Home | List Your Premises | Property Enquiry | Member Area | About Us  
Hong Kong Office Finding


 

:: Glossary of Terms - Hong Kong Office
  • A
  • B
  • C
  • E
  • F
  • G
  • H
  • I
  • J
  • L
  • M
  • N
  • O
  • P
  • R
  • S
  • T

Agent
One who acts or who has power to act for another. A licensed real estate agent authorized to act under a listing or management agreement executed by a property owner (the Principal); this creates a fiduciary relationship under the law of agency.

Agency Commission
Most agents charge a fee of up to 50 per cent of one month’s rent as a fee from the tenant for a successful leasing transaction and 1% of the agreed purchase price for each sales transaction. In some cases these will be negotiable. Please note that these commissions are payable upon the signing of the formal agreements i.e. tenancy agreement or the formal sale and purchase agreement.

Appraisal
An estimate of quantity, quality or value. The process through which conclusions of property value are obtained; also refers to the report setting forth the estimate and conclusion of value.

Area Definitions
There are only limited regulations governing the quoted area of leased premises in Hong Kong and tenants should take care in confirming the net areas. The following plan and notes provide commonly used area basis:

- Gross Floor Area
Gross Floor Area shall include all areas contained within the external walls at each floor level and the whole thickness of the external walls.

In general, mechanical and electrical services rooms, refuse chambers and rooms, water tanks, carparking floors and all lifts and staircases passing through these floors shall be excluded from the Gross Floor Area calculation.

- Lettable Area
Lettable Area of whole floor shall include toilets and lift lobbies but exclude common areas such as lift shafts, stairs, plant rooms and smoke lobbies.

- Net Area
The net useable area and columns up to the external window face.

- Net Useable/Carpetable Area
The net useable or carpetable area within the premises.

The basis for measurement can vary greatly and we recommend that the net areas should be confirmed by tenants' contractors.

Air-Conditioning
Air-conditioning can be centrally installed and controllable in each room (known as "Central Air-Conditioning"), or provided by individual units. Individual units may be "window-type" (usually manually controlled) or "split-type" (usually remote controlled).

Architectural drawing
Includes all architectural contracts and drawings such as plot plans, floor plans, elevations, sections, details, schedules, etc., and any architectural drawing that forms a part of the contract documents. Exceptions include mechanical, electrical and structural drawings, as well as specialized data that are normally handled by specialists in those fields.

Asking Rental
Rental quoted by landlord, usually with rooms for negotiation.

Assignment
The transfer of leasehold interest in a property to a second party.

As-is Condition
The existing condition of real estate, prior to any improvements contemplated under a lease

Binder
A preliminary agreement evidencing a meeting of the minds and effective until the principal agreement can be executed.

BREAK CLAUSE
A ‘break clause’ within a lease term allows the tenant to give 2 or 3 months notice of termination after a certain period of time has elapsed (usually after one year or 15 months).

 

 

 

 

 

 

 

 

 

 

Cancellation clause
A provision in a lease that confers upon one or both of the parties to the lease the right to terminate the lease upon the occurrence of the condition or contingency set forth in the said clause.

Commencement Date
The date that the tenancy starts. Rent becomes payable after the rent free period. The tenant may move in before the commencement date if he has a rent-free licence period or later if he carries out his own renovation or decoration works.

Commission
The fee paid to a real estate agentas procuring cause and/or for his or her services rendered in a real estate transaction. May be paid by either party in a transaction; it is usually governed by a prior written agreement.

Common areas
Areas used by two or more tenants and/or third parties and not under the control of any one tenant.

Early Termination
If the tenant needs to leave the premises earlier than allowed for in the tenancy agreement. This can be done in one of two ways:
1. Through negotiation and mutual agreement to surrender by compensation.
2. Through introduction of replacement tenant to take up a new lease with terms and condition agreeable to the landlord.

Effective Rental
Average rental achieved for the lease period after deduction of rent free period.

