SINGAPORE - More rent waivers are in the works for eligible small and medium-sized enterprise (SME) tenants in pandemic-hit sectors that have suffered a 35 per cent or more drop in average monthly revenue for April to May from the same year-ago period.
This and other additional support measures are in an extended Covid-19 (Temporary Measures)(Amendment) Bill to be introduced and debated in Parliament on Friday (June 5). If approved, the amendments will be implemented in end-July.
Nearly 260,000 SMEs employing more than two million workers stand to benefit from the measures. Many need help to stay afloat, as they have been hit hard by the unprecedented severity of the pandemic, with recovery likely to be slow in a phased opening of the economy.
To be eligible, SME tenants must have $100 million or less in annual turnover in 2019 and the tenancy must have been entered into before March 25, 2020.
Eligible tenants and subtenants in the food and beverage and commercial sector will get a total of four months of rent waived - two months from the Government and two months from the landlord. Those in the office and industrial sector will get two months of rent waived - one month from the Government and one month from the landlord.
Landlords, some of whom are said to be dragging their feet on providing assistance to tenants, will be required by law to give additional rent waiver to eligible SME tenants and subtenants that have been hit hard by the pandemic, on top of passing on property tax rebates and the cash grant given by the Government.
The landlord can apply for an assessment of the tenant's or subtenant's eligibility for relief within a specific time, and the case will be examined by an assessor, who will determine the tenant's or subtenant's eligibility.
The additional rent waivers will be applied to April through July for SMEs in commercial properties and April through May for those in industrial/office properties, as long as their leases are in force on April 1.
Certain landlords may get some reprieve. If the landlord is unable to provide the additional waivers, he may seek an assessment on grounds of financial hardship, which will take into consideration whether his rental income forms a substantial part of his total income and the annual value of his properties.
Law and Home Affairs Minister K. Shanmugam said at a media briefing on Tuesday: "Certain landlords will find it difficult to give the full waiver. Qualifying landlords, particularly the smaller landlords, with one property (and where rental) forms a substantial part of their income - we will set out the criteria - they will only be required to give half the amount of waiver."
This means they may give one month's waiver of base rent instead of two to F&B and commercial tenants, and half a month off instead of one month to office and industrial tenants.
"We are trying to strike a balance. It's a huge economic crisis. Government comes in, has put in $92 billion. Landlords have to do their part, tenants have to do their part, and together, with a bit of sharing of the pain, we hope that as many as possible can pull through," Mr Shanmugam said.
This is an even more substantive intervention by the Government, he added. It comes on top of giving companies more time to pay rent.
The new bill will also put a cap on late payment interest or charges for arrears for specific contracts. It will also let tenants repay their arrears through instalments.
Eligible SME tenants and subtenants can serve notice on landlords to take up a statutory repayment scheme for rental arrears accumulated from Feb 1 until Oct 19. Under the scheme, tenants must start paying the first instalment by Nov 1.
For example, if a commercial tenant applies to defer rent payment for six months from Feb 1 to July 31, of which four months (April to July) are waived, there will be a balance of two months' rent. The balance rent has to be paid in equal instalments for the remaining term of the lease, up to a maximum of nine months, with interest payable capped at 3 per cent per annum.
If tenants fail to make payment or terminate the lease or licence, the scheme will be cancelled and the landlord will be entitled to immediate payment of all the rental arrears, and to take steps under the contract for unpaid rent. Mr Terence Yow, a representative of Singapore Tenants United for Fairness (SGTUFF), said lease contracts are typically assessed late payment interest of between 10 and 15 per cent per annum.
"So capping late payment interest on rent arrears at 3 per cent is very fair because the finance charges that landlords or Reits pay on their bank loans are around 3 per cent also," he said.
According to the group, the new support measures will help reduce the number of store closures. "We had estimated that 30 per cent to 50 per cent of 2,000 stores will have some form of shutdown in the next three to six months. But with these measures, that number will drop to 15 per cent and 25 per cent," he said.
Tenants who, due to the pandemic, are unable to vacate their business premises after the end of their lease or licence but before the moratorium ends Oct 19, can seek relief too. If they meet conditions prescribed by the Law Minister, they will not be liable to their landlord for failing to vacate the property.
The law also prevents creditors from terminating contracts or taking enforcement actions against those who cannot meet certain payment obligations under specific contracts during the moratorium. But arrears on these contracts will continue to accrue and attract late payment interest and charges. To help them, amendments will be introduced to cap late payment interest and charges on arrears accrued under specific contracts.