reversion by a
further assignment
…………………..…………………..…………………..………………….

C/ Formality: by deed

The assignment or sub-lease for a period exceeding three years must be by deed under CPO
s4

4. Legal estate to be disposed of etc. by deed

(1) A legal estate in land may be created, extinguished or disposed of only by deed.
(2) This section does not apply to —
(d) the grant, disposal or surrender of a lease taking effect in possession for a term
not exceeding 3 years (whether or not the lessee is given power to extend the
term) at the best rent which can be reasonably obtained without a premium

Exception: If the assignment is not by deed, it may still be valid as a contract for an
assignment as long as s 3 of CPO is satisfied
___________________________________________________________________________

Determining/terminating a lease
There are many ways in which a lease or tenancy can be terminated

A/ Effluxion of time

A fixed term lease comes to an end when the term expires

Fixed term: no notice required when expires. Can take back after expiry (except SDU).
Cannot terminate earlier unless there is break clause (or statutory right to do so)
 after tenancy expires, if tenant refuses to leave, landlord can sue for trespass
 if no renewal clause, no right to renew

A periodic tenancy does not come to an end on the expiry of each periodic as it would
renew itself automatically for another period until either the landlord or tenant gives notice
to terminate

15
 Periodic tenancy: no need to renew, renews automatically, can give full period of notice
to terminate (unless becomes regulated tenancy in SDU), right to give notice cannot be
taken away

A1/ Tenancies created BEFORE 9 July 2004

Prior to 9 July 2004, even when the fixed term lease ended on the expiry date, the tenant
could continue to stay until the lease was terminated in accordance with Part IV of the
Landlord and Tenant (Consolidation) Ordinance

- Under Part IV, the landlord had to give at least 3 months’ notice (but not more than
4 months) before the date of termination
- After the tenant was served with the notice, he could apply to the Lands Tribunal for
a new tenancy
o The Lands Tribunal would have to order the grant of a new tenancy unless
the landlord could successfully oppose to it under s 119E
 eg the landlord reasonably needed the premises for his own
residence, or intended to rebuild etc
o The duration, rent and terms of the new tenancy would be up to the parties
to agree, but in default of agreement, would be decided by the Lands
Tribunal

A2/ Tenancies created on OR after 9 July 2004

This has now been changed by the Landlord and Tenant (Consolidation)(Amendment)
Ordinance 2004 since 9 July 2004. Under the new law, the security of tenure provided under
the old law is removed, and the common law position is restored

- For tenancies created before 9 July 2004, there is a transitional period of one year
after the tenancy expires: the landlord can give the tenant a Transitional Termination
Notice not less than 12 months before the intended termination date. And the
tenant no longer has the right to have a new tenancy
- For tenancies created on or after 9 July 2004, the tenant will have to move out when
the tenancy expires, unless it is renewed
…………………..…………………..…………………..………………….

B/ Notice to quit

B1/ Fixed term lease

A fixed term lease may be terminated BY NOTICE if it contains a break clause (EXAMPLE:
clause 9 in sample agreement)

16
 - In the case of a fixed-term lease, the parties may agree to confer on either OR both
parties a right to give a notice to quit or terminate before the fixed term expires

- The right under the break clause can only be exercised by serving a notice which
complies with it
o It used to be thought that a notice which clearly and specifically purports to
determine a fixed-term lease on a date not authorised by the lease, even by
one day, would be invalid
o Now, the court would consider whether the notice is clear to a reasonable
recipient reading it. As a reasonable recipient must be taken to know the
terms of the lease, it would be artificial to assume that he does not know
what the correct date should be

B2/ Periodic tenancy

A periodic tenancy can be terminated by either party by notice as a matter of law. The
notice required at common law is a full period to expire on the last day of the period,
(except in the case of yearly tenancy, only half a year’s notice is required)

- A notice to terminate a periodic tenancy can be given to take effect either on the last
day of the term or the anniversary of its commencement date; in either case, the
tenancy would terminate on the last day of the term

In the case of a yearly tenancy, a half year’s notice (ie, 182 days) is needed. Notice should
expire at the end of a year of the tenancy. If there is less than half a year remaining, then
the notice will take effect at the end of the next year

