Landlords will also not be allowed to charge unreasonable water and electricity fees.
The department said it will be responsible for the ordinance's implementation and has set up a section to promote awareness of the new regulatory regime, handle inquiries and provide free advisory and mediatory services on tenancy matters.
The new section will also publish a report with rental data of subdivided units after the implementation of the law and will take enforcement action as appropriate, it said.
"Additionally, the government has engaged non-governmental organizations to set up six district service teams with the aim of helping the department promote the new legislation," it said.
The amended Landlord and Tenant (Consolidation) Ordinance was passed by Legco in October to protect the most disadvantaged in the city from being exploited, covering at least 90,000 households living in subdivided units.
Once the law takes effect, tenancy agreements involving subdivided units will be standardized and will only set out rental prices, deposits, utility charges and fees for any breaches of agreements.
Lease will also be fixed for two years, and landlords cannot increase rents during the two-year period.
Upon expiry, a tenant has priority to renew the lease for another two years. The rent for the extension will be influenced by the department's index which reflects rent levels at private residential properties. The rate of the rental increase for the extension is capped at either the annual percentage change in the index or 10 percent - whichever is lower.
After four years, a landlord and a tenant are free to negotiate a new agreement with no cap on the rent increase.
Landlords overcharging for water and electricity will face fines of at least HK$10,000 upon conviction. It is also an offense if a landlord fails to submit a notice of tenancy to the department in the 60 days after the term of a tenancy commences.
Subdivided flats are notoriously small and many are located in rundown buildings.
Beijing has called Hong Kong's housing shortage a "deep-rooted problem," while the director of the Hong Kong and Macau Affairs Office, Xia Baolong, said in July that the SAR should "bid farewell" to subdivided flats and cage homes by 2049.
The average waiting time for public housing has climbed to 5.8 years - the longest in more than two decades.
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