Rental Relief Guide for Commercial Tenants during COVID-19

·10-min read

COVID-19 is giving businesses in Singapore a tough time, and it’s not just the obvious “victims” in aviation, tourism, etc. According to a report by Yahoo, a whopping 8,663 businesses in Singapore had to shut their doors for good in April. For some context on this alarming figure, it’s actually twice the number of business closures in March (4,008).

Most recently, we have seen the closure of high-profile retailers like Robinsons, highlighting yet again how the pandemic does not discriminate in its choice of casualty.

Before we go into your eligibility for the reliefs, let’s have a better understanding of the government’s COVID-19 (Temporary Measures) Act of 2020, the relevant updates and the components involving commercial tenants.

- Rental Relief, introduced in April 2020

As part of Singapore’s response to help individuals and businesses deal with the impact of COVID-19, the COVID-19 (Temporary Measures) Act of 2020 (the Act) was first announced in April.

This allows tenants who are affected by the pandemic and are unable to pay rent, or other payment obligations under their commercial lease, to seek temporary relief for a period of up to six months. The Act further requires landlords to pass on any property tax remissions granted by the government to their tenants in full.

Other relief under the Act includes the prevention of commercial landlords from evicting or commencing legal action against their tenants if they are unable to pay rent in these six months.

- Additional Rental Relief for SMEs, announced in June 2020

The government updated the Act passing amendments mandating rental relief for Small and Medium Sized Enterprises (SMEs). Commercial tenants, such as retail, whose businesses fall under the SME model will get an additional 2 months waiver of base rent. Tenants occupying industrial or office spaces receive an additional month of relief.

Half of the relief for each type of premises is covered by government grants and subsidies, while the other half is to be covered by the landlords themselves.

The rental relief introduced in June does not cover relief from additional costs from the commercial lease that are not rental charges eg. Cleaning, utilities and electricity.

- Amendments to Rental Relief Assessment as of September 2020

Responding to feedback and in efforts to ensure that landlords are not subjected to undue burden, the government amended the Act once again.

The refinements include expanding the powers of the third party “Assessors” in handling unresolved disputes between parties on the amount of rental waiver.

Rental Relief framework

Qualifying Commercial Properties

Other Non-Residential Properties (Office/industrial property)

Rental Relief (paid by the Government)

2 months waiver of rent (April & May 2020)

1 month waiver of rent (April 2020)

Additional Rental Relief * (paid by the Landlord)

2 months waiver of rent (June & July 2020)

1 month waiver of rent (May 2020)

Total

4 months waiver of rent

2 months waiver of rent

Conditions for Eligibility

  • Rented a qualifying commercial property or non-residential property (office/industrial)

  • Tenancy lease agreement must have been entered into or renewed before 25 March 2020

  • Earned not more than $100 million in revenue for Financial Year 2018

* Additional Conditions for Eligibility for the Additional Rental Relief

  • SME and Non-Profit Organisations (NPO) who have seen a 35% or more drop in their average monthly gross income due to COVID-19

 

Are all tenants eligible for rental relief under the COVID-19 (Temporary Measures) Act of 2020?

Just to be clear, the answer is no.

Before you heave a sigh of relief that you don’t have to pay next month’s rent, read this carefully: These particular rental relief measures are only for tenants under commercial leases. That refers to those renting office and industrial buildings, retail and shopping malls, and other non-residential properties.

Residential tenants are not included. That means individuals renting HDB and/or private homes are not eligible.

That said, if you’re struggling with cash flow and need financial relief, you can consider applying for a home loan deferment or deferment of insurance premiums.

 

What Kind Of Rental Relief Can You Seek Under COVID-19 (Temporary Measures) Act of 2020?

Tenants who signed (or renewed) their commercial leases and are unable to make payments are eligible to seek relief from contractual obligations or negotiate rental conditions. This includes any monetary, financial, operational or other commitments that are normally bounded by your tenancy lease.

Put simply, you can ask to temporarily suspend rental payments if you are unable to pay up due to the COVID-19 situation.

Do note that as its name suggests, the rental relief is 1) a temporary measure and 2) not a waiver (with the exception of the rent waiver granted for months of April-July, depending on the category of eligibility you fall into). The rental payments are only deferred until things improve. This means that you will need to pay back for the missed payments when the temporary measures are lifted by the Ministry of Law (MinLaw).

For now, the temporary measures will apply for a prescribed period of six months. The period may be extended or reduced depending on the COVID-19 situation, up to MinLaw’s discretion.

 

COVID-19 (Temporary Measures) Act of 2020 also comes with property tax and loan relief

Besides rental relief, the Act also lets you seek temporary relief for secured loan facilities with licensed local banks and finance companies before 25 March 2020.

In addition, landlords also receive property tax relief, which the government has mandated under legislation to be passed on fully to the tenants. The amount of property tax relief will amount to roughly one month of rent for tenants.