Other periodic tenancies are terminated at common law by a full period’s notice

Illustration

Right to terminate can only be exercised by giving a full period of notice; if weekly tenancy,
starts on Monday, today is Friday
 if give notice to terminate weekly tenancy on Friday, when does the tenant have to
leave? next Sunday
 tenant will have to move out at the end of the NEXT Sunday, not this Sunday
 not next Friday either because notice you give today on Friday cannot take effect
at the end of this week, viz., Sunday; tenancy starts on Monday and ends at the
end of Sunday

only 2 days notice is not a full notice, nothing to terminate tenancy on Sunday, so renews
itself automatically for another week, notice on Friday until next Sunday, more than a
week, more than a period (a week; a full period), so will take effect the end of next Sunday

similarly with monthly tenancy, if starts on 1st Jan; if on 15th Jan give notice; won’t take
effect on 15th Feb, will take effect at end of Feb; at end of Jan no notice has taken effect,
so the tenancy renews itself for whole period of Feb, but at end of Feb notice takes effect

17
 for yearly tenancy, requirement is only 6 months
 if yearly tenancy starts on 1st Jan 2024; will end on 31st Dec 2024
 if give notice on 1st March, notice will take effect on 31 Dec 2024, because more
than 6 months, so enough to take effect on 31 Dec 2024 → will end on that day

 but if notice given on 1st August, by 31 Dec, less than 6 months, so not effective to
give notice; nothing on 31 Dec to stop yearly tenancy from renewing itself
automatically, so takes effect for another year; ends on 31 Dec 2025
 notice given on 1st August will only take effect on 31 Dec 2025
 so here in effect have to give more than a year notice in practice
…………………..…………………..…………………..………………….

C/ Surrender

This requires the landlord’s consent. It releases the tenant from any future liability but not
accrued liability

tenant doesn’t want tenancy anymore, says want to end it to landlord)

 but cannot do it unilaterally, require landlord’s consent
 if landlord says no, tenant still has to pay the rent for entire duration
 unless there’s break clause and tenant can exercise right to terminate

C1/ Formality

An express surrender must be by deed (CPO ss 4(1)) unless by operation of law (s 4(2)(c))

4. Legal estate to be disposed of etc. by deed

(1) A legal estate in land may be created, extinguished or disposed of only by deed.
(2) This section does not apply to —
(c) a surrender by operation of law, including a surrender which may, by law, be
effected without writing;

An equitable lease may be surrendered by writing (s 5)

5. Certain instruments to be in writing

(1) Subject to section 6 —

(a) no equitable interest in land can be created or disposed of except by writing
signed by the person creating or disposing of the same, or by his agent
thereunto lawfully authorized in writing, or by will, or by operation of law

C2/ Surrender by operation of law

A surrender arises by operation of law where the tenant, with the landlord’s concurrence or
acquiescence, does some act to signify his intention to give up possession of the land

18
 - For example, where the landlord accepts back possession of the property and agrees
that the tenant will be free of further liability
o In deciding whether or not there has been a surrender, the parties’ subjective
intentions are irrelevant. Rather, it is necessary to examine the parties’
actions objectively and consider whether the surrender should be implied
from those acts
 Acceptance will not be inferred merely from the landlord’s entering
the premises to secure it
 Neither is acceptance of arrears of rent sufficient
 Delivery of keys is a symbolic delivery of possession, and it is sufficient
to bring a tenancy to an end if the keys are handed over by the tenant
with the intention of bringing that tenancy to an end and accepted by
the landlord with the same intention

C3/ Grant of new tenancy constitutes surrender by operation of law

Where a tenant accepts the grant of a new tenancy, that results in a surrender of the
existing tenancy by operation of law; the existing tenancy comes to an end despite the
absence of a notice of termination

Wing Hang Bank Ltd v Fast King Ltd (2001) – Illustration

 Facts: By a legal charge dated 11 June 1998, the Property was mortgaged by the 1st
defendant to the plaintiff to secure certain banking facilities granted by the plaintiff
to it.
 The Legal Charge was subject to two tenancies. One of them was a two years
tenancy granted by the 1st defendant to the 6th defendant under a tenancy
agreement dated 25 February 1998, which commenced on 20 February 1998 and
expired on 19 February 2000. The Property was let for business purpose. It is thus
common ground that Part V of the Landlord and Tenant (Consolidation) Ordinance,
Cap. 7 ("the Ordinance") applies to the 1st Tenancy. Under section 122(1) of the
Ordinance, no tenancy shall cease without a written notice of termination being
served, unless the tenant gives up possession or surrenders his tenancy in exchange
for a new tenancy.
 No written notice of termination served.
 P claimed possession. The 6th defendant’s defence:
o As a result of the 1st defendant's failure to issue notice of termination, the
1st Tenancy did not cease upon the expiration of its term, but was continued
by operation of the Ordinance. The 6th defendant therefore remains in
possession under a tenancy, which is a statutory continuation of the 1st
Tenancy. Further, being a continuation of the 1st Tenancy, it is not a new
tenancy for which the plaintiff's prior written consent is required under
clause 7.01(x) of the Legal Charge.
 For the plaintiff, it is argued that the 6th defendant remains in possession after 19
February 2000 not under a continuation of the 1st Tenancy, but pursuant to a new
tenancy agreement.

