Macau renting law legal opinion (2013)

Macau, ____, 2013.

To: ____ (________, SOLICITORS)

Re: LEGAL OPINION – Building on _______, Macau

Dear Sirs

I am a lawyer qualified to advise in Macau Special Administrative Region (“Macau”) and I was requested to provide a legal opinion (“Legal Opinion”) on the laws of Macau in force and applicable in the matter of Macau Renting Law procedures and its legal regime.

For the said purpose, I have examined the laws, rules and regulations that I deem necessary for this Legal Opinion hereunder.

This Legal Opinion is limited to and is given on the basis of the current laws and practice in Macau and is to be elaborated in accordance with and governed by the laws of Macau. ◊ In order to provide this opinion, I have examined the following documents: - Deed Registry Certificate of _____, Macau (document 1); - E-mails sent to me by ____, SOLICITORS and their attached documents, including e-mails sent from and by Mr. ______. ◊ Page 1 of 12

As relevant facts to take in consideration for this opinion, I point out the following ones: -

Half of _______, Macau was owned by the deceased ______;

-

Mr. ___ is the Executor of Estate for the late _______;

-

The other half is owned by _____ (1/8), ____ (1/8), ___ (1/12), ____ (1/12) and _____ (1/12);

-

Miss ____ is the representative of the above referred five co-owners of half of the building;

-

The ground floor of the said building is rented for commercial purposes and its tenant has a shop on the premises;

-

Second floor has three tenants: one couple and two single persons;

-

Third floor has one tenant, who has more than one subtenant; â—Š

The opinions in this legal opinion are subject to the following assumptions: - The examined documents are legal and all factual statements, information, representations contained in them are accurate, complete and upto-date. ◊ Based upon the foregoing and having regard for legal considerations which I deem relevant, including, without limitation, the Macau Civil Code and Macau General Regulation of Urban Construction, I am of the opinion that: 1st Question – Whether according to new legislation that has came into force in 2009 in Macau, a landlord can give notice to quit to a tenant or Page 2 of 12

subtenant, with no compensation required to be paid if he/she has resided in a property for more than 2 years?

1.1 Under Macau Law, the denouncing of a renting contract is regulated

by Macau Civil Code (enacted on 1999, not on 2009), mainly in its articles 1013, paragraph 2, 1022, paragraph 1, letter a), 1038 and 1039.

1.2 According to article 1038, landlord is allowed to denounce the renting contract whenever it has lasted for more than two years, which I deem is the case of the consultant.

1.3 Such denouncing must be communicated to the tenants by written, according to articles 1039, paragraph 1 and 1014, paragraphs 1 and 2.

1.4 Moreover, whenever the contract to be denounced has already lasted for more than six years – which I deem to be the case again -, such written notice of denouncing must be communicated to the tenant within a previous notice of at least 180 days.

1.5 The said previous notice of at least 180 days reports to the date when the contract – if no communication was sent – would renew itself.

1.6 For instance, if one renting contract is celebrated on 26 September it will renew itself each 26 September on, unless a written denouncing communication is served to the tenant maximum and no later than the previous day 26 of March, that is to say, at least 180 days before its renewal would happen by simple effect of law.

1.7 By means of the denouncing, the contract will be terminated and over on the very day it would be renewed if there had been no denouncing communication.

1.8 The denouncing of a renting contract under the above conditions Page 3 of 12

grants to the tenant (and/or subtenant) no right to any sort of compensation or to any payment whatsoever.

2nd Question - If the Tenant is reluctant to leave after a 6-month notice period, the landlord may ask the court to evict the tenant?

2.1 After communicating the denouncing by written within a previous notice of at least 180 days, if the tenant (and/or subtenant) does not leave by his own will the house on the due date, the only way to provoke or obtain his coercive eviction is through a judicial proceeding asking the Court to declare that the tenant must leave.

2.2 In case the tenant does not even comply with the judicial decision, this decision shall have to be enforced, even in a coercive way and with the use of public force.

2.3 Moreover, according to article 1027, paragraphs 1 and 2, for each day and as long as the tenant persists to remains in the premises and does not return it to the landlord/owner after the termination of the contract, he shall have to pay, at least, the double as much as was the amount of the rent previously to the termination; for instance, if the ex-tenant, after termination, lingers in the house for two months, he will be obliged to pay an amount equivalent to four month rents.

2.4 Even furthermore, according to article 1027, paragraph 3, of Macau Civil Code, landlord/owner is entitled to ask the ex-tenant for compensation regarding any other damages caused by the retention of the premises, namely if such retention has prevented the landlord/owner from renting the place to another tenant for a higher rent.

Page 4 of 12

3rd Question - If the Tenant is reluctant to leave after the 6-month notice period, Landlord is allowed to increase the rent, even to a level not affordable by the Tenant?

