3. Some tenancy documents must be registered with the Land Registry but some do not. Why?
The major purpose of registering documents at the Land Registry is to notify the public of all documents affecting lands in Hong Kong and to set up a priority system regarding documents affecting a particular property. Once a document is registered, the public is deemed to have notice of its existence and its content. The date of registration also affects the priority of a party’s rights in a particular property. A written tenancy agreement, being an instrument affecting land, is of course registrable at the Land Registry.
The laws that govern the registration of documents at the Land Registry are contained primarily in the Land Registration Ordinance ( of the Laws of Hong Kong). Strictly speaking, the Land Registration Ordinance does not contain any provision that compels the registration of documents. It only spells out the consequences of non-registration. Therefore, the question should be: why is it that some tenancy documents should be registered with the Land Registry?
Lease and Tenancy Agreement
Although a tenancy document is registrable with the Land Registry, Section 3(2) of the Land Registration Ordinance provides that the principles of notice and priority do not apply to "bona fide leases at rack rent for any term not exceeding 3 years". Therefore, a document that creates a tenancy for a term of more than 3 years (i.e. a Lease) should be registered, otherwise it is prone to be defeated by successors in title of the landlord (e.g. purchasers or new tenants) and will lose its priority against other registered documents that affect the same property. In such event, the existing tenant may become evicted.
In contrast, a document that creates a tenancy for a term of 3 years or less (i.e. a Tenancy Agreement) does not gain or lose anything by registration.
However, if a Tenancy Agreement contains an option to renew the existing tenancy, it should be registered even though the term of the tenancy does not exceed 3 years. An option to renew confers on the tenant a right to continue to rent the property after the expiry of the current term, i.e. to renew the existing tenancy. As this exercisable option to renew represents a legal interest in land and affects the principles of notice and competing priority with third parties, the relevant Tenancy Agreement should be registered.
To play safe, parties to a Tenancy Agreement should check with legal professionals to ascertain the necessity of registration.