The surging fifth wave of the pandemic and the government’s countermeasures weighed on last-minute preparations for the budget. The sudden reality of compulsory mass testing next month along with intensified social distancing threatens the survival of many small-to-medium enterprises, to whom it is the last straw. That is a price the government is not willing to pay if it can be avoided. Financial Secretary Paul Chan Mo-po was under pressure to come up with something different to give fresh hope of life after the coronavirus. It turned out to be a three-month rent deferment plan, with the prospect of another three, to enable struggling SMEs to stay afloat and avoid sackings. It prohibits landlords terminating tenancies in specified sectors for failing to pay rent. It is set to benefit up to an estimated 130,000 shops, for example. Along with other relief, it sends a message that the government is alert to deepening distress among 340,000 small enterprises that account for 98 per cent of the city’s businesses. Measures to help them include extension of the 100 per cent loan guarantee scheme, limited to HK$9 million (US$1.15 million) instead of HK$6 million. Chan did not overlook landlords, many of whom have sacrificed rent to help business tenants, promising instructions to the Hong Kong Monetary Authority to work out ways to meet loan commitments flexibly. The government had previously targeted businesses generally with subsidies intended to help sustain employment. But the latest form of relief is more tailored to avoid closures in a significant employment sector dependent on incomings to meet outgoings. Chan said it was to provide enterprises in deep water with breathing space and to secure jobs. What sets it apart is the temporary subordination of contractual rights. Critics have pointed out the moral hazard that tenants who can afford rent will choose not to pay, or secure a rent deferral and shrink their workforce anyway. Both sides need to enter into the spirit of the new law. We trust Chan is not too optimistic in hoping “landlords and tenants will sit down together to sail through the challenges”. Perhaps Hong Kong needs to reflect on Singapore’s example, when introducing a similar temporary law, of needing evidence of loss of sales or inability to pay rent. Some issues remain to be clarified. For instance, there is a call for the government to clarify whether deferred rents can be paid in instalments after the deferral period, if business needed more time to recover. It could be an issue. The aim is to avoid a wave of bankruptcies and evictions, not just delay them. At the same time landlords might need continued accommodation from their bankers. Lawmakers should pass legislation urgently if the rent deferral is to have full impact.