Coronavirus: More clarity on rent relief for tenants soon

More details on rent relief for tenants and the criteria that financially strapped landlords must meet to be exempt from giving the full rental waiver will be announced in the next few weeks, Senior Minister of State for Law Edwin Tong said.

Guidelines are being worked out for the subsidiary legislation that is expected to give more clarity to parties on the new rent relief framework. This comes after Parliament passed a landmark law on June 5 to help 260,000 small and medium-sized enterprises (SMEs) cope with issues of rent, among other things, as the economic outlook worsens.

Under the enhanced Covid-19 (Temporary Measures) (Amendment) Act, eligible tenants and sub-tenants in the food and beverage and commercial sectors will enjoy four months of rental waiver from April to next month – two months each from the Government and the landlord.

Those in the office and industrial sectors will get two months of rent waived for April and May – one month each from the Government and the landlord. This is as long as their leases are in force on April 1.

The enhanced Act – which is based on the premise of fair sharing of rental obligations among landlords, tenants and the Government – came into force as many SME tenants continued to struggle in the face of a slower economy.

Not all have had relief from their landlords. This, despite the passing of an earlier Covid-19 Act in April to ensure that non-residential property owners unconditionally passed on property tax rebates in full to their tenants as part of the Government’s relief measures.

Part of the problem with the earlier scheme, said Mr Tong, who is also Senior Minister of State for Health, was “a mismatch in timing”.

“When rent is due may not always coincide with when the landlord receives the property tax rebate. That lack of coincidence sometimes means the tenant is wondering why the landlord hasn’t given the rebate.

“To the landlord, who might himself be also cash-strapped, he will say, if I haven’t received it, then I should not be funding this month’s rental for the tenant. That mismatch caused some tensions. We became aware of that… and we realised that an easier way to do it would be what the scheme (has been designed) for now,” he said in an exclusive interview with The Straits Times.

The enhanced Act aims to ensure peace of mind and certainty, Mr Tong said. “We didn’t want to put the tenants in a position, where even if it was their right to ask for a rebate, (to have) to approach the landlord because it’s not an easy conversation. We wanted to make it easy and not require the tenants to have to apply,” he said.

“The cash grant will be made to the landlord around the end of July. And there will be a (moratorium) between when the Act came into force (on June 5) and end July, or whenever the Inland Revenue Authority of Singapore (Iras) issues the notices of the cash grant. During this period, landlords will know that for their SME tenants, no rent will be due. This creates certainty in the market,” he said.

At the same time, safety mechanisms were built in to ensure financially strapped landlords are not forced to give the full rent waiver. Landlords can make an appeal if their tenants did not suffer a 35 per cent or more year-on-year drop in average monthly revenues in April and last month.

“For example, supermarkets and smaller minimarts have been doing well. So we want to make sure there is an out for the landlord. And, second, if the landlord is also financially strapped, then it would not be fair to make him or her bear the full two months as well,” Mr Tong said.

Furthermore, smaller landlords, such as retirees for whom the rental yield from one small commercial property forms a large proportion of their income, may seek an assessment to not give the full waiver. The assessment will also take into account the annual value of the landlord’s properties.

As of May 29, since the initial Act was passed in April, nearly 4,000 notifications for relief (NFR) have been served. But only about 10 to 11 per cent have ended up before the assessor, which means almost 90 per cent of the cases are resolved by the parties themselves, Mr Tong said.

“So we hope to have the same kind of attitude when we have the (enhanced Act),” he said.

There are currently close to 300 assessors working on the caseload, with plans for between 60 and 90 more to be added.

Landlords who have already given rental waivers or rebates will be able to set off the equivalent value against the amount of waiver they are required by law to give. The kinds of reliefs that landlords can take into account will be set out in subsidiary legislation.

There will also be reprieve for tenants whose lease contracts expired during the circuit breaker period but who faced difficulties moving out because they were not allowed to go back to the office or shop. In such cases, it would be unfair for the tenant to have to pay double rent or similar charges under the contract. The enhanced Act will also deal with these situations through subsidiary legislation.

Going forward, there may be a need to look at Singapore’s restructuring rules to help micro and small enterprises get back on their feet, Mr Tong said. “Restructuring is not only for the big boys. It’s not just for Hyflux or Hin Leong (Trading) and all these large giants going through restructuring. It’s also for the smaller enterprises,” he said.

“There will be some that will no longer be viable in a post-Covid-19 world. So we need to find a way for them to exit in the least painful way possible, so that the individuals behind those businesses can come back, rescale, retool, find new businesses, new opportunities,” he said.

Data from BizInsights.net, an authorised information service provider of the Accounting and Corporate Regulatory Authority, showed the number of companies and businesses that ceased operations in the first three months of this year jumped 78 per cent to 18,923, from 10,611 in the same period last year.

Pointing out that the effect of the circuit breaker in April and May may well be felt only in subsequent months, Mr Tong said: “Government measures like the Jobs Support Scheme (which provides employers with wage subsidies), and so on are useful. But no business is modelled on the basis of zero cash flow, zero income.”

Source: Read Full Article