Equity
The interest or value an owner has in real estate over and above the mortgage against it.

Escalation clause
A clause in a contract providing for increases or decreases in rent payments in accordance with fluctuations of certain costs or expenses of the landlord.

Escrow
A written agreement between two or more parties providing that certain instruments or property be placed with a third party to be delivered to a designated person upon the fulfillment or performance of some act or condition.

Estate Agents Authority (EAA)
The body set up to regulate the Estate Agency industry in accordance with the Estate Agents Ordinance. The body acts as an educator and regulator.

Executive suite / Business Centre
Executive suites are shared offices with services provided by a management firm.

Expiry
The date that the tenancy ends.

Face Rental
Nominal rental achieved after negotiation.

Financial Strength
Financial strength or "credit" is VERY important to landlords. Tenants are required to furnish their financials for review (Balance Sheet and Profit & Loss statements). Many businesses are setup as limited liability corporations which can easily run out of money and declare bankruptcy. A personal guarantee from a financially dependable principal or a substantial deposit is often required if the corporate financial strength doesn't satisfy the owner's requirements. Landlord's are looking to lease to profitable companies with a track record of success and stability. The most financially viable companies have the greatest negotiating leverage with landlords.

 

Governement Rates
A property tax levied quarterly by the Hong Kong SAR Government which is usually equivalent to approximately 5 per cent of the annual rentable.

Graduated lease
A lease that provides for specific increases or decreases in rent at definite times during the term of the lease.

Grantee
A person to whom an interest in land is conveyed by deed, grant or other written instrument.

Grantor
A person who transfers his or her interest in land to another by a written instrument.

Gross Floor Area
Gross Floor Area shall include all areas contained within the external walls at each floor level and the whole thickness of the external walls.

In general, mechanical and electrical services rooms, refuse chambers and rooms, water tanks, carparking floors and all lifts and staircases passing through these floors shall be excluded from the Gross Floor Area calculation.

Hand-over
This is the procedure of handing the property from the landlord to the tenant. At this stage, your estate agent will assist you to check the internal and external condition of the property, check the inventory, take details of meter readings, etc. A detailed hand-over report will be prepared and a copy given to both the landlord and the tenant. At the end of the tenancy, a similar procedure is carried out, known as a "hand-back".

Holding Deposit
Usually equivalent to one month's rent and generally paid subject to contract (to the landlord's solicitor) when an offer is made on a property and prior to receiving a draft Tenancy Agreement. This deposit becomes the first month's rent when the Tenancy Agreement is signed. Sometimes, the amount of holding deposit may be as much as three months' rent. This deposit is usually fully refundable in the event that the Tenancy Agreement is not signed by both parties. Sometimes, the offer letter may be signed as a binding contract.

Interior partitions
All types of interior nonload-bearing partitions that enclose or subdivide tenant space. May be of steel, wood, glass, masonry or combinations of these materials. Such partitions may be either movable or non-movable, prefabricated or built on the job.

Inclusive Rental
This denotes that the Management Fees and Government Rates are payable by the landlord. Unless otherwise negotiated or specified, an Exclusive Rental is the usual arrangement in Hong Kong.

Joint tenants
Two or more landowners who have been specifically named in one conveyance as joint tenants. Upon the death of a joint tenant, the surviving joint tenant or tenants receive the deceased tenant's interest by the right of survivorship, which is the important element of joint tenancy.

Landlord
The landlord may be an individual who owns one unit in a strata-titled block or alternatively a major developer or investor who owns the entire development.

Landlord's Provisions
Items provided by the landlord free-of-charge such as acoustic ceiling tiles, florescent light boxes, A/C fan coil units, carpet etc.

Legal Fees
Common practice dictates that a landlord will instruct and pay his solicitor for drafting a lease and sale contract whilst a tenant or purchaser will pay his own solicitor.

Lettable Area
Lettable Area of whole floor shall include toilets and lift lobbies but exclude common areas such as lift shafts, stairs, plant rooms and smoke lobbies.

