Buffer for HK Businesses with the Tenant Protection Act
Tenant protection act comes into effect, offering three months’ protection.
The Hong Kong Government is providing a three-month protection period for business tenants with its tenant protection act. The Temporary Protection Measures for Business Tenants (COVID-19 Pandemic) Ordinance took effect on May 1, 2022. The ordinance will carry on until July 31, 2022.
The ordinance will provide three months of protection against any action that landlords may seek to enforce. However, it does not preclude liability completely, and all arrears become due upon the expiry of the protection period. Business tenants who default on rental payments during the stipulated time will have a short respite to recoup.
This is part of the rental enforcement moratorium legislation from the 2022-2023 Budget. Its primary aim is to provide relief and protection to business tenants hard hit by the pandemic. It also seeks to facilitate negotiation and settlement solutions between landlords and tenants.
A Three-Month Rental Enforcement Moratorium
The tenant protection act categorises business premises that qualify under the protection period. It also specifies the timeline that the moratorium runs for and how business tenants can be eligible for it. It covers most businesses with certain exceptions, such as supermarkets and cruise ships.
The premises themselves must be in use, wholly or partially, under the regulatory sector specification. These businesses cover travel and employment agencies, laundries, retail shops, food and catering premises, and education-related premises. It extends to scheduled premises under the Prevention and Control of Disease (Requirements and Directions) (Business and Premises) Regulation.
The rent arrears should occur during the relevant period, i.e., between January 1 to July 31, 2022. In such instances, the landlord would not be able to seek specific rental enforcement actions. These include forfeitures, deducting arrears from deposits, termination of tenancy, suspension of utilities, or employing the right of re-entry. Landlords also won’t be able to take legal action against tenants, such as winding-up or bankruptcy suits.
Any breach, including failure to pay rent outside of this timeframe, remains fully actionable by the landlord. However, pending actions commencing prior to the start of the protection period will be put on pause. Any landlord in breach of these specifications commits an offence by taking action against the business tenants.
Better Business Recovery for All
Despite being known as a tenant protection act, the ordinance also addresses the needs of landlord-borrowers. It offers protection to landlord-borrowers, who themselves default on secured loans due significantly to their tenants’ arrears. Lenders will have to wait out the protection period before seeking repayment. Overall, the ordinance aims to act as a protective buffer to allow businesses in distress to recover.
To learn more about this ordinance or business registration in general, get in touch with 3E Accounting Hong Kong. We are an award-winning business solutions provider with a global track record that speaks for itself. All our solutions are comprehensive, customisable, and transformational. Contact 3E Accounting today for business outcomes you can rely on