SDU Tenancy Control at 3 Years: The 73% Compliance Gap and What Landlords Must Know

Three years ago today, the Landlord and Tenant (Consolidation) (Amendment) Ordinance came into force, bringing subdivided units under tenancy control. But honestly? We've seen way too many landlords fall into the same traps.

The most surprising number? Out of roughly 110,000 SDU units in Hong Kong, the Rating and Valuation Department has received only 29,354 AR2 forms. Quick math: over 70% of landlords simply haven't filed. This isn't minor—it's a criminal offense. If you're renting out SDUs, we recommend learning about our residential repossession services as a precaution.

1. Form AR2: The Document Many Landlords Don't Know Exists

It's called the "Regulated Tenancy Notice." By law, SDU landlords must submit it within 60 days of the tenancy starting. Miss this or file late? You've committed a criminal offense.

We've handled cases where landlords had no idea this was required. One landlord in Sham Shui Po ran SDUs for two years without ever hearing about AR2—until a tenant complained.

2. Utility Bills: Over Half of Landlords Are Breaking the Law

This is probably the most common violation. According to a 2025 survey by the Society for Community Organisation, 55.2% of SDU tenants are being charged non-standard electricity rates. The median is $1.6 per kWh, with some paying up to $2.2.

The law is clear: the total water and electricity charges you collect from tenants cannot exceed the amount on your actual utility bills. If you're multiplying meter readings by your own rate—that's illegal.

The Right Approach

Apportion utilities by floor area or usage ratio, based on actual bills. If your total electricity bill is $3,000 and your SDU takes up 25% of the floor, you can only charge $750. Thinking of making money here? Forget it—the risk is too high.

3. The "2+2" Tenancy Right: Are Landlords Really Powerless?

Many landlords misunderstand this system. The ordinance mandates a fixed 2-year first term for SDU tenancies—no rent increases allowed during this period. Tenants then have the right to renew for a second 2-year term.

But landlords aren't completely locked in. Second-term rent increases have a cap: either the RVD rental index change or 10%—whichever is lower. 2025 data shows 3.8% of landlords still illegally increased rent beyond 10%.

Here's a blind spot many miss: if a tenant is 15+ days behind on rent, you can still terminate the tenancy and apply for repossession. The "2+2" protects law-abiding tenants—not rent-dodgers.

4. Tenants Fear Retaliation, But Enforcement Is Tightening

Here's a sobering number: 75.2% of tenants who suspect landlord violations choose to stay silent. The top reason? "Fear of being evicted" (41.2%).

But things are changing. Six SDU regional service teams are now operating. The Rating and Valuation Department has stepped up inspections. Advocacy groups are pushing for proactive inspection mechanisms instead of relying on tenant complaints. Long-term, landlords banking on tenants staying quiet may find that path narrowing.

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Bottom line: the spirit of SDU tenancy control is straightforward—protect vulnerable tenants' basic rights while giving law-abiding landlords clear rules to follow. Non-compliance costs are rising, but compliance costs aren't high: file an AR2, charge utilities based on actual bills, understand renewal rules. None of this is complicated—you just need to know about it. If you need help with SDU tenancy disputes, check out our residential rent recovery services.