3.1 Wishing to terminate the contract through denouncing, what the landlord must do is to send, within the said 180 days previous notice, a denouncing communication and, according to law, the contract will be terminated and over on the very day it would be renewed if there had been no denouncing communication.

3.2 After such termination, wishing to enforce the actual eviction of the place, what the landlord can and must do is to enforce it through the Court.

3.3 Moreover, such judicial request for the eviction enforcement must be presented by landlord as soon as possible and never after one year; otherwise, according to articles 1037 and 1022, paragraph 1, letter a) and paragraph 2, the contract will be expressly deemed by law – despite its actual initial termination – as a renewed contract and, in this case, the due rent is exactly the same as before.

3.4 What the landlord/owner can do is, after the termination of the contract, propose to his ex-tenant the option to celebrate a new contract for a higher rent; if he accepts, a new contract is celebrated with a larger monthly rent; otherwise, if the ex-tenant does not accept such proposed increase, contract will obviously remain terminated.

3.5 As so, in sum, try to obtain, through the increasing of rent of a terminated contract, the enforcement of its eviction makes no sense and, furthermore, would be useless for the purposes pursued.

Page 5 of 12

4th Question - If a surveyor from Macau Public Works Department considers that some repair works are necessary to ensure structural safety, the owner will be obliged to carry out necessary repairs?

4.1 According to Macau Law (articles 988 and 989 of Macau Civil Code and articles 7, paragraph 2, and 54 of Macau General Regulation of Urban Construction, approved by Decree-Law 79/85/M enacted on 21 August 1985), in case Macau Public Works Department (M.P.W.D.) concludes that a building needs any ordinary conservation works in order to assure its proper habitability, any extraordinary conservation work or any betterment work, in order to assure public safety or public health, the said Department is legally obliged to order the owner of the building to perform or to promote such works within a certain deadline.

4.2 The owner can carry out himself the works or ask a third party to do them, at his expense.

4.3 If the owner does not act as above, M.P.W.D. will perform itself such works and, afterwards, shall obtain from the owner the incurred expenses, even coercively if needed, and shall also fine him.

4.4 In both the cases that any extraordinary conservation work or any betterment work is done - even if those works have been ordered to carry out by administrative bodies, v.g., M.P.W.D. -, landlord is allowed to increase the rent according to article 1000, paragraph 1.

4.5 On such two cases, unless tenant is willing to accept an higher increasing, the landlord is legally allowed to increase the rent until a monthly maximum of 1/12 of 9,75% of the total cost of those works,; for instance, on a 1 million MOP total cost works, monthly increase cannot be higher than Page 6 of 12

MOP$8.125,00 (which is 1/12 of 9,75% of 1 million MOP).

5th Question – In case any repair works are mandatory, if the expected reasonable income from the property is too small when compared with the repair costs, shall the owners be allowed to demolish the related structure or even the building altogether?

5.1 As above said, any mandatory works that are done will only allow rent increasing by landlord on the condition explained under 4.4 and 4.5 above.

5.2 As so, demolition is not legally an extra option that landlord/owner can at his own criteria choose.

5.3 Such technical decision to demolition is one that only M.P.W.D. has the power and the duty to take, according to article 54, paragraph 1 of Macau General Regulation of Urban Construction.

6th Question - Can Mr. _____, having authority to handle only ½ of the interest of the property, proceed with hiring a surveyor and carry out necessary repair, without the consent of the person(s) representing the other 50% interest and, if so, can half of the money spent be recovered by him?

6.1 According to article 977, letter b), of Macau Civil Code, landlord is obliged to assure to the tenant the enjoyment of the rented house.

6.2 Also according to 4.1 and 4.3 above, M.P.W.D. must order the owner of the building to make certain works within a certain deadline.

6.3 As so, it is not only a right or power of Mr. ___ but also a legal obligation and a legal duty to act as described in the question and, thus, to perform such ordered works on the whole building/affected areas, and not only on his Page 7 of 12

respective half.

6.4 By doing so – doing/paying himself the said works – he will be benefiting and acting on behalf of the owners of the other 50% and, according to the rules of unjust enrichment (articles 467 to 476 of Macau Civil Code), Mr. ____, as Executor of Estate for the late ____, is entitled to be reimbursed of half of his incurred expenses by the other owners.

7th Question - If the building is to be demolished due to structural safety will the owners be obliged to pay compensation to the tenants and, if so, what will be the amount prescribed by the relevant legislations?

7.1 If demolition is ordered by M.P.W.D., it is implied that the repairing works have not been ordered by such Department under its legal duties and public tasks or that - even if ordered but not executed by the owner/landlord the same Department did not perform them itself replacing the lacking owner/landlord, as expressed on 4.3 above.

