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Saturday, Mar 02, 2024

Landlord sues shop owner for US$3.2 million as unpaid-rent cases spike

Landlord sues shop owner for US$3.2 million as unpaid-rent cases spike

Commercial landlords have stepped up legal action against tenants for unpaid rent after a moratorium against such activities expired at the end of July, a property executive says.

Hong Kong commercial landlords have stepped up legal action against tenants for unpaid rent after a moratorium against such action expired at the end of July, with one owner going after shop operators in a Tsim Sha Tsui shopping centre for HK$24.85 million (US$3.2 million).

Silvercord Limited on Monday sued companies related to local fashion company I.T Group for unpaid rent and other fees relating to four shops in the Silvercord shopping centre, according to official documents and writs.

Silvercord Limited’s directors are Chan Hoi Wan, who is the wife of tycoon Joseph Lau and the CEO of Chinese Estates Holdings, and Chan Sze Wan, who is Chan Hoi Wan’s sister and the former CEO of Chinese Estates.

Enacted by the Legislative Council during the city’s fifth coronavirus wave, the rent moratorium became effective in early May. It barred landlords from taking action against tenants who defaulted on rents between January 1 and July 31.


A woman walks past vacant shops in Tsim Sha Tsui on December 5, 2022.

Landlords have filed “a lot of cases” recently, according to Tony Lo, executive director and CEO of the ICI Property unit of Legend Upstar Holdings, the parent company of Midland IC&I.

“There has been a lot of [actions] to recover rent, as recovery was only stopped short by the ban,” he said. “Tenants took the opportunity to not pay rent. There was not even a chance to negotiate.”

As the overdue rent accumulates, it becomes even harder for shop owners to pay, so more landlords will definitely sue, he added.

Chinese Estates used to own the Silvercord shopping centre, but now manages leases for the owners.

The writs said rent had been outstanding since February this year. The plaintiff is seeking HK$24.85 million, which includes past-due rent and various fees.

Chinese Estates and I.T did not immediately respond to the Post’s requests for comment.

In future, “landlords will [try to] secure more guarantees,” said Lo. “For example, if a company rents [a property], will there be a personal guarantee if a limited company is used? Some may take more deposit. Each case is different.”

Tenants may end up bankrupt if the court rules that they have to repay the unpaid rent and they cannot do so, Lo added.

New shop leases in 2022 have fallen by 25 per cent to 3,897 compared with last year, hitting a seven-year low, according to Centaline Commercial.

Some landlords may hold off on filing lawsuits in hopes that last week’s easing of Covid-19 restrictions will boost retail fortunes, said Polly Chu, a partner at law firm Withers.

“There is a strong belief that retail business will bounce back in Hong Kong,” she said. “Landlords might wait to see this happening and might not hastily take action if the retailers have potential to pay back in a couple of months.”
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