Singapore has passed a law to help businesses affected by COVID-19, including tenants under commercial leases. The COVID-19 (Temporary Measures) Act came into effect on 9 April 2020, and allows tenants unable to pay rent and other amounts under certain commercial leases to seek temporary relief from those obligations for a period of up to six months. The Act further requires landlords to pass on any property tax remissions to their tenants in full.
On 20 April 2020, the COVID-19 (Temporary Measures) (Temporary Relief for Inability to Perform Contracts) Regulations 2020 came into operation. The Regulations detail how qualifying individuals and businesses can apply for relief under the Act.
Relief from payment obligations under commercial leases
Commercial leases, including office, retail and industrial, are granted relief under the Act. Qualifying leases are those entered into or renewed before 25 March 2020. The payment obligation must have arisen on or after 1 February 2020. Relief, namely suspension of rent and other payments, requires that tenant’s inability to perform is caused to a material extent by a COVID-19 event.
How can tenants seek relief?
A tenant seeking relief under the Act must deliver a notice to a landlord and any guarantors stipulating its inability to pay its rent and any other amounts.
The form for notice (Form 1) is prescribed by the Ministry of Law on its Electronic System. Tenants may, and in most cases should, adapt the form and supplement the form with supporting evidence. The Regulations stipulate an order of preference for delivery:
- Ministry of Law’s Electronic System;
- other electronic means (e.g. WhatsApp);
- physical means.
Notice may be delivered to landlords between 20 April 2020 and 19 October 2020. This prescribed period eventually may be lengthened or shortened. A notification to a guarantor is to be delivered within one working day of delivery to a landlord.
What does a notice mean to a landlord?
Delivery of a notice entitles a tenant to a moratorium on most legal action during the period prescribed by the Act. Landlords from whom relief is sought may not:
- terminate a lease due to non-payment of rent and other monies;
- continue or commence court and insolvency proceedings due to the non-payment; or
- exercise a right of re-entry, forfeiture or any other right with an equivalent outcome due to the non-payment.
Can landlords dispute a notice?
Yes. The Act provides a mechanism for landlords to challenge a tenant’s notice for relief. Challenge requires landlords to submit an application in the prescribed form (Form 6) with supplementary documents to the Registrar via the Ministry of Law’s Electronic System. Applications may be submitted between 20 April 2020 and 19 October 2020. This prescribed period eventually may be lengthened or shortened.
If the Registrar accepts the application, it will provide its response to the landlord in the prescribed form (Form 8). Landlords are then required to send the Form 8 to the tenant within two working days of its receipt from the Registrar, and afterwards to submit evidence of service to the Registrar. The tenant has five working days to respond to landlord’s application, with responses to be delivered in the Form 8. The Registrar will notify the parties of the appointment of an assessor to make a final determination. Assessors are expected to conduct hearings and deliver determinations by email exchange.
What should tenants consider before issuing a notice for relief?
Relief does not constitute a rental waiver. Rent relieved under the Act is payable when these temporary measures are lifted. Accordingly, before issuing a notice for relief, tenants should ask themselves two questions:
- Am I unable to pay rent or other amounts from 1 February 2020 under my Singapore lease; and
- is this inability caused to a material extent by COVID-19?
The first question is particularly relevant to multinationals that have reaped the rewards of the prolonged bull market before the onset of COVID-19.
The second question is particularly relevant to tenants required to comply with government directives that have led to closings or significant loss of business. If the answer to both questions is yes, tenants should consider relief. If the answer to both or either question is no, tenants must more carefully weigh the temporary cashflow benefits against the relationship damage and potential time and energy lost disputing a notice for relief.
Passage of property tax remissions to tenants
The Act requires landlords to pass on to tenants any property tax remissions granted by the Minister of Finance when such a rebate is provided in response to the COVID-19 pandemic. Landlords may not place conditions on such benefit, including renegotiation of lease terms, any of which shall be void. The amount of the remission may be paid to the tenant in lump sum or in instalments, and it may be offset against rent payable by the tenant to the landlord.
The Act provides that disputes relating to property tax remission are to be heard by a valuation review panel. A party may appeal at the Singapore High Court.
Given that the amount of remissions normally may amount to one month’s rent, tenants are advised to confirm with their landlords that such remissions are being granted.