You Need a Lawyer! New "No-use Restriction" Requirement under HK's New Vetting Regime for Hotels and Guesthouses
Background
The Hotel and Guesthouse Accommodation (Amendment) Ordinance 2020 came into operation in Hong Kong on 1 December 2020. The Amendment Ordinance introduces new requirements, including a "no-use restriction requirement" (In traditional Chinese: 無使用限制規定), to the licensing regime for the operation of hotels and guesthouses in Hong Kong.
No-use Restriction Requirements
Section 12J of the amended Hotel and Guesthouse Accommodation Ordinance (Cap.349) (the amended HAGAO) requires that, in order for a premises to satisfy the "no-use restriction" requirement, such premises must be "free from a use restriction" to the satisfaction of the Hotel and Guesthouse Accommodation Authority (the Authority).
Premises will be considered "free from a use restriction" if their relevant Deed of Mutual Covenant (DMC) (or, if there is no DMC, the Government lease) does not contain a "restrictive provision".
A "restrictive provision" is defined to mean, in relation to a part of premises, an express provision that the part is :-
- prohibited from being used as a hotel or guesthouse;
- prohibited from being used for commercial purpose; or
- permitted to be used only for private residential purposes.
How to Proof Compliance? You Need a lawyer
On 26 November 2020, the Office of the Licensing Authority (the Office) issued an Information Note to give guidance on the implementation of the new licensing regime (the Information Note).1 Paragraph 2(a) of the Information Note states that "The applicant [of a new licence or renewal of a licence] is required to provide a written legal advice given by a legal practitioner2 on whether there is any restrictive provision in the deed of mutual covenant (DMC) or land lease concerned."
The Office has also updated the application forms for the new issue or renewal of licences (Form HAD 133 and HAD 140A) to require applicants to submit such written legal advice from a legal practitioner along with their application.
Consequences of Incompliance
If the premises fails to satisfy the no-use restriction requirement, the Authority must :-
- in the case of an application for a new licence: refuse such application (section 12B(3)(a), amended HAGAO);
- in the case of an application for the renewal of a licence: refuse such application (section 12C(4)(a), amended HAGAO)3; and
- in the case of an existing licence: cancel or suspend such existing licence (s.12D(1)(a), amended HAGAO).
Conclusion
Under the new licensing regime introduced by the amended HAGAO, it is now mandatory for applicants and holders of licences for operation of hotels and guesthouses to observe the no-use restriction requirement. In order to prevent refusal of their applications for new issue or renewal of licences or cancellation of existing licences, concerned applicants and licence holders are strongly advised to consult trusted legal practitioners to conduct a review of the subject premises' land documents and issue written legal advice to prove that the relevant premises are free from a use restriction.
1 Please see a copy of the Information Note at https://www.hadla.gov.hk/filemanager/en/docs/Letter_20201126_eng.pdf
2 A legal practitioner is defined to mean a barrister or solicitor under section 2(1) of the Legal Practitioners Ordinance (Cap.159).
3 The Amendment Ordinance provides for a transitional period of 12 months (i.e. from 1 December 2020 up to 30 November 2021). If an existing licence expires before the end of the transitional period and its renewal application (Form HAD 140) is submitted within the transitional period, the renewal application can be processed in accordance with the requirements under the old regime and the licence can be renewed for a period not exceeding 12 months. Upon expiry of the licence, the licensee will have to meet all new requirements for further renewal of the licence.
