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What to know and do before signing a Preliminary Contract for renting a commercial office

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  1. #11

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    Quote Originally Posted by dragon_simon:
    Are you sure this is correct? I can see the Landlord can be a wealthy man/woman through this!
    Yes it's correct. With respect, since you don't live in HK right now it's abit unfair to be commenting and confusing the OP on this issue.

  2. #12

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    My 2 cents - all of the above sounds normal except not indicating who pays the Gov't fees etc. They should be stated - normally stated in the information you got from your agent. In fact, getting 12+12 for a commercial property is a great deal! We had to agree 3 years fixed on our last move.

    How extensive are your renovations? I think 3 weeks is too short. You should also ask about whether you can chose your reno company or if you have to use the contractors determined by the management company of the office because often (at least for fire services, water and electricals) you have to use their people (who are normally more expensive in my experience than others!).

    Other items to check (you probably already have) .... who provides the floor and ceiling; is the building 24 hour access; do you have to pay extra for air-conditioning (and check again if you have to pay extra at weekends).


  3. #13

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    Quote Originally Posted by dragon_simon:

    Have you got a qualified lawyer acting for your interests? I know its only a short lease but I'm sure it will be your best investment. The advice I have given here are really intended as food for thought, you can take note of all the useful comments in this forum to formulate the right question to ask the lawyer.
    Seriously?

    That's just NOT done here (except maybe if you rent an entire building!). In my experience most landlords rent 10's of properties, have standard contracts and refuse to edit one word of them for small tenants.
    carang likes this.

  4. #14

    My two cents worth on the questions you raised:

    Quote Originally Posted by chips:

    How much information should be on the preliminary agreement for example?
    We've been given a preliminary agreement by our agent but there doesn't seem to be enough information on there.
    There is no mention about who pays Govt rent and rates or management fees for example (which the landlord has verbally agreed to pay)

    This should be stated in the Prelim Agreement. If it is not, write it in the Prelim Agmt by hand.

    Landlord is asking for 3 months deposit with 1 month's rent in advance which seems a lot to us.

    For small commercial properties, my experience is that 2 months deposit with 1 month's rent in advance is quite normal. Unless there is a lot of built-ins and furniture, then perhaps the Landlord will wish to have more security deposit. But this does not appear to be the case, since you say you need to do a lot of renovations

    Landlord is willing to give 3 weeks rental free as we will have a lot of renovations to do.
    Landlord will not do any renovations

    Rent free period is entirely a matter for negotiation. However, if you are going to do a lot of renovations, I suggest a clause be inserted in the Prelim Agreement stating that you are not obliged to Reinstate the premises to its original condition. If you do not, at the end of the lease term, the Landlord could demand you remove your renovations so that the premises revert to its original state. The security deposit could be forfeited for this purpose.

    Landlord requests at least 18 months fixed rental period but we only want 12 months in case the business doesn't work out as well as hoped.

    Think carefully about this. If you are going to do a lot of renovations, you will have spent a good sum of money on it. The business could be a roaring success in which case the Landlord could raise the rent after 12 months, in the knowledge that you have spent money on renovating the premises and the feng shui has been good to your business.


    What are normal practices in Hong Kong?

    Any advice on this would be appreciated.

    Thanks
    Last edited by stanleyliving; 22-11-2012 at 08:40 AM.

  5. #15

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    Our first choice of apartment in HK - the landlord refused to carry out any renovations (even a broken toilet seat as "it would be cheap and easy for the tenant to do") AND they wanted 3 months' rent deposit and 1 month up front. We didn't take them up on it. This was Chinachem by the way, not some hard-up landlord.

    Edit: was also unfurnished. We asked what kind of damage would warrant taking over 100k as a deposit - no answer naturally!

    Last edited by Satay Sue; 22-11-2012 at 08:43 AM.

  6. #16
    Quote Originally Posted by MovingIn07:
    Seriously?

    That's just NOT done here (except maybe if you rent an entire building!). In my experience most landlords rent 10's of properties, have standard contracts and refuse to edit one word of them for small tenants.
    I appreciate your point and I'm aware its a short lease and a small business, however the OP has come on this forum to ask for 'good advice' and that he is new to it all, nothing we write here can trump that of a professional.

    The transaction is still under negotiation so cant think of a good reason why any Landlord would play hardball and not try to negotiate a deal as its not in his interest to see the deal fall through. Notwithstanding this, i think its in the OP's interest to see a lawyer to protect his interests in the deal so he is aware of everything that is in the LL 'standard contract' and where he stands should things go tits up!

  7. #17
    Quote Originally Posted by chips:
    Whoops! I meant if we drop out we pay 1.5 months in compensation, but if Landlord drops out, it states the Landlord pays more for some reason I don't know.
    Usually, if the tenant "drops out", meaning does not go through with the agreement, he forfeits his deposit - usually the sum paid upon signing the preliminary agreement. If the landlord "drops out" the usual agreements will state that the landlord will need to return the deposit the tenant paid, AND the landlord will need to pay the tenant a sum equivalent to the deposit paid by the tenant.

    Should there be anything in the preliminary agreement about air cons, wooden flooring, lighting fixtures etc...?
    If there is anything agreed between the parties and this is not set out in the Prelim Agmt, write in on the Agreement that will be signed by both parties. The Prelim Agmt is a contract, and do not believe you can rely on what the agent told you to bind the Landlord.

  8. #18
    Quote Originally Posted by MovingIn07:
    Yes it's correct. With respect, since you don't live in HK right now it's abit unfair to be commenting and confusing the OP on this issue.
    I dont think i need to be in hk to spot an obvious error in a forum!

    Sent from my GT-I9100 using GeoClicks Mobile

  9. #19

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    Quote Originally Posted by dragon_simon:
    I dont think i need to be in hk to spot an obvious error in a forum!

    Sent from my GT-I9100 using GeoClicks Mobile
    Except it wasn't an error....

  10. #20

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    Fantastic advice here so far!

    It's quite a daunting process for us as there's a lot of financial commitment upfront.

    The office space is not complete bare shell. But the washroom and pantry are in very poor condition and may need full renovation.
    The floor isn't that great either and may need retiling or carpeting.
    All this, if done, won't cost too much!
    It at least needs to be thoroughly cleaned out.

    Will have to view the premises again to see what renovations needs to be done.

    There are a lot of wall cabinets already.
    We did mention a need to do quite a bit of renovation.
    Perhaps that is why the LL wanted us to pay 3 months deposit to start with then.

    Thanks for the advice to take pictures.
    When we first viewed the premises it was only for about 5-10 minutes.
    We will check the premises again and take more pictures. During the 1st visit, we only took a few pictures to get general idea of size and rooms rather than specific things like windows or air cons.
    All the curtains were closed during the first viewing, so will check the windows during next viewing for scratches etc...
    Will also check for other defects.
    Will also ask current tenants (who haven't moved out yet) if they've had any problems with the premises or LL.

    Thanks also for the advice on stating in what the condition the premises need to be delivered. Especially when we may be doing quite a bit of renovation. Although seems unfair for the LL to deduct deposit for renovating or renewing the current state it's in.
    Will try get that into the contract.

    Am I right to say then that all the terms and conditions that need to be agreed on the Final Contract should be on the Preliminary Contract too?
    It concerns us that the Preliminary Contract we got is only on 1 page without all the details.


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