Three Fundamental Boilerplate Clauses Explained: Rent Suspension, Quiet Enjoyment and No-Set-Off
In light of the recent surge of landlord tenant disputes in relation to commercial premises, in this article, Ross Yuen and Eunice Lui will provide a succinct summary of relevant principles of three common boilerplate clauses, namely (1) the rent suspension clause; (2) the quiet enjoyment clause; and (3) the no-set-off clause. Indeed, if parties had worded their leases more appropriately, instead of simply adopting boilerplate clauses, many of these landlord tenant disputes could have been avoided.
Rent Suspension Clause
It is common in tenancy agreements of commercial premises to find rent suspension or abatement clauses which operate to suspend rent when certain events occur, with a standard event being when the property has become “unfit for occupation and use because of damage or destruction”, or when the property is rendered “inaccessible” by the event.
The starting point is that clauses of such extreme nature with the effect of removing contractual obligations may amount to a force majeure clause which should be strictly construed and any ambiguity would be resolved against the party seeking to rely on the clause: Goldlion Properties Ltd v Regent National Enterprises Ltd (2009) 12 HKCFAR 512 [6].
It is thus a matter of interpretation as to whether the ambit of the specific rent suspension clause covers the subject event. While every case is decided on its own facts, certain common events that usually feature in such rent suspension clauses have been considered in various cases, which may provide helpful guidance.
In Financial Conduct Authority v Arch Insurance (UK) Limited & Ors [2021] AC 649, in the context of an insurance policy, the UK Supreme Court held that “inability of use” required a complete inability of use [137], and “prevention of access” would mean access having been completely stopped from happening [151], and that in both terms, a mere impairment or hindrance in use was not sufficient.
In the more specific context of landlord tenant disputes, the court in Holdwin Limited v Prince Jewellery and Watch Company Limited [2021] HKCFI 2735 held that the rent suspension clause did not cover the Covid-19 in that the pandemic neither resulted in the destruction or damage to the premises nor rendered it inaccessible.
In Time Rich 08 Limited v DBE (HK) Limited HCA566/2017, unrep., 23 November 2017, the tenant alleged that water seepage caused the ceiling to crack and fall apart, and that during and after rainy days, water kept dripping continuously from the ceiling, causing damage to a lot of goods. The court however held that if the premises is just damaged rather than destroyed, then it “must be so severely damaged as to be rendered unfit for use, not merely dilapidated and in need of repair” [67].
It appears that the threshold for invoking the rent suspension clause is extremely high, and the fact that the tenant continues to be in occupation shows that the premises is not unfit for occupation or inaccessible.
Quiet Enjoyment Clause
It is also common for tenants to claim damages from the landlord for the latter’s breach of the quiet enjoyment clause and use this as a defence to set-off the outstanding rent.
Interference with quiet enjoyment requires some substantial interference with the tenant’s ordinary and lawful enjoyment of the land. Temporary interference, temporary disturbance of enjoyment or temporary inconvenience that does not interfere with the title or possession of the tenant would generally not be a breach of the covenant: Wharf Realty Limited v Abebi Limited trading as “ARMANI JUNIOR” [2022] HKCFI 2036 [142].
Again, the threshold for the tenant is high. Mere temporary inconvenience which does not interfere with the estate or title or possession does not amount to a breach. In Wing On Properties v Create Wealth Development Ltd HCA 632/2004, unrep., 5 July 2005 [12]-[13], the court rejected reliance on the renovation work of the landlord to the commercial portion of the building.
On the other hand, in Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501, it was accepted that the flooding from the landlord’s retained portion of the building amounted to a breach of the landlords’ covenant of quiet enjoyment when the premises suffered severe damage caused by flooding.
It is also important to note that the quiet enjoyment clause may be qualified in different aspects. For example, in Chong Lap Fu George v Hydra Shipping Services Ltd [2009] 4 HKLRD 369, the court held that the qualified covenant (on the cause of the interference) did not extend to the acts of a stranger (the registered owner of other flats) [29]-[34]. Also, in Time Rich 08 Limited, the tenant, who failed to pay rent, was barred from relying on the quiet enjoyment clause which provided the condition precedent that the tenant must have observed and performed all obligations before the clause can be invoked.
No-set-off Clause
It is well settled that the right to set-off may be excluded by clear words to such effect. In Worldwide Flight Services Holdings SA Royal Caribbean Cruises Ltd v Kai Tak Cruise Plaza Ltd [2019] 4 HKLRD 56 [23]-[26], the Court of Appeal rejected the tenant’s attempt to raise an unliquidated damage arising from the alleged breaches by the landlord to set-off against the rent payable as defence ([19] and [25]). The court held that the subject clause of “without deduction, set off or claim whatsoever” is wide enough to exclude equitable set-off.
However, a clause of “without any deduction” but without any reference to set-off was held in Connaught Restaurants Ltd v Indoor Leisure Ltd to be not sufficient to exclude the right of equitable set-off.
Conclusion
To conclude, it is important for landlords to carefully consider these three common clauses before entering into leases with their tenants, in order to ensure speedy recovery of rent and vacant possession. For the quiet enjoyment clause in particular, it would be prudent for landlords to ensure that the clause requires tenants to first perform all obligations under the lease before it can be relied upon. As for rent suspension clause, landlords are encouraged to carefully examine boilerplate clauses and make prudent changes only, so as to ensure that it only covers the situations contemplated by the parties.
Landlords should ensure that leases are drafted appropriately, and give thought to whether certain boilerplate clauses are necessary. In the same way, landlords should not make unnecessary changes to boilerplate clauses which may in turn complicate matters.
Authors: Ross Yuen, Eunice Lui.
Ross Yuen
Ross has his practice mainly in property law (including Chancery, Trust and Probate) and commercial law. He regularly acts in compulsory sale and adverse possession cases. Advising on other land related matters such as conveyancing, building management and tenancy is also his regular practice.
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Eunice Lui
Eunice was called to the Bar in 2024 and joined Chambers in the same year. Eunice is developing a broad civil practice, with particular emphasis on land-related matters. Eunice has recently appeared in two compulsory sale cases with Ross, in which one case concerns a building in Wong Nai Chung Road, and the other case being Tai Chung Property Ltd v Chen Lan Sum Irene (LDCS 4000/2023) [2025] HKLdT 40, which involves a building erected under the old Civil Servants’ Cooperative Building Society Scheme. Eunice accepts instructions in all areas of Chambers’ work.
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This article was first published on 8 August 2025.
Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photographs which appear in this article are included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related. The views and opinions expressed in this article/material are solely those of the members authoring it and do not necessarily reflect the official policy or position of Denis Chang’s Chambers, or of any other member or members of Denis Chang’s Chambers.