SINGAPORE — Retail tenants and landlords unable to resolve their differences over lease agreements through mandatory mediation may apply for an adjudicator to be appointed to settle the dispute, according to a proposed law tabled in Parliament on Tuesday (July 4).

Under the Lease Agreements for Retail Premises Bill, both sides will have to comply with any decision or resolutions made by the adjudicator, which could include financial penalties.

If passed, the proposed law will also make it mandatory for all qualifying retail lease agreements to comply with an existing code of conduct, according to a press release by the Ministry of Trade and Industry.

The code sets out guidelines and principles for fairer and more balanced lease negotiations of retail premises and was first announced by the fair tenancy pro tem committee on March 26, 2021.

The Bill was read in Parliament for the first time by Minister of State for Trade and Industry Low Yen Ling. 

Under the proposed law, should there be any disputes, parties may be required to undergo mediation.

Currently, disputes between the parties can be resolved via voluntary mediation at the Singapore Mediation Centre. The Bill proposes that if one party applies for mediation, both parties must attend.

Since 2021, all government landlords and at least nine major private sector landlords have voluntarily adopted the code of conduct.

These nine landlords are: APM Property Management, CapitaLand Group, City Developments Limited, Far East Organization, Frasers Property Singapore, Keppel Land Limited, Mercatus Co-operative Limited, SPH REIT Management, and UOL Group. 

CODE OF CONDUCT

The code of conduct, which is publicly available on the Fair Tenancy Industry Committee (FTIC) website, sets out four guidelines that aim to enable fair and balanced lease negotiations between landlords and tenants.

If the Bill is passed, the law is expected to come into effect about six months later.

This means that the code will be applied to all qualifying retail leases with a tenure of at least one year, signed or renewed from the date of commencement of the legislation.

The four guidelines under the code of conduct are:

First, lease agreements must be carried out in good faith, including acting honestly and fairly, by considering the legitimate interests of all parties.

Second, the code lists leasing principles for 11 key tenancy terms which are required in a lease agreement or are identified as best practices.

These terms include providing transparency of any third-party costs, any pre-termination by a landlord due to the landlord’s redevelopment works, and sales performance.

Landlords and tenants who agree to deviate from clauses that allow for deviation must submit a joint declaration of deviation, which must be filed with FTIC within 14 days of signing of a lease agreement. 

Third, landlords must be transparent about the data of their retail spaces by sharing sales data metrics by trade category before signing the lease agreement.

Fourth, if the lease agreement does not comply with the code, the affected parties can make a report to the FTIC, which will collate and monitor reported cases.

DISPUTE RESOLUTION PROCESS PROPOSED

If the parties disagree over the lease agreement, either party may escalate the matter to the Singapore Mediation Centre, where both parties must approach and comply with its resolutions. 

The Bill also proposes a dispute resolution process for landlords and tenants with qualifying retail leases.

If a landlord and tenant are in dispute over their lease agreement, they may undergo mediation to resolve a complaint. 

If the issue is still unresolved after mediation, the complainant can apply for an adjudicator to be appointed to decide the outcome of the dispute. 

This adjudicator’s decision may be enforced as an order of the court, and if the parties do not comply, they may incur financial penalties, with the amount to be decided on a case-by-case basis.

COMMITTEE TO OVERSEE, REVIEW THE CODE 

The custodian of the code is the FTIC, which comprises landlord and tenant representatives, as well as industry experts.

The Bill sets out that the FTIC will review and update the code and establish the process to administer and promote compliance by landlord and tenants. 

It also includes the appointment of the chairperson and members of the FTIC, which will continue to be represented by landlord and tenant communities, as well as industry experts.

The current FTIC chairperson is Mr Max Loh, who is the chairman of the Competition and Consumer Commission of Singapore. He was previously the Singapore and Brunei managing partner for professional services firm EY.

The Bill will be debated in the next parliamentary sitting in August.