19
  The new tenancy does not bind the plaintiff because no prior consent was given by
the plaintiff. The creation of the new tenancy, however, brought about a surrender
of the 1st Tenancy by the operation of law, and the 1st Tenancy is thereby
terminated.
 Held: Termination of the 1st Tenancy by surrender? It is common ground that the
creation of a new lease amounts to a surrender of an existing lease by operation of
law, if the new lease is to begin during the currency of the existing lease.
 It is also common ground that in order to operate as a surrender of an existing
tenancy, the new lease must be valid. Thus a surrender by the grant of a new lease
is subject to an implied condition that the surrender should be void if the new
lease should fail, in which case the old lease remains in force.
 In the present case, the granting of a new tenancy upon the expiration of the 1st
Tenancy results in a surrender of the 1st Tenancy through operation of law. Despite
that no notice of termination has been served by the 1st defendant, the surrender
operates to bring an end to the 1st Tenancy. The new tenancy, being granted
without the prior written consent of the plaintiff, cannot bind the 6th defendant.
There is accordingly no basis for setting aside the order for possession.

C4/ Deed of variation constitutes surrender by operation of law

A deed of variation which affects the lease either in the extend of the premises demised
(e.g., increasing the extent of the premises demised) OR the terms for which they are held
constitutes a surrender by operation of law and the grant of a new tenancy in accordance
with the variation

CF. But a letter which merely asks for an increase in the rent and deposit in accordance
with/pursuant to the agreement does not create a new tenancy

West Coast International (Parking) Ltd v Secretary for Justice (2001) – Illustration
 Facts: In the letter of 23 March 1999, the tenant was asked to consent to the
increased rent and the landlord demanded an increase in the tenant’s deposit (even
though the tenant was entitled to refuse that demand).
 Held: I do not think that those two features of the letter militate in any way against
according to the letter, and the acceptance of its terms by the tenant, its plain and
obvious meaning, namely, that the landlord and the tenant were simply agreeing
that the existing tenancy, which had by then become a quarterly tenancy, would
continue at the new rent with the increased deposit.
o Thus, the landlord was entitled, pursuant to the second sentence of para. 1 of
Sch. 2 to the tenancy agreement, to terminate the tenancy by giving to the
tenant three months’ notice in writing to that effect. Since that is what the
landlord did, the tenancy came to an end on 30 September 1999 when the
notice terminating the tenancy expired.
 The way the matter has been put is that, on a true and proper construction both of
the Tenancy Agreement and the letter of 23 March, the consideration for the
deposit was a grant of a new tenancy. In my view that argument is simply

20
 untenable in view of the terms of the letter of 23 March. The letter is quite clear
that it is a continuation of the existing tenancy: The only matter to which attention
can be drawn which is in any way remiss was the reference in that letter to the
demand for the increase in the amount of the deposit. However, the terms of the
letter make it clear that the writer of the letter was under the impression that the
terms and conditions of the Tenancy Agreement enabled the defendant to ask for
the increase in the deposit.
 In those circumstances, given the other wording of that letter, I see no possibility at
all of that letter constituting an agreement for a new tenancy as opposed to a
continuation of the existing tenancy under terms of increased rent and an increase in
the amount of the deposit.
 In any event, it was open to the parties to increase the amount of the deposit. There
is nothing, by itself, in an increase in the amount of a deposit under a tenancy
agreement which would dictate that there was a new tenancy agreement as
opposed to the continuation of an existing tenancy agreement.
 Citing the judgment of Russell LJ in the case of Jenkin R Lewis & Son Limited v.
Kerman (1970): “In the absence of an increase in the extent of the premises
demised or of the term for which they are to be held, both of which would change
the legal estate, I can see no reason why the lessor and assignee could not achieve
the changes they desired in the terms of the lease without the law implying its
surrender and a regrant for the remainder of the term of the lease.”
 Even taking all the factors into consideration, I do not consider that the plaintiff's
argument can prevail in this case. There was simply, at the highest, a variation in two
terms in the Tenancy Agreement and there was no necessity or requirement for the
law to imply that there should be a new grant.
…………………..…………………..…………………..………………….

