SBF launches fair tenancy framework

SINGAPORE — The Singapore Business Federation (SBF) yesterday laid out guidelines aimed at putting a stop to unfair leasing practices, in a move that should create a more balanced playing field between landlords and tenants here.

The guidelines under the voluntary Fair Tenancy Framework were developed after companies reported surprise jumps in rents when renewing leases, which add considerable pressure to already escalating business costs in a tough economic restructuring environment.

“Over the past few years, businesses have seen continuous increases in rental costs. This is not confined to just retail and F&B shop spaces, but also for office, commercial and industrial spaces. While it is a reflection of a healthy economy where demand far outstrips supply, at some point, it becomes unsustainable as businesses find it difficult to make ends meet,” said SBF chairman Teo Siong Seng.

SBF hopes that the framework will help businesses, particularly small and medium enterprises (SMEs), to better understand tenancy terms and conditions, thereby leading to a fairer negotiation ground between both landlord and tenant.

As part of the framework, an SBF-led committee has published a guidebook on common terms and conditions found in leasing agreements, as well as explanations on what they mean and their implications.

The guide also include clauses that tenants may opt for to better protect themselves, such as using mediation as a primary choice for dispute resolution.

The committee is also working with the Government to release more detailed rental data that businesses can refer to when negotiating leases.

This data can be broken down in terms of street, size and floor level, said Ms Cynthia Phua, chairman of the Rental Practices Working Group under the SBF-led SME Committee.

In addition, rental rates can also be presented in the price range of the 25th percentile, median and 75th percentile.

However, as a guide, the framework is intended to be voluntary. Legislation in this area would require greater in-depth studies on the implications, noted Minister of State for Trade and Industry Teo Ser Luck, who was also present at yesterday’s briefing. Nevertheless, he said this is the first step towards fairer leasing practices.

“Singapore’s reputation is important. While we develop our business sector to be more vibrant, I think it is important to have fair practice not just on the consumer side, but also between businesses. This framework adds on to the good reputation and goodwill of Singapore in terms of a pro-business government, pro-business economy and that is exactly what we are trying to promote,” he said.

Mr Kurt Wee, president of the Association of Small and Medium Enterprises, said: “One of the things we hear is when you have a landlord that is aggressive, every incremental dollar of margin that a business makes ends up paying the rent and over the long term, this kind of characteristic actually compromises value creation, entrepreneurship and risk taking.

“So this is about sustainability; this is not about tenants coming back against the landlords … There’s also a huge responsibility on the end of the SMEs to learn about lease and not just sign blindly.”