CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe LLP
6.8 Costs Payable by a Tenant at the Start of a Lease Generally, in addition to rent, a refundable secu - rity deposit, equal to rent plus a management fee of three to six months in most cases for commer - cial leases (or one to three months for residential leases), is required to be paid to the landlord at the start of a lease. If the tenant wishes to improve or fit out the property, the tenant may be required to pay a security deposit for the fitting- out or improvements, refundable after the com - pletion of the work. 6.9 Payment of Maintenance and Repair Unless otherwise agreed by the parties, the landlord is responsible for the maintenance and repair of the leased premises. In practice, small maintenance and repairs of common areas and shared equipment, machinery and facilities are generally conducted by the property manager engaged by the landlord, and covered by the management fees, which are payable to the property manager by either the landlord or the tenant, subject to the lease agreement. 6.10 Payment of Utilities and Telecommunications In practice, the tenant pays their own utilities and telecommunications fees incurred in respect of, or consumed at, the leased premises. Utili - ties and telecommunications fees incurred in respect of common areas, and public equip - ment, machinery and facilities are often shared and charged to the end user (ie, the tenant in most cases, or the landlord if otherwise agreed in the lease, or if the premises are vacant) in pro - portion to the floor area of the leased premises. 6.11 Payment of Property Taxes The landlord typically bears property tax and urban land use tax relating to rental property,
and stamp duty is equally borne by the landlord and the tenant. 6.12 Insurance Issues The landlord will usually take out and maintain, at their own cost, property all risks insurance for the leased premises, which covers physical loss of or damage to the insured property arising from any natural hazards or accident. Damages caused or expenses incurred by intentional acts or gross negligence, confiscation, requisition, destruction or damage by any action or order of any government or public authority, war, coup d’état, or strike are generally excluded. On the other hand, the tenant is usually requested by the landlord to take out and maintain through the lease term construction/installation works all risks insurance for the tenant’s fitting-out or improvement works, and public liability insur - ance for the tenant’s business operations in the leased premises. Business interruption insurance, an insurance ancillary to the property all risks insurance, gen - erally only covers losses incurred by business interruption resulting from property damage. 6.13 Restrictions on the Use of Real Estate In practice, the landlord commonly imposes vari - ous restrictions in the lease agreement on how a tenant shall use the leased property, including but not limited to restrictions on the permitted use, subleasing, assignment, and fitting-out of the leased premises. Applicable PRC laws also require that use of the leased premises shall be in accordance with the zoned usage, and the tenant shall not change the load-bearing struc - ture or demolish indoor facilities without the landlord’s approval.
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