7.2 On the other hand, landlord is obliged to assure to the tenant the enjoyment of the rented house (article 977, letter b, of Macau Civil Code) and to perform each five years, if needed, conservation, repairing and betterment works (articles 7, paragraph 1 of Macau General Regulation of Urban Construction).

7.3 Finally, according to articles 983, letter d), and 1026 of Macau Civil Code, tenants must not make a reckless and unwise use of the premises and they will be liable for the loss or deteriorations of the rented premises, unless such loss or deteriorations do not arise from their behavior.

7.4 Anyway, on a case or the other, the legal effect of demolition is that Page 8 of 12

the renting contract will be terminated by forfeiture, according to article 1022, paragraph1, letter e) of Macau Civil Code.

7.5 Considering such loss of the building, in order to be able to answer if and how much would be any hypothetical compensation due to the tenants, I would need to consider case by case each one of the renting relationships regarding all three floors of the building.

7.6 Namely, I would need to have full information related to the value of the rents, the date of commencement of each contract, when and how many renovations have already taken place (even though in a tacit way), if any of the tenants have asked for repairing works or have communicated to the owners any structural or unsafety issues regarding their premises (ex vi article 983, letter i) of Macau Civil Code), if any of the tenants has incurred in any reckless behavior fit to cause danger or serious damage to the premises or if any repair works have ever been carried out in the past by landlord/owners or have been ordered by M.P.W.D. 7.7 As so, I understand that in case of demolition due to structural unsafety, the calculation of any due compensation will have to be considered in a separate legal opinion based upon, at least, all relevant data referred above.

CONCLUSIONS: 1st - Under Macau Civil Code enacted on 1999 landlord is allowed to denounce the renting contract whenever it has lasted for more than two years and no compensation is due to the tenant.

2nd - The only way to provoke or obtain the coercive eviction of a tenant is through a judicial proceeding and in case the tenant does not even comply Page 9 of 12

with the judicial decision, this Court ruling shall have to be enforced, even in a coercive way and with the use of public force; moreover, as long as the evicted tenant does not return the premises to the landlord/owner, he shall have to pay, at least, the double as much as was the amount of the rent previously to the termination and, furthermore, landlord/owner is entitled to ask compensation for any other damages, namely if the retention of the premises has prevented the landlord/owner from renting the place to another tenant for a higher rent.

3rd - Wishing to terminate the contract through denouncing, landlord must send, within an at least 180 days previous notice, a denouncing communication and, according to law, the contract will be terminated and over; needing to ask for the enforcement of the actual eviction of the place, landlord must do it through the Court as soon as possible and never after one year.

Landlord/owner can, after the termination of the contract, propose to his ex-tenant the option to celebrate a new contract for a higher rent; if he accepts, a new contract is celebrated with a larger monthly rent; otherwise, if the extenant doesn’t accept such proposed increase, contract will remain terminated.

Try to enforce such an eviction through a later rent increase is useless and shall not have the intended effect of obtaining an immediate termination of the contract.

4th – In case Macau Public Works Department concludes that a building needs any ordinary conservation works in order to assure its proper habitability, any extraordinary conservation work or any betterment work, in order to assure public safety or public health, the said Department is legally obliged to order the owner of the building to perform or to promote such works within a certain Page 10 of 12

deadline.

After those works are done, landlord is legally allowed to increase the rent until a monthly legal maximum.

5th - Demolition is not legally an option that landlord/owner can at his own criteria choose, being such technical decision one that only Macau Public Works Department has the power and the duty to take.

6th – It is not only a right or power of Mr. ___ but also a legal obligation and a legal duty to perform or carry out all necessary works on the whole building/affected areas, and not only on the respective half he acts as Executor of Estate and, by doing so, he will be benefiting and acting on behalf of the owners of the other 50% and, as so, he is entitled to ask for reimbursement of half of his incurred expenses.

7th – In case of demolition due to structural safety, in order to check if and how much would be any hypothetical compensation due to the tenants, it will be needed, in a separate legal opinion, to consider case by case each one of the renting relationships regarding all three floors of the building, namely to have full information regarding the value of the rents, the date of commencement of each contract, when and how many renovations have already taken place (even though in a tacit way), if any of the tenants have asked for repairing works or have communicated to the owners any structural or unsafety issues regarding their premises, if any of the tenants has incurred in any reckless behavior fit to cause danger or serious damage to the premises or if any repair works have ever been carried out in the past by landlord/owners or have been ordered by M.P.W.D. Page 11 of 12

This Legal Opinion is confined to and given on the basis of the laws of Macau as they are in force at the date of this opinion.

Yours faithfully,

Attached: 1 (one) Deed Registry Certificate of ______, Macau.

Page 12 of 12