D/ Forfeiture

Where there is a forfeiture clause enforceable on breach of certain covenants, the landlord
may forfeit on certain conditions and bring the lease to an end. This is a remedy for landlord
which will be discussed further  See Chapter on Remedies for Landlords and Tenants

- If the fixed-term lease is subject to termination on the occurrence of a specified

event, the lease terminates automatically when the event occurs. As will be seen,
where the determining event is breach of covenant, the landlord must serve a notice
under section 58 of CPO

Nature of forfeiture = a remedy that landlord MAY have

 MAY because if you have a legal lease, then only have a right to forfeit if given to you
expressly by a clause in tenancy agreement; if no forfeiture clause, no right to forfeit
a legal lease

 if have that, it’s a remedy

 a remedy when there’s a breach of term by tenant
 any clause there → breach by tenant + forfeiture clause
 then landlord can forfeit; if forfeit successfully, tenancy will end
 so another way to end tenancy, but a remedy for the landlord

21
usually this is discussed together with remedies available to landlord if breach by tenant

D1/ If lease is equitable, in order to be able to forfeit…

if lease is equitable not legal, then don’t need forfeiture clause
 when beach of term, landlord can terminate equitable lease
 has a right to forfeit equitable lease, don’t need forfeiture clause to do that

D2/ If lease is legal, in order to be able to forfeit…

Must have express (forfeiture clause) OR implied right of forfeiture (s 117(3) LT(C)O) +
must not have waived the breach

legal tenancy: can forfeit only if have express forfeiture clause if have a legal lease
 basically a clause which gives landlord right to re-enter when there’s a breach by
tenant

Cap. 7 Landlord and Tenant (Consolidation) Ordinance

Section 117(3) Continuation of tenancies and grant of new tenancies

(3) In the case of a tenancy entered into on or after the *commencement (27 December
2002) of this subsection –
(a) if the tenancy does not contain a covenant to pay the rent on the due date,
then there shall be implied in the tenancy —
(i) a covenant to pay the rent on the due date; and
(ii) a condition for forfeiture if that implied covenant is broken by virtue of
non-payment of the rent within 15 days of the due date

(c) if the tenancy does not contain a covenant substantially to the effect that the
tenant not use, or suffer or permit the use of, the premises or any part thereof for
an immoral or illegal purpose, then there shall be implied in the tenancy —
(i) a covenant that the tenant not use, or suffer or permit the use of, the
premises or any part thereof for an immoral or illegal purpose; and
(ii) a condition for forfeiture if that implied covenant is broken

(f) if the tenancy —

(i) does contain a covenant substantially to the effect that the tenant not
cause unnecessary annoyance, inconvenience or disturbance to the
landlord or to any other person; but
(ii) does not contain a condition for forfeiture if that covenant is broken,
then there shall be implied in the tenancy a condition for forfeiture if that
covenant is broken;

(g) if the tenancy does not contain a covenant substantially to the effect that the
tenant not make any structural alteration to, or suffer or permit any structural
22
 alteration to, the premises without the prior written consent of the landlord, then
there shall be implied in the tenancy —
(i) a covenant that the tenant not make any structural alteration to, or
suffer or permit any structural alteration to, the premises without the prior
written consent of the landlord; and
(ii) a condition for forfeiture if that implied covenant is broken;

s 117(3)
 landlord has implied right of forfeiture given by the statute
 for breach of one of the four implied terms
 implied terms by law by LT(C) Ordinance

an implied term that tenant will pay rent in manner stipulated in tenancy
 e.g., pay rent on 1st day of every month
 if no clause which says I will pay, only says rent will be paid on this month in this
amount
 still there will be implied term that tenant will pay rent according to what is required
under tenancy agreement

second, not to use premises for illegal/immoral purposes

 this is implied term
 but usually there’s an express term to this effect

third, implied term not to cause annoyance/nuisance

fourth, implied term not to carry out structural changes without landlord’s consent

if you breach one of these, s117 says landlord has implied right to forfeit, whether you have
express forfeiture clause or not
SECOND, you must not have waived the breach

waiver means you must not send a message to tenant knowing he has committed a breach,
saying that it’s okay
 if you sent a message saying it’s okay to commit a breach, you waived a breach, and
then you cannot forfeit

even if you don’t say it’s okay expressly, waiver can take the form of something you do
 can be inferred from your conduct
 what conduct can amount to waiver
 e.g., if you ask for the rent or remind tenant you’re late haven’t paid rent,
KNOWING he has breached, then treated as waiver
 because you want tenancy to continue, otherwise won’t be asking for rent

 accepting rent also considered to be a waiver

D3/ Also depends on nature of breach!!!

