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September 17, 2022

8,000 businesses chased over unpaid rent after end of government protection

Thousands of restaurants in hong kong face closure as owners battle to pay landlords after the government’s rent-protection policy ends. (south china morning post photo)
Thousands of restaurants in Hong Kong face closure as owners battle to pay landlords after the government’s rent-protection policy ends. (South China Morning Post photo)

HONG KONG: Hong Kong is facing a wave of restaurant closures with landlords chasing about 8,000 businesses over unpaid rent, and the sudden collapse of a bakery chain signalling the first of such potential shutdowns.

Simon Wong Ka-wo, president of the Hong Kong Federation of Restaurants and Related Trades, said catering businesses in the city were reeling, with the end of a government rent-protection policy and a pandemic-hit economy not yet out of the woods.

He was referring to the three-month ban, first floated by Financial Secretary Paul Chan Mo-po in his February budget speech and implemented in May, which prohibited landlords from pursuing tenants for overdue rent.

Under that scheme landlords could not terminate tenancies, cut services, or take legal action against tenants from vulnerable sectors for failing to pay rent on time.

Well-received among the catering, retail and service industries at the time, the scheme lapsed in July, exposing affected businesses to legal action.

“The government expected the pandemic to be under control and the economy to rebound in July, helping the food and beverage service industry. However, this hasn’t happened and business has dropped a lot for these restaurants,” Wong said.

He also attributed the problem to the city’s failure to reopen its borders.

“We are like an isolated island now. Simply relying on Hong Kong’s internal circulation of consumption isn’t sustainable,” Wong said. “A further extension of rent deferral wouldn’t be of much use, but would make more shops consider closing, incurring more losses.”

Wong said that from what he understood, some 8,000, or up to 60% of the city’s restaurants had been under pressure for three months from landlords. Among those being chased, around 2,000 to 3,000 businesses were still negotiating repayment terms two months after the relief scheme ended.

“If these discussions do not reach a settlement by the end of this month, these restaurants may have to close their businesses for good,” Wong warned.

The total number of valid restaurant licences in Hong Kong stood at 16,492 as of May 1 last year.

On Wednesday, bakery chain Crostini became the first to fall under rental pressure as its owner announced the closure of its 15 branches on the chain’s Facebook page, blaming the lapse of the rent deferral scheme.

Around 700 customers who had bought prepaid cake vouchers from the bakery were left in shock and uncertain about the prospect of refunds, forming groups on WhatsApp for support.

An administrator of one of these WhatsApp groups, who gave her name as Yandy, told a radio show on Thursday that affected customers had spent an average each of HK$6,000 (28,000 baht) on around 200 cake vouchers, mainly for wedding gift purposes. The maximum amount spent was on 250 vouchers.

According to her, most of the customers who bought the cake vouchers turned to their credit card companies for help, as they were entitled to a refund within 120 days of the purchase.

However, Yandy recalled credit card companies telling her and other customers that they could not assist if the bakery chain had been liquidated, saying it would take five to eight months before a formal reply could be issued on the possibility of a refund.

“I’m not sure if I can get my money back, maybe a fifty-fifty chance,” Yandy said.

Meanwhile, Crostini employees were concerned about unpaid wages, as Chiu Kwun-chung of the labour affairs committee under the Eating Establishment Employees General Union revealed that about HK$3 million to HK$5 million in unpaid wages had been incurred for full-time workers.

Chiu told a radio show on Thursday that Crostini’s full-time employees had not received their salaries for September, which would usually be disbursed on the seventh day of the month, while some 30 part-time workers for the chain had not received their wages for August and September.

Crostini’s union had been in touch with the Labour Department, but both the government and the group were unable to reach brand founder Wong Kwong-fai, according to Chiu.

Chiu urged Wong to sign a declaration of insolvency as soon as possible to avoid dragging out the matter.

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