New retail premises Bill proposed to aid in fairer lease negotiations

SINGAPORE - A new Bill was read in Parliament on Tuesday to mandate compliance with the Code Of Conduct for leasing of retail premises in Singapore, which sets out guidelines enabling fairer lease negotiations between landlords and tenants of retail premises.

The new Lease Agreements for Retail Premises Bill, read in Parliament for the first time by Minister of State for Trade and Industry Low Yen Ling, will include 13 leasing principles that landlords and tenants have to abide by.

If passed, the legislation is expected to take effect about six months later.

The Code will then apply to all retail leases with a tenure of one year or more, signed or renewed from the date of commencement of the legislation.

The Fair Tenancy Industry Committee (FTIC)

first released the Code in 2021.

It was updated in 2022. The FTIC was set up in 2020, as there was heightened tension between tenants and landlords at the time.

The Code has been voluntarily adopted by at least nine major private sector landlords, including CapitaLand Group and Frasers Property Singapore, and all government landlords.

Some principles covered in the Code that will become mandatory when the new Bill is passed include prohibiting landlords from including clauses in their contracts to make their tenants pay for unspecified costs. They also cannot profit from the sale of electricity.

The new Bill will also mandate that landlords cannot include exclusivity clauses that restrict tenants from opening another business within a certain radius, except by mutual agreement.

Some other principles in the Code that must be complied with include landlords not holding more than three months’ worth of security deposits for leases of up to three years and covering an area of 5,000 sq ft and below; the prohibition of using rental formulas that change during a lease; and not allowing landlords to include in their agreements sales performance clauses where landlords can unilaterally terminate a lease if certain sales targets are not met.

Landlords will not be allowed to unilaterally pre-terminate leases, except under circumstances for redevelopment works such as a notice period of at least six months and informing the tenant at the point of lease signing.

The landlord and tenant are encouraged to renegotiate the lease agreement in cases where the tenant is prevented, obstructed or hindered from performing its typical business activity at the leased premises due to events beyond the tenant’s control.

The Bill will also establish a dispute resolution process for landlords and tenants of qualifying retail leases, said the Ministry of Trade and Industry (MTI) in a statement on Tuesday.

In a dispute, parties may be required to undergo mediation to resolve a complaint. If mediation does not result in an agreed-upon outcome, the party that filed the complaint may apply for an adjudicator to be appointed to decide the dispute. The adjudicator’s determination may be enforced as an order of the court, said MTI.

Said Ms Low: “The Bill marks a remarkable stride forward for our retail sector and achieves a significant milestone towards ensuring fair and balanced lease negotiations between retail landlords and tenants.

“This will benefit the retail sector, and in the long run, enhance the interest of consumers.”