The rental relief framework aims to help affected SMEs* who need more time and support to recover from the impact of COVID-19, by providing mandated co-sharing of rental obligations between the Government, landlords and tenants.
These measures are intended to establish a baseline position for the handling of tenants’ rental obligations. Landlords and tenants are encouraged to continue to try and work out mutually agreeable arrangements that best address their specific circumstances.
*The new rental relief framework will also be applicable for eligible Non-Profit Organisations (NPOs) and tenants of government properties.
Eligible SMEs which are occupying tenants (including subtenants and licensees) can receive a total of 4 months’ waiver of base rental for qualifying commercial properties (e.g shops), and a total of 2 months’ waiver of base rental for industrial and office properties, provided by the Government and landlords.
The rental relief will be part supported by Government assistance, and part shared by landlords, as summarised in the table below:
*Government Assistance: Owners of qualifying commercial properties (e.g. shops) will generally receive approximately 1.2 months of rent through the Property Tax Rebate, and owners of industrial/ office properties will generally receive approximately 0.36 month through the Property Tax Rebate. The Government will provide additional cash grants approximately equivalent to 0.8 month of rent to owners of qualifying commercial properties, and approximately 0.64 month of rent to owners of industrial/office properties. To ensure that these measures benefit the intended beneficiaries, landlords will be required to grant eligible SMEs in qualifying commercial properties 2 months’ waiver of their base rental, and eligible SMEs in industrial/office properties 1 month’s waiver of their base rental. This will provide rental relief to eligible SMEs (i.e. with not more than $100 million in annual turnover reported in their tax returns filed for Year of Assessment 2019, and (i) entered into before 25 March 2020 or (ii) entered into before 25 March 2020 but expired and renewed automatically, or in exercise of a right of renewal in the contract.
^The rental waivers may subject to conditions be offset by any previous direct monetary assistance provided by the landlord to the tenant (or subtenant/licensee) and/or any passing on of the Property Tax Rebate from property owners to their tenants.
Occupying tenants (including subtenants and licensees) will need to satisfy all criteria below to be eligible for the mandatory rental relief co-shared by landlords:
SME at the group level (≤$100 million turnover in 2019);
Substantial drop in average monthly revenue during COVID-19 (average monthly revenue from April to May 2020 on an outlet level reduced by 35% or more, compared to April to May 2019); and
The tenancy must be in force on 1 April 2020 and must have been: (i) entered into before 25 March 2020; or (ii) entered into before 25 March 2020 but expired and was renewed automatically, or in exercise of a right of renewal in the contract
Landlords will have the opportunity to apply to have an Assessor determine whether the tenant satisfies the eligibility criteria. The case will be examined by an Assessor, who will ascertain the tenant’s (or subtenant’s/licensee’s) eligibility. The legislation will require that tenants provide the necessary information to determine eligibility to the landlord upon request.
The landlord may also seek an assessment on the grounds of financial hardship if they are unable to provide the additional rental waiver. This will take into consideration the annual value of the landlord’s properties and the proportion of the landlord’s dependence on the rental income for his livelihood.
If the landlord meets the grounds of financial hardship, the Assessor can halve the amount of additional rental relief that needs to be provided by the landlord, i.e. 1 month waiver of base rental for qualifying commercial properties, and half a month waiver of base rental for industrial and office properties.
The Assessor’s determination will be binding on both the landlord and the tenant.
Eligible SMEs that qualify for the additional relief by landlords may also elect to serve notice on their landlords to take up a prescribed repayment scheme for a specified portion of rental arrears accumulated from 1 February up till 19 October 2020 (corresponding to the prescribed period of relief for non-performance of contractual obligations provided for under the Act). The notice should be served no later than 19 October 2020.
Upon serving the notice, tenants must start payment of the first instalment no later than 1 November 2020. Under the repayment scheme, tenants can pay for a specified portion of their arrears over an extended period of time (up to 9 months, or the remaining term of the tenancy, whichever is shorter) in equal instalments, with the interest payable on such arrears capped at 3% per annum.
For commercial properties, the maximum amount of arrears that can be paid in instalments will be 5 months’ base rent. For industrial/office properties, the maximum amount of arrears that can be paid in instalments will be 4 months’ base rent.
If the tenant fails to make a payment under the statutory repayment scheme within a prescribed period of time, or the tenant terminates the lease or licence, or the landlord terminates the lease agreement for any other default by the tenant, the statutory repayment scheme will be cancelled, and the landlord will be entitled to:
Landlords may also draw the existing security deposits to offset accumulated rental arrears during the repayment period. They may do so, until there is the equivalent of one month of rent remaining in the security deposit. At the end of the repayment period, the tenant will be obliged to reinstate the security deposit to the contractual amount.
Tenants who have rescheduled the payment of arrears will have to provide specified documents and information to their landlords if: (a) the lease agreement is terminated or repudiated during the repayment period; and (b) there are 2 or more rescheduled repayment instalments outstanding.
The documents and information to be provided will include filing a statutory declaration on their statement of accounts from April 2020 until the termination or repudiation of the lease. The tenant will also be required to set out how he proposes to repay the outstanding rental arrears.