“Right-Sizing” Hong Kong SAR Commercial Leases

In Hong Kong SAR, business disruption seems to have become the new norm in the last 12 months or so, dominated by news of a regional slowdown caused by the US/China Trade War, frequent protests on the streets, in the malls and railway stations of Hong Kong, and now COVID-19. Businesses are being dramatically hit and some landlords are now offering significant rental discounts on existing retail leases. It will not be a surprise if many tenants will be re-assessing their real estate needs in Hong Kong SAR. This Newsletter examines some of the key issues to consider in a COVID-19 world in the context of any evaluation of your commercial leasing portfolio in Hong Kong SAR. It also ends with a few comments on whether force majeure provisions will now apply given the impact of Covid-19.  Highlighted in this Newsletter:

•  Premature Termination of Commercial Leases
• Options to Consider: Break Clause, Sublet/Assignment Clause, Surrender Agreement, Replacement Tenant
• Whether or Not to Walk Away from the Existing Leases: Heads of Claims Available to the Landlords
• Force Majeure
• Frustration
• BCLP’s Recommendations