e) Interests affecting the tenancy
Unlike a transaction for the sale and purchase of land, it is indeed lesser common for a potential tenant to investigate the title of the landlord to the subject property prior to entering into a tenancy agreement. The interests and rights of the tenant can nonetheless be affected by other interests or encumbrances in relation to the same property or land. Examples are:
1. Instruments registrable under the Land Registration Ordinance (Cap. 128)
Instruments affecting land duly registered under the Land Registration Ordinance (Cap. 128), e.g. an existing lease for a term exceeding 3 years, takes priority according to their respective dates of registration and are generally binding on subsequent interests in land.
Even a registrable but unregistered instrument affecting land may take priority over the tenancy as a tenant is not a bona fide purchaser for value of the property under the meaning of section 3(2) of the Ordinance.
2. Interests of beneficial owner of the property
In some cases, the registered owner is in fact holding the property for the benefit of a beneficial owner by way of constructive trust or resulting trust. Sometimes it is not easy to ascertain the beneficial ownership of a property on paper. For example, at the time when the property was purchased, X and Y had a common intention or agreement that whilst the property was held in the sole name of X, both X and Y would have beneficial interest in the property and both of them had contributed to the purchase price, then both X and Y may be the beneficial owners of the subject property.
The beneficial owner may not agree to lease the property and may even obstruct the tenant from taking possession. The beneficial owner also has the right to receive the rent.
3. Interests of occupiers of the property
If it happens that there is a subsisting tenancy in respect of the same property, the existing tenant will have an interest in the property. The new tenant may not be able to enter or have possession of the property on the intended commencement date of the tenancy.
4. Orders or notices from the Building Authority or other government departments
These documents tend to show that the property or even the building as a whole is in an unsafe or dangerous state not fit for habitation or occupation.
To better protect its own interests, the potential tenant is advised to conduct a land search to ascertain what instruments or encumbrances are registered against the subject property. The potential tenant should also, as far as practicable, arrange an inspection of the property before entering into the tenancy agreement.
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