If breach relates to non-payment of rent, must make demand first

23
 if breach relates to non payment of rent / in breach of term to pay rent
 then for that kind of breach, law says have to make a demand first before you can
forfeit
 so asking for the rent, when the breach is non payment of rent, is not a waiver
 but if breach is something else, not non payment, then taken as waiver

non payment, once you have forfeited, go to court to start forfeiture proceeding; if tenant
doesn’t come for hearing, can get judgment in default; but if tenant justifies himself, court
may let him off this time, if not tenancy forfeited, tenant has to move out, otherwise
contempt of court

If breach relates to other breaches, must give notice to tenant stating the breach, and if
remediable ask to remedy it, and if wants compensation ask for it (s 58 CPO)

IF breach not non payment of rent, before forfeit have to serve notice on tenant, and notice
should state the breach first of all, second, if breach can be remedied, have to give tenant a
chance to remedy, if you don’t give a chance, notice not valid, forfeiture also not valid
 tenant’s right to have notice cannot be contracted out

what kind of breach is remediable

breach of positive covenant: covenant requires tenant to do sth/spend money/incur

expenses if you do what is required to do (e.g., you have to maintain property)
 for breach of positive covenant → it is usually remediable by delayed performance
(should have done it 6 weeks ago, fix it, not too late, e.g., fix the sink)
 unless it’s too late; if building has collapsed because of lack of maintenance
 if not too late, can always remedy the breach by belated performance

if breach is breach of negative covenant, can be further subdivided into 2 types

 one is continuing breach of negative covenant (NOT TO DO STH) e.g., keeping a
dog when you shouldn’t have
 for a continuing breach, can be remedied by ceasing the act complained of

exception: unless the act complained of, the continuing breach has caused damage which
cannot be removed by simply ceasing the act complained of
 example: Rugby School
 school own some property, found out let property out for prostitution, when principal
found out, said want tenant out, served notice based on equivalent of HK legislation,
but didn’t give a chance to allow tenant to remedy
 tenant didn’t want to give up
 issue = whether notice was valid; if not valid, cannot forfeit, have to serve another
notice which is valid, which will prolong the period up till repossession of property

 depends on whether breach was remediable

 counsel argued not remediable; although continuing breach, the breach has caused
a stigma on the property, bad reputation, so even if stop using house for prostitution
today, reputation still be there for a while until people forget about this
 cannot be done overnight so not remediable
 court accepts this argument because of stigma

24
  hence creation of stigma which cannot be removed simply by ceasing act complained
of → then not remediable

if it’s a once and for all breach of negative covenant

breach it once and that’s it
 e.g., not to assign/sublet
 if you assign and sublet, you commit a breach
 that breach is once and for all

you commit a breach, end of story

 if once and for all breach, cannot be undone
 so landlord, after serving notice, give reasonable time for tenant to get ready, can re
enter peacefully; if don’t want to leave have to start forfeiture proceeding

if remediable and allow tenant to remedy, then after remedied, everything goes back to
normal

Tenant can apply for equitable relief

if landlord doesn’t get forfeiture order, if court has sympathy, might grant equitable relief
 relief = no forfeiture, tenant won’t be forced out of apartment
 equitable because initially exercised by court of equity
 also means that subject to court’s discretion

up till now is how tenancy can be ended

58. Restrictions on and relief against forfeiture of leases and under-leases

(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease for a
breach of any covenant or condition in the lease shall not be enforceable, by action
or otherwise, unless and until the lessor serves on the lessee a notice —
(a) specifying the particular breach complained of; and
(b) if the breach is capable of remedy, requiring the lessee to remedy the
breach; and
(c) specifying the compensation, if any, which the lessor requires in respect of
the breach,

and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is
capable of remedy, and to make reasonable compensation in money, to the
satisfaction of the lessor, for the breach.