License Period
A period of right to occuping the property. Rent becomes payable after the License or/and rent free period. The tenant may move in before the commencement date if he has a rent-free licence period or later if he carries out his own renovation or decoration works. License Period doesn't need to court in stamp duty in Hong Kong, therefore some landlord will provide License period instead of Rent-free period due to confidenial of rental.

Management Fee
A monthly charge payable to the landlord or management company for the upkeep and security of the building and its common areas.

Market value
The highest price that a buyer ready, willing and able but not compelled to buy, would pay, and the lowest a seller ready, willing and able but not compelled to sell, would accept.

Move-in Date
The sooner you can move in, the better. Vacant space is lost income for the landlord. Everyday a space sits vacant is cash down the drain. If a quick move is possible, it is easier for your agentto negotiate free rent and other concessions for you. If you try to negotiate for an occupancy date too many months in the future you will lose substantial negotiation leverage. A landlord asked to "hold" a space off the market waiting for your occupancy would lose months of rent and much of the desire to bargain with you. Timing of lease negotiations is critical.

Net Area
The net useable area and columns up to the external window face.

Net Useable/Carpetable Area
The net useable or carpetable area within the premises.The basis for measurement can vary greatly and we recommend that the net areas should be confirmed by tenants' contractors.

Offer Letter
Once a property has been found and negotiations begun between the tenant and the landlord, the estate agent will prepare an offer letter. The letter should be signed by both parties, is subject to contract and details all the main terms and conditions of the tenancy including rent, term, commencement date and any decoration or renovation works necessary. Sometimes the parties may wish to sign the offer letter as binding contract.

Offer to lease
An agreement that binds the lessor to continuing negotiations in good faith once a qualified tenant has been found, until all negotiating points have been covered. In effect, it takes the space off the market during the negotiating period.

Option
A term in a lease for the rights either tenant or landlord may have with respect to one another, usually with stipulations regarding timing of those rights.

Partition wall
A wall constructed to create work areas such as offices or conference rooms. Depending on security needs, a partition wall may not be constructed to the roof or floor decking, but may terminate at lower point such as a suspended ceiling.

Premises
In commercial real estate, the description of the leasehold and the specific square footage for which the parties enter into a lease.

Principal
(1) A sum lent or employed as a fund or investment, as distinguished from its income or profits;
(2) the original amount (as of a loan) of the total due and payable at a certain date;
(3) a party to a transaction, as distinguished from an agent.

Rate
Price is often focused on as the way you determine if you are getting a "good deal" but the overall occupancy cost is the more important. The "effective rental rate" is the number that you should use when comparing lease proposals. Your effective rate is the figure you get after factoring in free rent and other cash concessions. Example: 1 month free and then 23 paid months at $18 per SF = $18 X (23/24) = $17.25 Effective Rate.

Real estate agent
A person licensed to act as an agent for another person or business to negotiate a lease or purchase of a leasehold or property, respectively, for a fee.

Renewal option
Lease language that provides the means for tenant to give landlord notice of its intent to renew (extend) the lease.

Rent
This is the agreed monthly amount written within the tenancy agreement which remains the same for the term of the lease and which usually excludes the standard management fee for the building and government rates.

Rent commencement date
The date upon which the rent and usually the term of the lease begins. May be different from the lease commencement date when certain obligations must be fulfilled such as the construction of tenant improvements.

Rent Free
Rent Free is a very important part of the occupancy cost that can lower the effective lease rate for the tenant but still leave a "higher" lease rate for the landlord when they go to sell the building. Free rent also allows tenants to use the cash they would normally spend on rent to pay for movers, wiring and furniture. Free rent is typically given on the front end of the lease and is in addition to the agreed lease term. Example: 3 year lease with 2 free months = 38 months of occupancy.

Replacement cost
The current cost of replacing the subject property with property having exactly the same utility and amenities.

