Case Summary: The basic requirement of 'vacant possession' is to clear up, empty it, move out, and return the keys, otherwise the tenant might still be in arrears of rent (Chi Chiu Yueh v Choi Ka Wing)

Case Summary: The basic requirement of ‘vacant possession' is to clear up, empty it, move out, and return the keys, otherwise the tenant might still be in arrears of rent (Chi Chiu Yueh v Choi Ka Wing)

Chi Chiu Yueh v Choi Ka Wing
Case No.: LDPD 171/2022
Date of Judgment: 11 May 2022
Citation: [2022] HKLdT 20 
https://www.hklii.hk/tc/cases/hkldt/2022/20?hl=%5B2022%5D%20HKLdT%2020 (Chinese judgment only)

Facts

The Landlord (Chi Chiu Yueh) leased a domestic apartment to the Tenant (Choi Ka Wing) for two years (from 1 March 2021 to 28 February 2023) at $17,800 per month inclusive of built-in fixtures, furniture and electrical appliances; Landlord shall maintain and upkeep the main structural parts of the property (including main sewages, pipes and electrical wires).

Tenant stopped paying rent since February 2022, and so Landlord applied to the Lands Tribunal for terminating the tenancy, recovering the property, and claiming arrears of rent. Tenant alleged that Landlord did not fulfil her promise made in November 2021 that she would replace two malfunctioned air-conditioners and was in breach of the tenancy agreement; Tenant used the security deposit to cover the rent for February; Landlord did not proactively re-possess the property, and did not discuss with Tenant how the property would be re-possessed.

When the Lands Tribunal heard this case in April 2022, Tenant alleged that he had moved out of the property, but he had not yet returned the key to Landlord. Therefore, the Lands Tribunal ordered Tenant to return the vacant possession of the property to Landlord, and ordered that Tenant shall pay the arrears of rent since and after February (at $17,800 per month). Tenant requested the Lands Tribunal to review the orders.

Issue

As Landlord did not fulfil her promise to replace the air-conditioners, was Landlord in breach of the tenancy agreement? Could Tenant use the security deposit to cover the rent? Was Landlord responsible in re-possessing the property proactively?

Ruling and Reasons for Judgment

The Lands Tribunal referred to many precedent cases, adopted the following generally applicable legal principles, and dismissed Tenant’s application for review:

1. Air-conditioners was the ‘main structural parts’ or ‘main pipes’. In the tenancy agreement, Landlord was only to provide ‘built-in fixtures, furniture and electrical appliances’ for Tenant’s use, but it did not require Landlord to repair, replace, or provide new appliances. Generally, the legal principle is that a landlord is not responsible for repairing the property or providing suitable appliances.
2. Even if Landlord made the oral promise to repair, such a promise was made only after the tenancy agreement was signed, which was not part of the tenancy agreement. Tenant did not pay for the promise the ‘consideration’ required by law, therefore Landlord’s promise was not binding at law, Tenant could not allege Landlord for breaching the tenancy agreement.
3. Even if Landlord was in breach and caused inconvenience to Tenant, the tenancy agreement would not be frustrated, and Tenant still needs to pay rent.
4. Security deposit was for guaranteeing Tenant’s compliance with the clauses of the tenancy agreement. If Tenant was not in breach of any clauses of the tenancy agreement (including paying the rent on time), Landlord shall return the security after certain number of days only upon Landlord re-possessing the property and receiving all payment due from Tenant. Unless Landlord agrees, Tenant cannot unilaterally cover the rent with the security deposit. The obligation of Tenant to give vacant possession and the obligation of Landlord to return the security deposit was not the same and must not be confused. Tenant could not insist return of the security deposit by Landlord at the same time as Tenant giving back the keys to Landlord.
5. A tenancy agreement usually requires a tenant to give ‘vacant’ possession back to the landlord. Clearing up and moving out are not the same as giving up (and Tenant did not even return the keys). Tenant shall unconditionally and proactively giving and returning those; otherwise Tenant needs to compensate for the mesne profit in the interim until Tenant gave vacant possession. It was the responsibility of Tenant to give possession, not Landlord to take possession.

Takeaway

The above legal principles quoted by the Lands Tribunal are applicable to the tenancy generally in Hong Kong. Unless individual tenancy agreements or the common law otherwise provides for the contrary:

1. A landlord has no legal obligations to repair for the tenant, or to provide suitable appliances for tenant’s use.
2. What the landlord has agreed after signing the tenancy agreement is unlikely to be binding in law; an oral promise is not necessarily legally enforceable.
3. Even if the landlord might be in breach of the tenancy agreement, the tenant still has the responsibility to pay rent.
4. Security deposit cannot cover the rent. The responsibilities regarding rent, security deposit, repair, and ‘vacant possession’ etc. were different. There was no legal basis to say ‘only if you return my security deposit, I’ll give you back the keys’.
5. The basic requirement of ‘vacant possession’ to clear up, empty it, move out, and return the keys, otherwise the tenant might still be in arrears of rent.

Ideally speaking, every terms and conditions should have been spelt out in the tenancy agreement when the agreement was negotiated and before signing it. In reality, as a matter of law, it may be already too late when problems arise.