Accounting and Auditing

Number of unlicensed Hong Kong guest houses doubles over past five years

The government auditor says there is not enough being done to curb the practice, citing a lack of proper inspections and enforcement

PUBLISHED : Wednesday, 22 November, 2017, 5:30pm
UPDATED : Wednesday, 22 November, 2017, 10:52pm

The government auditor on Wednesday urged the licensing authority for Hong Kong’s guest houses to get tough on illegal accommodation, which have doubled in the past five years.

In its latest report, the Audit Commission highlighted the rise in suspected unlicensed establishments since 2012, from 644 to 1,322. Of those 1,322 cases, 20 per cent remained unresolved after three years.

“There was a risk that some unlicensed establishments related to these outstanding cases had been in operation for a long time,” the commission said in a report.

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The issuing of hotel and guest house licences, inspections and enforcement are conducted by the Office of the Licensing Authority under the Home Affairs Department.

The auditor pushed for enforcement teams to use more decoy operations to help gather evidence against unlicensed guest houses who often evade inspectors by simply not opening the door.

In one case, nine complaints were received over five years about a suspected illegal guest house operating out of a flat. The enforcement team visited the premises 66 times. The team was only able to enter the establishment eight times and found the flat had three rooms with lodgers.

However, since there was no manager, signboards or advertising posters, “sufficient evidence had not been collected for prosecution”.

The commission also slammed weak enforcement of penalties against those who were prosecuted.

Under the Hotel and Guest house Accommodation Ordinance, apart from a one-time financial penalty and imprisonment for up to two years, a fine of HK$20,000 (US$2,560) is applied for each day the offence continues.

However, the commission found that none of those prosecuted had had the daily fine applied, which did not deter unlicensed guest house owners from continuing to be “recalcitrant”.

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The commission suspected uneven allocation of caseloads among 24 inspectors may be leading to delays in enforcement and prosecution. They found that caseloads varied from 32 to 75 cases each, and recommended “closely monitoring caseloads”.

The auditor added that those who received prison sentences should not be the manager of the establishment but the business owner, which would “give a clear message to the community that operating unlicensed establishments is a criminal offence”.

In response to the report, the Home Affairs Department said it agreed with the Audit Commission’s recommendations.

Sam Lau Kung-shing, chairman of the Tourist Guest Houses Federation, said illegal accommodations have been “flooded” by offerings through the hospitality website Airbnb.

Lau said he believed the current penalties were sufficient deterrents but were rarely enforced to the fullest extent. He urged the government to enforce the law against such illegal services, who do not go through proper fire safety inspections, and worried about a tragedy occurring.

AirBnB is illegal under Hong Kong law.