(2) Where a lessor is proceeding, by action or otherwise, to enforce such a right of re-
entry or forfeiture, the lessee may, in the lessor’s action, if any, or in any action
brought by himself, apply to the court for relief; and the court may grant or refuse
relief, as the court, having regard to the proceedings and conduct of the parties
under the foregoing provisions of this section, and to all the other circumstances,
thinks fit; and in case of relief may grant it on such terms, if any, as to costs,
expenses, damages, compensation, penalty, or otherwise, including the granting of
an injunction to restrain any like breach in the future, as the court, in the

25
 circumstances of each case, thinks fit.
…………………..…………………..…………………..………………….

E/ Disclaimer

Disclaimer has two meanings: (1) when the tenant does any act which challenges the
ownership of the landlord, it gives the landlord a right to forfeit the lease, and once
forfeited, the lease is ended

- A tenant is not supposed to deny his landlord’s title. If he does so by setting up a rival
claim to the ownership or by asserting a claim of ownership in himself, such conduct
operates as a disclaimer which automatically entitles the landlord to forfeit the lease
on the ground that the disclaimer is a breach of an implied covenant that the tenant
shall not do anything which may prejudice the landlord’s position
o However, the landlord is entitled to ignore the disclaimer and treat the lease
as still subsisting

(2) when the tenant is declared bankrupt, his assets (including his lease) vest in his trustee
in bankruptcy, and if the lease is an onerous burden, the trustees in bankruptcy is given
statutory power to disclaim it (ie to terminate it) in the interest of general creditors
Bankruptcy Ordinance (Cap 6) s 59

The liquidator of a bankrupt company has similar power Companies Ordinance (Cap 32) s
268

disclaimer by a trustee in bankruptcy

 once disclaim lease, lease is ended
 doesn’t require landlord’s consent
 can just tell landlord we don’t want lease anymore, end of story, lease ended
 power given to trustee in bankruptcy by bankruptcy law, not common law

 trustee in bankruptcy has this power because it wants to cut down as many liabilities
as possible, savings from not paying rent
…………………..…………………..…………………..………………….

F/ Merger

A lease comes to an end where the tenant acquires the landlord’s reversion (lease merges
with reversion) OR where a third party acquires both the landlord’s reversion and the
tenant’s lease
…………………..…………………..…………………..………………….

G/ Frustration

26
The obligations of a tenant or landlord may come to an end (so the lease ends) if external
events, through no fault of either party, have made it impossible for the obligations to be
performed, or the performance would be substantially different from what was agreed

neither party has to perform obligations anymore (landlord doesn’t have to provide
apartment; tenant doesn’t have to pay)

National Carriers Ltd v Panalpina (Northern) Ltd (1981) – HoL confirmed that a lease
may come to an end under the doctrine of frustration if the supervening event has
rendered the performance of the parties’ obligation under the lease fundamentally
different from what they originally contemplated
 Facts: A warehouse was demised to the defendants for a period of 10 years. By the
lease, the defendants covenanted, inter alia, not to use it otherwise than for the
purpose of a warehouse without the plaintiffs’ consent. The only vehicular access to
the warehouse was by a street which the local authority closed because of the
dangerous condition of a derelict Victorian warehouse opposite to that demised to
the defendants.
 In the events that subsequently happened, the period between the closure of the
street and its reopening after demolition of the Victorian warehouse was likely to be
about 20 months. During that period, the demised warehouse was rendered useless
for the defendants’ purposes.
 In an action by the plaintiffs for recovery of unpaid rent, the defendants claimed
that the lease had been frustrated by the events that had happened.
 Held: The doctrine of frustration was in principle applicable to leases; but that in the
present case, having regard in particular to the likely length of continuance of the
lease after the interruption of user in relation to the term originally granted, on the
facts the defendants had failed to raise a triable issue as to its applicability.
o No doubt, even with this limited interruption the appellant's business will
have been severely dislocated. It will have had to move goods from the
warehouse before the closure and to acquire alternative accommodation.
After reopening the reverse process must take place.
o But this does not approach the gravity of a frustrating event. Out of 10 years
it will have lost under two years of use: there will be nearly three years left
after the interruption has ceased.
o This is a case, similar to others, where the likely continuance of the term after
the interruption makes it impossible for the lessee to contend that the lease
has been brought to an end. The obligation to pay rent under the lease is
unconditional, with a sole exception for the case of fire, as to which the lease
provides for a suspension of the obligation. No provision is made for
suspension in any other case: the obligation remains. I am of opinion
therefore that the lessee has no defence to the action for rent, that leave to
defend should not be given and that the appeal must be dismissed