For the property tax relief, landlords can expect to receive a rebate notice from IRAS by 31st May 2020. The rebates will then be refunded to the landlord by 30th June 2020. At the same time, landlords will also need to transfer the property tax rebate to their tenant(s) by 30th June 2020.

Landlords who fail to pass on these savings to their tenant(s) are liable for a fine not exceeding $5,000 under Section 29(2) of the Act.

 

How to apply for Rental Relief Under COVID-19 (Temporary Measures) Act of 2020

The first thing you need to do is check that you are eligible for this rental relief scheme. To qualify, you must be unable to pay your rent or any other monetary obligation due on or after 1st February 2020.

You will need to show that your business was badly affected by the COVID-19 events, and because of that, you do not have the cash flow to pay rent. For example, if your retail store was closed for an extended period due to the circuit breaker regulations.

If you are financially stable and your books are still in the green (think MNCs, large corporates), you don’t qualify.

Once you have ascertained that you qualify for the rental relief, the next step is to issue a ‘black and white’ notice to your landlord. If you’re unsure how to do it, you can refer to the notice guidelines prescribed by MinLaw. The notice needs to be delivered either through the Ministry of Law’s Electronic System, email, other electronic means such as WhatsApp, or physical means (ranked by preference).

The notice also needs to be delivered to your landlord between 20 April 2020 and 19 October 2020.

Can your landlord reject your rental relief request?

Yes. According to the law, a landlord does not necessarily have to grant the rental relief you are seeking. If your landlord thinks that there are grounds for dispute, your landlord can challenge the rental relief request.

Your landlord will need to apply to the Registrar of assessors to appoint an assessor, who will then decide whether you should be entitled to the rental relief or not.

Depending on the decision, you may end up in any of the three scenarios:

  1. Ordered by the assessor to pay rent to your landlord

  2. Allowed to enjoy the rental relief from your landlord

  3. A compromise between a and b (e.g. A moratorium on rent payment with review on an ongoing basis)

 

How does the COVID-19 (Temporary Measures) Act of 2020 protect tenants?

If you are applying for rental relief under the COVID-19 (Temporary Measures) Act of 2020, your landlord will not be allowed to foreclose the lease, re-enter your premise without your permission and evict you for non-payment of rent during the COVID-19 period.

However, although landlords will not be able to sue you, terminate your lease or exercise its right of re-entry for non-payment of rent, there are other actions that they can still take which you should be aware of.

Firstly, landlords can offset rental payment from your security deposit.

MinLaw determines that the security deposit will not affect the cash flow of the tenant (i.e. you). As such, your landlord can use it to make up for the payments you’re unable to make.

Secondly, landlords can take legal action if you don’t pay up after the rental relief period is over.

After the relief period (which is 6 months for now), you must make sure to pay up. If not, your landlord can take the prescribed legal actions for any amount accrued over the rental relief period.

Thirdly, the Act does not allow you to unilaterally terminate the lease as a tenant.

The rental forfeit payable for unilaterally termination of lease will not be waived under the COVID-19 (Temporary Measures) Act of 2020.

These sound harsh, but remember, the COVID-19 (Temporary Measures) Act of 2020 is meant to temporarily alleviate the financial burden on contracting parties. It is not meant to diminish the sanctity of the underlying contract.

 

What can residential tenants do if they need rental relief?

As mentioned earlier, this rental relief does not apply to residential tenants. However, this does not stop you from negotiating with your landlord for a personalised rental relief.

We believe that most landlords will be understanding during this trying period to help you as a tenant. This is especially if you have been a good tenant with a history of making prompt payments previously.

If you are unable to convince your landlord, you might want to consider getting a new space that is more affordable for you.

 

More FAQ related to Rental Relief under the COVID-19 (Temporary Measures) Act of 2020 for Commercial Tenants

What is the purpose of the Rental Relief framework?

The rental relief framework aims to help affected businesses, specifically SMEs and non-profit organisations (NPOs) with their cash flow through fair sharing of economic hardship between the government, landlords and tenants.

What is the rental relief given to commercial tenants?

On top of the property tax remissions granted by the government, qualifying commercial tenants may seek temporary relief for a period of up to six months.

Under the Rental Relief framework, eligible commercial tenants who are SMEs and NPOs can also receive up to 2-4 months’ waiver of rent, depending on the eligibility conditions met.

What are the eligibility criteria for an SME tenant to qualify for the rental relief?

  • Rented a qualifying commercial property or non-residential property (office/industrial)

  • Tenancy lease agreement must have been entered into or renewed before 25 March 2020

  • Earned not more than $100 million in revenue for Financial Year 2018

Why does the rental waiver cover only the period of April to May 2020?

April to May 2020 corresponds to the period of the Circuit Breaker. This is intended to help SME tenants who have been substantially hit by COVID-19.

 

For more details pertaining to the Rental Relief Framework, visit the Ministry of Law here.

 

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