Hong Kong’s finance minister has halved the “protection period” for tenants to three months during which landlords cannot evict them for failing to pay rent as part of changes to a controversial proposal featured in this year’s budget address.

The revised rent relief scheme will also allow landlords to defer property rate payments and offer protections from banks if they fail to repay mortgages or other loans as a result of tenants being unable to pay rent.

The initiative aims to provide landlords and tenants an opportunity to negotiate new rental arrangements, meaning it would not apply in instances where both parties had agreed on a new tenancy agreement during the three-month “protection period”.

Financial Secretary Paul Chan Mo-po briefed legislators on the changes to the proposed “rent enforcement moratorium” on Monday during a Legislative Council videoconference panel on commerce and industry.

If passed into legislation, the original proposal would have prevented landlords from terminating tenancies, cutting services or taking legal action against businesses from vulnerable sectors for failing to pay their rent on time.

Initially featured as part of Chan’s budget speech on February 23, the measure would have been valid for three months, with the option to be extended for another three months.

But the scheme has proven divisive among Hong Kong’s business community, with landlords raising concerns about the potential impact on their sources of income.

The Real Estates Developers Association said the proposal could result in tenants eventually evading their liability to pay rent to landlords.

It also warned the moratorium would “set a very bad precedent” and “undermine the core values of Hong Kong’s free-market economy”.

However, groups from other industries have supported the initiative, such as the Hong Kong Retail Management Association and Hong Kong Federation of Restaurants and Related Trades.

At the meeting on Monday, Chan told legislators: “Having heard the views of different sectors, we appreciate that the proposal might cause some landlords short-term financial difficulties or make them unable to meet mortgage repayments in turn.”

As a result, Chan said the scheme’s protection period would only last for three months and would not be extended, to “enhance certainty” of the measure.

For elderly landlords relying on income from business properties to earn a living, the financial secretary said the government would lend them a sum of up to three months’ rents, for a maximum figure of HK$100,000 (US$12,796).

Rental relief measures will also cover businesses forced to close as part of social-distancing curbs.

The rent relief scheme will also cover all businesses forced to close as part of anti-epidemic measures, such as eateries, gyms, kindergartens and tutorial schools.

However, lawmaker Louis Loong Hon-biu, who represents the real estate and construction sector, criticised the proposal for relying on the assumption landlords were financially better off than their tenants.

“I heard from many landlords that they would face cash flow problem too if they cannot collect the rent,” he said during the panel meeting on Monday.

Loong added that the protection period would result in tenants accumulating larger debts after it expired and instead urged the government to provide subsidies to help businesses pay rent.

But Chan maintained scheme would provide short-term relief to tenants, saying it could also give businesses and landlords the opportunity to revise their rental arrangements.

“The proposal is not to take away the right of landlords to collect rent or waive the tenants’ obligation to pay,” he said. “It will only cause a slight deferral of any action that the landlords may take if the tenants fail to pay rent.”

Tang Fei, a lawmaker for the Election Committee constituency, said the government should simply create a law to waive the rents of affected businesses for the three months, a move which was rejected by Chan.

The government was also urged to set out guidelines on the level of rent reductions, with textiles and garment industry representative Sunny Tan saying it would help landlords and tenants negotiate new arrangements.

However, Chan said that while the government appreciated the impact of the Covid-19 on businesses, he added it would be difficult to order landlords to make rental cuts according to set percentages.

Speaking after the panel meeting, lawmaker Peter Shiu Ka-fai, who represents the wholesale and retail sector, said a six-month protection period would have been ideal, but the priority should now be passing the law to give the industry “time to take a breath”.

Federation of Restaurants and Related Trades president Simon Wong Ka-wo told the Post on Monday that a “buffer” was needed to give businesses time to discuss rent cuts with landlords, but also called for authorities to support tenants after the scheme ended.

“After three months, things may still be bad for businesses. We hope the government can discuss with banks to offer loans to help us repay the rent,” he said.