This rarely happens, but it can happen sometimes when e.g., there is a land slide as in Wong
Lai-ying v Chinachem Investments Co Ltd (1980)

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 Facts: The appellants each entered into a sale and purchase agreement with the
respondents under which the respondents agreed to sell to each of them a flat in
two blocks of building to be constructed on land owned by the respondents.
 During the construction of the building a major landslip occurred above the
respondents' land causing the destruction of all buildings works so far carried out on
the site. Because of the instability of the soil no building works were allowed but
extensive foundations works had to be carried out.
 It was some 3 years after the occurrence of the landslip that building works started
again. When the fiats were completed there had been a delay of nearly 2= years
under the terms of the agreement.
 The respondents refused to complete the sale to the appellants claiming that the
contracts with them were frustrated by reason of the occurrence of the landslip.
 Held: The landslip was a frustrating event. A frustrating event makes further
performance uncertain or for the character and duration of any further performance
(should any prove possible) to be radically different from that which the original
contract contemplated.
___________________________________________________________________________

Sub-divided units
In an attempt to regulate the renting of sub-divided units (and poor conditions of these
units e.g., no proper facilities), government introduced Part IVA of LTCO to provide some
limited security of tenure and rent control with effect from 22 January 2022

tenancy of sub divided units  gov recently brought back protected tenancy law for this type
of tenancy
 amended the ordinance with these new provisions
 these new provisions look like old protected tenancy law

provides security of tenure to tenant; second, rent control

 these two have to go hand by hand; even with rent control, control rent is for renewed
period, not 1st period; once you rent a place, gov can control the increase in rent
 if only control rent for renewed period, but no security of tenure, landlord can always
ask tenant to leave after 2 years; landlord can then let place to sb else and charge 20
percent more

however, degree of security given to tenant of sub divided unit is not as great as it used to
be
legislation also imposes obligations on landlord; ease problems faced by tenant e.g., poor
maintenance of property

this doesn’t apply to other types of tenancy

…………………..…………………..…………………..………………….

A/ When will Part IVA of LTCO apply?

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Domestic tenancy granted after 22 Jan 2022, of a sub-divided unit, for tenant’s dwelling,
and tenant is natural person, and not an excluded tenancy (eg employee quarters, owner’s
room, Government/HA/HS tenancy, social services organization tenancy) is a regulated
tenancy under Part IVA of LTCO

1. have to rent sub divided units out for DWELLING for this law to apply; if tenancy is for
storage, not dwelling, then SDU does not apply

2. tenant also has to be a natural person, not a company

3. also, the tenancy is not an excluded tenancy

 e.g., employees’ quarters

so these are exceptions to the SDU

 look similar to common law exceptions common law covered in seminar 1
 Street exception spelt out expressly in legislation

exceptions clear here so won’t be an issue/subject to dispute in court – does it

expressly by legislation
 if you rent a room for employee as employee quarter, then won’t be governed by the
law, employees will resourceful enough to protect themselves, don’t need protection

 owners’ room → meaning landlord lives in the room himself

o say converts floor into 10 rooms, lives in one; this is an owner’s room, then
THE WHOLE OF OWNER”S PROPERTY (1 + 9) won’t be governed by new
law
o because incentive to maintain the property; if owner lets others out, chances
he’s only doing this temporarily; if hit him with new law, then stuck with
tenants at least for maybe four years because 2 + 2

 if subdivided units made by gov, or housing authority etc. → tenants will be out of
new law; rationale = gov won’t exploit these low income people, so don’t need law to
protect these tenants

 social services ORG → again, don’t want to tie charity’s ends with 2 + 2, just like
charity exception in Street
…………………..…………………..…………………..………………….

B/ What does the new law say

Tenant of regulated tenancy is entitled to security of tenure (2+2 tenancy, landlord to offer
second term tenancy within two months but not less than a month before tenancy expires)
(ie in the penultimate month) and rent control (no increase in first term tenancy, follow
index for second term tenancy but not more than 10%)

B1/ Security of tenure

Security of tenure in the form of the initial first term two year tenancies plus second term
two year tenancies (ie, 2+2 tenancies). Landlords are required to offer second term

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tenancies within two months, but not less than one month, before the expiry of the first
term tenancies (ie, in the penultimate month)

if you grant fixed term tenancy on or after 22nd Jan 2022, then tenancy will be for 2 years;
and then at the end of 2 years period, have right to renew another 2 years period

have to give tenant notice in the penultimate month of first tenancy to tell him your tenancy is
going to expire, do u want to renew for another two years
 hence security of tenure = 2 + 2

cf. under old law, you can renew again and again and again until landlord establishes ground
to get property back (self-use/redevelopment)

