Shanmugam addresses concerns on rent deferment

Move gives tenants short-term liquidity but doesn't mean they don't have to pay rent

The deferment of rent payment is meant to give tenants breathing space and short-term liquidity, said Law and Home Affairs Minister K. Shanmugam, but he stressed that it does not mean tenants do not have to pay rent.

"The measures are for a period. The landlord's rights can be exercised after that," he said, adding that those who can make rental payments must continue to do so.

Speaking at the second reading of the Covid-19 (Temporary Measures) Bill, Mr Shanmugam also addressed concerns by some landlords that the Bill is too "heavily weighted in favour of tenants".

The legislation, which was passed yesterday, prevents landlords from terminating a lease or commencing legal action because a tenant cannot pay rent.

The proposed law covers contracts in which the obligations have to be performed on or after Feb 1, but excludes those entered into on or after March 25. Relief is provided for six months though it could be extended to a year.

The Reit Association of Singapore (Reitas) has said "deferring rental obligations transfers cash flow constraints from tenant to landlord". It also claimed that the enforced interruption of revenue could affect their financial stability.

But Mr Shanmugam pointed out that landlords are "able to set off the security deposits they have. So for the first few months, the landlords do not have cash flow constraints... and during that period, parties are encouraged to compromise".

"Landlords have to be realistic about the impact Covid 19 has had on the entire economy and cash flow on all sectors. Reits are not the only ones affected."

He added: "We are not anti-landlords... Our task is to see how to protect as much as possible the business ecosystem because the welfare of Singaporeans and their jobs depend on the economy being protected."

He said landlords are getting help as well via the Jobs Support Scheme, which subsidises up to 75 per cent of wages.

"Morally, some of this pain has to be shared. Landlords have benefited tremendously from growth, the Government's rational policies, good governance, low taxes in Singapore. Fairness and justice require they share some of this pain, rather than leaving it to the smallest and weakest to bear it all."

Several MPs like Mr Chong Kee Hiong and Mr Saktiandi Supaat (both Bishan-Toa Payoh GRC) also raised concerns about landlords who are Reits and the impact that non-payment of rent would have on retail investors.

Mr Shanmugam, in his wrap-up speech, stressed that the law does not remove the payment obligations of the tenants to the landlords.

"The landlords can tell the assessors, show the assessors that the tenant in fact has the financial capacity to pay a part, if not all, of the rent. If the assessor finds that the tenant is able to pay all or part of the rent, he may determine that the tenant pays that part or in full either immediately or after the expiry of a prescribed period."

The laws provide for disputes to be settled by assessors appointed by the Ministry of Law.

The legislation also provides relief for construction firms unable to fulfil their contracts.

Under the Bill, if a contractor is not able to perform due to a Covid-19 event between Feb 1 and the end of the prescribed period, that period should be disregarded in determining the period of delay in performance.

The law also covers certain types of loan facilities, including secured loans given to small and medium-sized enterprises (SMEs) with a turnover that does not exceed $100 million in the latest financial year.

If an SME is unable to repay its instalments due to a Covid-19 event, then some legal actions cannot be taken against it.

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A version of this article appeared in the print edition of The Straits Times on April 08, 2020, with the headline Shanmugam addresses concerns on rent deferment. Subscribe