Rules and Regulations
Building standards that are binding on the tenants are usually set forth in a part of the lease covering such things as use of common areas, door lettering, signs, noise, odors, moving or installation of equipment, special locks, etc.

 

Sale and Purchase Agreement
This is the legal agreement drawn up between the vendor and the purchaser of a property and is signed in two stages:

1. Provisional Agreement for Sale and Purchase
Once the vendor and the purchaser have agreed on all of the terms, the Provisional Agreement is signed. This identifies both parties and the property, states the sale price and the amounts to be paid at various stages, and stipulates the commission to be paid by both parties to the estate agent. Upon signing the Agreement, the purchaser must pay an initial deposit (usually equivalent to 3% of the purchase price) to the vendor. Once this Agreement is signed, neither party can back out of the sale and purchase except by forfeiting the amount of the initial deposit and agency fees, plus the total amount of the stamp duty due.

2. Formal Agreement for Sale and Purchase
A detailed agreement stipulating all of the terms and conditions of the sale and purchase. This is always drawn up and handled by lawyers as part of the conveyancing procedure.

Security Deposit
On the signing of a tenancy agreement, the tenant pays to the landlord a sum of money as security against any failure to conform with the terms of the lease. This is usually two months’ rent plus two months’ management fees, but in the case of personal leases it can be three months’ rent plus three months’ management fees.

Sub-let
A lease executed by the lessee of an estate to a third person that conveys the same estate for a shorter term, or a portion of the estate for the same or a shorter term, is a sublease.

Sole Agent
A contract under which the owner appoints a real estate agent as the one exclusive agent for a designated period of time to sell/rent the property on the owner's stated terms, and under which the owner agrees to pay the agenta commission.

Stamp Duty
A duty payable to the government upon the signing of a lease. The amount is 0.5 per cent of the annual rent and is usually divided equally between both landlord and tenant.

 

Tenant
In the case of expatriate companies taking a lease, the company is usually designated as the tenant whilst the employee is the occupant. On accessions landlords may grant a personal lease which allows an individual, as opposed to a corporation, to sign the tenancy agreement. The tenant is obliged to comply with all of his obligations under the lease, including the payment of rent and other charges.

Tenant representation
Arrangement whereby a prospective tenant engages a real estate agent as its exclusive agent in negotiating a lease for commercial space. Also know as a "buyer's broker."

Term
The length of your lease determines how aggressive a deal your agentcan negotiate for you. Short term leases of 1-3 years expire so fast that another vacancy and lost income is just around the corner for the owner-- not very attractive. Long term leases of 4-10 years equals low vacancy and high profits for the landlord. The costs incurred by the landlord with each new lease signed (legal fees, tenant finish-out and brokerage fees) must also be amortized over the term of the lease. Landlords are willing to invest more in your tenant improvements if they can justify the up front cost with a long term rental income stream. Sometimes landlords are prepared to grant a ‘break clause’ whereby, under certain carefully defined circumstances, a tenant may give early notice of termination.

Replacement Tenant
Early Termination may be achieved through introduction of a replacement tenant to take over the lease. This can be done in one of two ways:
1. The new or replacement tenant takes over the property until the expiry of the existing lease.
2. The new or replacement tenant has a lease granted by the landlord. In either case, the outgoing tenant will need the permission and co-operation of the landlord and should expect to pay the landlord's share of the agency fee, legal costs and stamp duty payable.



             
 

The Site
Home
Glossary
Privacy Policy
Disclaimer

Company
About us
Contact us
Services
Careers
Office Space
Office Finding
Listing your Premises
Property Enquiry
Building Search
Rental Reports
Transaction Report
Members
Login
Sign-up
Clipboard

Other Prime Property Sites
Primeoffice.com.hk
hongkongofficebuilding.com
officesasia.com
primehome.com.hk
primehomedb.com.hk
Quick Contact
Tel: (852) 2854 2856
Fax: (852) 2125 8722

     
  Copyright by Prime Property Consultants Ltd. (EA License No:C-031341)