That emerged as the Task Force for the Study on Tenancy Control of Subdivided Units submitting its report to the government yesterday after a year of study, saying 226,000 people live in 100,943 subdivided units here.

Task force chairman William Leung Wing-cheung said yesterday that a standard tenancy agreement for a two-year period should be signed by landlords and tenants of subdivided flats.

Leung said landlords would not be allowed to increase the rent during this period, but it could be reduced after negotiation between the two sides.

Tenants would get priority to renew leases for another two years but after four years, a landlord and a tenant could negotiate whether they wanted to sign a new deal.

Landlords could raise rents when tenants renew the lease but could only increase it according to the Rating and Valuation Department's rental index for residential properties, with increases capped at 15 percent.

Leung also said rents should be reduced if the percentage change of the index is negative.

"There were years in which there [were decreases] and there was a period of time when the increase was well over 15 percent. What we are trying to do is to balance the interest of the tenants and the landlords," Leung said.

The task force tried "to make sure that whatever we propose, we are not overly protective of one side while damaging the benefit of the other."

Tenants would have the power to terminate leases after a year with one month's notice.

But initial rents were not included in the report as Leung explained it would not be feasible for the task force to come up with a mechanism to determine initial rents because units are affected by many factors.

Asked if the rental increase limit of 15 percent is too high, Leung said landlords would lose their interest in renting subdivided units if there are too many restrictions, which could lead to a reduction in supply.

Lawmaker Alice Mak Mei-Kuen of the Hong Kong Federation of Trade Unions said a 15 percent increase is still too high for renters and suggested the increase be capped at 10 percent.

She also said some landlords may keep rents at a high level in the first place if initial rents are not regulated.