Introduction

The Financial Secretary announced in his 2022-23 Budget the legislation for a “Rental Enforcement Moratorium”. The arrangement is intended to provide business tenants of specified sectors affected by the fifth wave of the COVID-19 epidemic with a breathing space, so that they would not be forced out of business by legal or other actions taken by their landlords for failing to pay rent on time, while giving landlords and tenants an opportunity to work out a mutually agreeable rental arrangement in the interim through negotiation.

In this regard, the Temporary Protection Measures for Business Tenants (COVID-19 Pandemic) Ordinance (“the Ordinance”) commences operation on 1 May 2022 upon its gazettal. The “protection period” under the Ordinance lasts for three months (i.e. from 1 May 2022 to 31 July 2022). The Ordinance will cause a deferral of certain actions that landlords may take during the “protection period” in respect of their tenants’ failure to pay rent. Upon the expiry of the “protection period”, however, landlords may recover the accrued rent in arrears from their tenants, while tenants should also pay the outstanding rent.

MAIN FEATURES

Protection to Tenants

In relation to a tenancy for specified premises, landlords will be barred from taking certain specified actions during the “protection period” for outstanding rental in respect of their tenant’s failure to pay rent in the relevant period, i.e. from 1 January to 31 July 2022. (Landlord will not, however, be barred from taking actions in respect of the tenant’s failure to pay rent before the relevant period or breach of other terms of the tenancy.)

A landlord who takes any specified action during the “protection period” commits an offence.

Protection to Landlord-borrowers

To relieve the short-term financial difficulties that some landlord-borrowers may face arising from the Rental Enforcement Moratorium, the Ordinance imposes a corresponding moratorium to bar lenders from taking certain specified actions during the affected period against the landlord-borrowers, guarantors and sureties concerned, in respect of the landlord-borrowers’ failure to make related secured loan repayments.

Similarly, a lender who takes any specified action against a landlord-borrower for repayment default during the affected period commits an offence.

Carving Out from the Application of the Ordinance through Agreement

To encourage landlords and tenants to reach new rental agreements through negotiation, the Ordinance will not apply to landlords and tenants who have reached written agreements during the “protection period”. The application of the Ordinance to lenders and landlord-borrowers will likewise be carved out if similar agreements are reached between them.

Other Support Measures

In respect of any individual landlord who lives off rental income from specified business premises he or she holds, the Government will provide an interest-free loan equivalent to three-month rent in advance under the 100% Personal Loan Guarantee Scheme, subject to a ceiling of $100,000. Please refer to the press release issued by the Hong Kong Monetary Authority for details.