A landlord wants to sell a commercial building currently leased out to several tenants. The lease includes a redevelopment clause that allows the landlord to terminate the lease by giving six months’ notice. What legal protections do tenants have if the landlord exercises this clause?
If the lease contains a redevelopment clause clearly allowing the landlord to terminate by giving six months’ notice, and the landlord serves such notice in accordance with the clause, the landlord is not in breach of the agreement. The tenants are not entitled to compensation or continued occupation beyond the notice period unless the lease expressly provides for this. The court will usually not intervene if the clause is valid and properly exercised. The tenants can, however, challenge the notice if:
- The notice does not comply with the contractual requirements (e.g., insufficient notice period, improper service, or failure to specify redevelopment as the reason if required).
- The landlord’s conduct is inconsistent with the purpose of the clause (e.g., invoking the clause for reasons other than redevelopment).
Conclusion
Tenants’ protection is mainly procedural, ensuring the landlord strictly follows the redevelopment clause. If the clause is valid and properly invoked, tenants generally have no right to remain or to compensation unless the lease states otherwise.
For further guidance on lease enforcement and tenant disputes, see our Ultimate Guide to Commercial Lease Agreements in Hong Kong.
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