Bill to be fast-tracked to compel landlords to waive up to 2 months' rent for eligible SMEs

SINGAPORE — Landlords of commercial, industrial and office properties may soon be legally required to shoulder the rental burden that their tenants have been bearing while fighting for survival amid the Covid-19 pandemic.

On Wednesday, the Law Ministry (MinLaw) said it will be proposing several amendments to the existing Covid-19 (Temporary Measures) Act, including a rental relief framework that, if passed, will compel landlords to waive up to two months of base rent for eligible small- and medium-sized enterprises (SMEs) that have suffered significant losses due to Covid-19.

This adds to the two months’ rent relief that the Government announced in the Resilience Budget and the recent Fortitude Budget, and is expected to benefit nearly all of the 260,000 SMEs in Singapore. SMEs — defined as corporations with annual turnovers of under S$100 million — are responsible for employing more than 70 per cent of the country’s workforce, or 2 million workers.

Deputy Prime Minister Heng Swee Keat had said in his Fortitude Budget statement last month that the decision to table this Bill had been deliberated carefully by the Government, adding: “The Government does not ordinarily intervene in contracts after they have been entered into.

“However, as the Minister for Law had explained… (for) exceptional situations such as this, the Government needs to intervene, through legislation, with temporary targeted steps to safeguard the economic structure for the common good.”

The proposed amendments will be fast-tracked in Parliament by a Certificate of Urgency. It will be tabled and debated in the same sitting on Friday and, if passed, the existing Act is expected to be amended in end-July, the Law Ministry said.

Speaking to the media on Tuesday, Law Minister K Shanmugam said the proposal comes as the entire economy has faced very severe headwinds, and businesses will continue to face hardship even as Singapore comes out of the circuit breaker in phases.

“People have had to shut down for two months. Even when Phase Two (of the economy’s reopening) starts, recovery will be slow, or is likely to be slow. We have nearly 260,000 SMEs employing more than 2 million of our people, and they are the lifeblood of our economic system, jobs, people's futures,” he said.

“It's a huge economic crisis. Government comes in, has put in S$92 billion. Landlords have to do their part, tenants have to do their part, and together, with a bit of sharing of the pain, we hope that as many as possible can pull through. So that's the whole purpose of this.”

LANDLORDS TO PROVIDE RELIEF

To qualify, SMEs need to show that they turned over S$100 million or less in 2019, and suffered a 35 per cent fall in average monthly revenue from April to May 2020 compared with the same period last year. The tenancy must also have been entered into before March 25, 2020, said the ministry.

This also applies to eligible SMEs who are sub-tenants or licensees of the property, and will also be extended to eligible non-profit organisations and tenants of government properties.

Said MinLaw: “The new rental relief framework aims to help affected SMEs who need more time and support to recover from the impact of Covid-19 by providing mandated co-sharing of rental obligations between the Government, landlords and tenants.”

The proposed amendments include a new rental relief framework for eligible SMEs that will force landlords to provide waivers of base rental for two months to eligible SMEs if they rent commercial properties, and for one month if they rent industrial or office properties.

Landlords who are facing financial hardship themselves and are therefore unable to provide the waiver can appeal to a panel of assessors to halve the waivers to one month for commercial property tenants and half a month for industrial and office property tenants, said MinLaw.

“This will take into consideration whether his rental income forms a substantial part of his total income and the annual value of his properties,” said the ministry.

These waivers will come on top of rent reliefs provided for in the government budgets announced earlier this year.

Mr Heng, who is also Finance Minister, had announced a total of S$2 billion of cash grants to offset rents in the Fortitude Budget and S$1.8 billion worth of property tax rebates in the Resilience Budget.

Altogether, the measures and the proposed framework will work out to two months of rental relief for commercial tenants, and one month for industrial or office tenants.

The rental waivers can be offset against any previous direct monetary assistance provided by the landlord to the tenant, MinLaw added.

HELP FOR ARREARS

Under the proposed framework, eligible SMEs may also seek a repayment scheme for rental arrears that they may have accumulated from Feb 1 up till Oct 19 this year, with the first instalment beginning no later than Nov 1.

The interest payable for arrears in this scheme will be capped at 3 per cent a year, and if the SME misses paying an instalment, the scheme will be cancelled and the SME will be liable to repay all the arrears immediately.

Aside from tenancy agreements, other amendments will also cap the late payment interest for arrears for certain contractual obligations disrupted by Covid-19.

The ministry is proposing to cap any interest or charges due to late payments arising from these obligations.

“Creditors will also not be allowed to terminate such contracts due to late payments during the prescribed period (until Oct 19),” it said.

RELIEF FROM VACATING PREMISES

The Bill will also propose amendments to provide relief to tenants who are unable to vacate a non-residential property after their lease or licence expires before October 19.

This means that in that period, they will not be liable to their landlord for failing to vacate the property, said MinLaw.

The ministry added that it had received feedback that Covid-19 has created difficulties for tenants who had to vacate their business premises after their leases expired.

If passed, the move would prevent these businesses who are hampered by the strict restrictions caused by Covid-19 from having to fork out high financial penalties for failing to vacate. In Singapore, lease contracts typically charge double rent for tenants who overstay beyond lease expiry.

To qualify for this relief, the ministry said the tenants must notify the landlord and meet “such other conditions as may be prescribed by the Minister”.