MTI seeks feedback on plan for fairer retail leasing laws including dispute resolution process
- The Ministry of Trade and Industry is seeking public feedback on laws to make retail leasing fairer
- The proposed legislation includes a dispute resolution mechanism
- It would also mandate compliance with a code introduced in 2021 that applies to retail leases
- The code is a set of guidelines and principles designed to combat unfair leasing practices
- Tenants cheered the proposals, saying they will level the playing field
SINGAPORE — The Ministry of Trade and Industry (MTI) is seeking public feedback on a proposed dispute resolution mechanism and other legislative provisions to make the leasing of retail premises fairer.
In a press release on Monday (July 18), it said that the proposed dispute resolution process would be low-cost and useful, comprising mediation and adjudication.
It would be provided to tenants and landlords when a dispute arises over whether a lease agreement is compliant with the Code of Conduct for Leasing of Retail Premises in Singapore.
The code, which is a set of guidelines and principles introduced last year, seeks to combat unfair leasing practices and level the playing field in the retail leasing space.
The guidelines were put forward by a committee made up of landlords, tenants, government representatives and industry experts after nine months of negotiations between landlords and tenants.
Some principles include allowing tenants to terminate rental agreements before their leases are up if they become insolvent or lost franchise rights, and having landlords collect rent based on a single rental computation.
Since it took effect in June last year, eight landlords in the private sector and all government landlords have publicly committed to abide by the code.
MTI said on Monday that it proposes to introduce legislation to mandate compliance with the code.
Ms Low Yen Ling, Minister of State for Trade and Industry, said that the ministry supports the industry's pledge to uphold the code.
"The establishment of the code has been a significant step forward for the retail sector. Landlords and tenants who had adopted the code have found it very helpful for their lease negotiations,'' she added.
“The establishment of the code has been a significant step forward for the retail sector. Landlords and tenants who had adopted the code have found it very helpful for their lease negotiations.Ms Low Yen Ling, Minister of State for Trade and Industry”
She also said that the ministry has been "consulting widely with key stakeholders" and is "ready to move forward on the public consultation exercise" before making it compulsory to comply with the code.
FACILITATED DISPUTE RESOLUTION PROCESS
Tenants who spoke to TODAY said that they welcomed the proposed facilitated dispute process and MTI's decision to make compliance with the code mandatory.
They said that it would help new entrepreneurs who are new to such agreements and might be inexperienced and unsure if the terms of a deal are unfair to them.
Tenants or landlords who find themselves in dispute over whether a term in a lease agreement is compliant with the leasing principles of the code may submit an application within 14 days to the Singapore Mediation Centre, which the MTI intends to appoint as the authorised dispute resolution body.
The parties involved in the dispute will have to first go through mediation to resolve the dispute, before the complainant can request for the authorised dispute body to appoint an adjudicator to decide the outcome of the dispute, if mediation fails.
The adjudicator will have the authority to decide if the lease terms are compliant with the principles set out in the code and direct the parties to adjust the lease terms to be in compliance to the principles.
Ms Grace Tan, director of ToTT Store that sells kitchenware, said that knowing who to turn to in a dispute would help tenants, especially if they are new entrepreneurs.
In 2018, she worked with a landlord who made "unreasonable requests" such as delaying the payment of a security deposit without reason.
Fairly new to the retail sector at the time, Ms Tan said that the only action she could take was to record her conversations with the landlord but she did not know who to report the matter to then.
"I had no one to send (the recording) to and I did not know of any body or organisation handling this. It would have been nice to have some kind of clear body or organisation that can protect the tenant when the security deposit is delayed (even after completing the necessary requirements)."
Others said that having a facilitated dispute resolution process also allows tenants to raise a complaint without having to go to court and bear legal fees.
Mr Kelvyn Chee, chief executive officer and founder of fashion chain Decks, told TODAY that some businesses do not have the financial capacity to go to a lawyer when a dispute arises and having a mechanism that finds a fair outcome for both parties would be favourable for both parties.
Decks runs dozens of retail stores across the island including household clothing brand names such as Hang Ten, M)phosis and Surfers Paradise.
Some retailers said that the move would allow for greater transparency in rental price increases.
Speaking to TODAY in a phone interview, Mr Lik Wong, director of outdoor clothing and equipment shop X-Boundaries, said: "Making this law is good because new tenants or new business owners who don't know what is considered fair grounds — this serves as a good platform for them."
He gave the example of coffee-shop landlords doubling rent and causing some tenants to pull out. Some malls have also done the same, which left many tenants paying rent higher than before the Covid-19 pandemic struck in 2020.
Mr Wong elaborated on the example and how a landlord may think: "Now that the pandemic is over and business is good, I want to increase your rent by double. If you don't like it, then please leave because there is no law to say that you cannot leave and I cannot increase rent by 100 per cent."
He added that there is sometimes a lack of transparency on why these rental hikes happen.
He went through a similar experience in 2019, when his landlord wanted to double rent.
"There are people who agree because they cannot afford to leave, or they invested a lot in the unit, or that is their only shop and they cannot move to other places easily."
Having the code in law would help tenants in such situations, he said.
Interested parties may give their views and comments on MTI's consultation paper by Aug 5.