Periodic tenancies granted before but existing on 22 January 2022 are covered by the new
law and turned into regulated tenancies, and commence as first term tenancies when the
new period commences on or after 22 January 2022

if you have periodic tenancy before law came into effect,

 if you end it before 22 Jan 2022, say on 31st Dec
 and you want to give the same person a tenancy, can give him a fixed term tenancy

if you give him a fixed term tenancy on 1st Jan, before new law came into effect
 then tenancy granted before 22 Jan won’t be governed by new law
 tenancy from 1st Jan 2022 this will expire on 31st Dec 2023
 when it expires on 31 Dec 2023, if want to renew, landlord can say no, because not
governed by new law, no security of tenure, just like any other tenancy, can let it to
sb else
 or let it to same person again, new tenancy, but granted after new law came into
effect
 so this new tenancy granted on 1st Jan 2024 would take effect as the first 2 year
tenancy; at the end, will have to give tenant a chance to renew for another 2 years, 2
plus 2

if periodic tenancy wasn’t terminated before 22nd Jan 2022 viz., not terminated on 31st Dec,
will renew itself automatically, allowed to grow beyond 22nd Jan 2022, so not terminated on
31st December, renews for another month, expires on 31st jan 2022
 without new law, will renew itself for another month
 after new law, when renews itself on 1st Feb 2022, renew itself as a 2 year tenancy

 at end of 2 year tenancy, tenant has right to renew for another 2 years, 2 + 2
 this is what 3nd para is saying

 when new period commences on 1st Feb, before supposed to be another period of
monthly tenancy, but now commences itself as first term 2 years tenancy

B2/ Rent control

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Once the initial rent for first term tenancies is agreed by the parties, it cannot be
increased during the first term tenancies

For the second term tenancies, any rent increase has to follow a government index, but in
any event the increase cannot be more than 10 per cent

no control on rent you can charge for 1st term

 as long as tenant agrees to pay
 then law says cannot increase rent in 1st term
 if agree to 6,000 will be the same for 2 years

if renews after 2 years, can increase only in accordance with index set by gov for 2nd term
 so gov will compile index
 obligation by landlord to give notice of tenancy to the rating evaluation department
 tell this department you have signed this tenancy of SDU
 have to do it for any other type of tenancy as well
 give details about tenancy to department e.g., rent, size of room, address
 with all this info, department can then compile index, see how rent has moved,
whether there’s an increase of rent in that area
 if so, by how much, if info says there’s been a 5 percent increase of rent in that area,
then can only increase by 5 percent for next 2 years when tenancy renews for
another 2 years
 so have to follow index
 if rent goes up by 20 percent, there’s a cap/ceiling of 10 percent
 even if everyone else charging more than 10 percent, landlord of SDU cannot do so

so for rent for 2nd period, either follow index, or if index higher than 10 percent then it’s 10
percent
…………………..…………………..…………………..………………….

C/ Other protections

C1/ If tenancy oral, tenant can ask landlord to issue written agreement

C2/ Not more than 2 months deposit

landlord can ask for deposits
 if this law not in effect, can ask for 6 months deposit
 but law says at most 2 months rental

C3/ Tenant can terminate earlier by not less than 30 days’ notice
tenant can terminate earlier by not less than 30 days’ notice; but landlord cannot

C4/ Obligations on landlord

Landlord has implied obligations to repair drains, pipes, electrical wiring, windows, fixtures
and fittings provided

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Landlord must stamp agreement and submit notice of tenancy to Rating and Valuation
Department

Landlord has implied right of forfeiture for breach of implied obligations above

law imposes obligations on landlord to maintain the unit

stamp agreement
 also have to stamp other type of tenancy agreement as well
 stamp is one way for gov to collect taxes
 formula to calculate how much stamp duty has to be paid if stamped

if you don’t stamp, agreement won't be admissible as evidence in court if there’s a dispute
later
 then cannot use agreement as evidence in court

in addition, have to send notice to department about tenancy, to help department set index
for rent control

C5/ Obligations on tenant

Tenant has implied obligations to pay rent, not use premises for illegal or immoral purpose,
not to cause annoyance, inconvenience or disturbance, not to make structural changes,
must not assign or sublet

law also imposes obligations on tenant

 consistent with what we have gone through before
 legislation wants to be consistent with these

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