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The Ministry of Law is introducing the COVID-19 (Temporary Measures) (Amendment) Bill in Parliament later this week. It will introduce a rental relief framework to help SME tenants.
Landlords will need to provide more rental reliefs to small- and medium-sized enterprise (SME) tenants under the amendments to COVID-19 regulations to be introduced in Parliament on Friday (5 June), reported Channel News Asia.
The amendments require commercial property owners to waive the base rent for the months of June and July of SME tenants that suffered “significant” revenue declines because of Covid-19, while landlords of industrial and office properties will have to grant tenants with a one-month base rent waiver for May.
Tenants whose leases or licences were in force on 1 April are eligible for the said reliefs. These measures are on top of the rent support from the Government that are already in place.
The proposed amendments require a “co-sharing of rental obligations” which will result to a total of four months’ worth of rental relief for SME tenants of commercial properties, and two months for those at industrial and office properties.
While the Act that was passed in Parliament on 7 April 2020 and took effect on 20 April already grants those who cannot fulfil contractual obligations with temporary relief for six months, the need to amend the same came because businesses, especially SMEs, continue to face financial burdens and uncertainties due to the pandemic.
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“In early April, we intervened through the COVID-19 (Temporary Measures) Act, to give time for companies to pay their rental. This time round, it’s an even more substantive intervention. It gives rental waiver for SMEs,” said Law and Home Affairs Minister K Shanmugam.
The relief measures will aid nearly 260,000 SMEs with more than two million employees to cope with the impact of the pandemic as slow recovery is expected considering that Singapore will reopen in a phased approach.
To strike a balance, these measures impose a set of criteria before tenants can be eligible for the reliefs. As a rule, SMEs must have an annual turnover of no more than $100 million in 2019 and have suffered a 35% or more drop in average monthly revenue from April to May on a year-on-year basis, in order to be eligible for reliefs. They must also have entered tenancy before 25 March 2020.
Landlords can apply for an assessment of this eligibility “within a specific time” and the case will be scrutinised by an assessor.
Landlords may also use the tax rebates they passed to their tenants since February and any direct monetary assistance to them to offset the required rental waivers, while those who are unable to provide tenants with the additional rental waivers may opt for an assessment on “grounds of financial hardship”.
Aside from the rental reliefs form landlords, the amendment Bill will also require property owners to pass to their SME tenants the Government-granted tax rebates and the new $2 billion cash grant in the form of base-rent waivers.
Announced as part of the latest Fortitude Budget, the $2 billion cash grant gives tenants at eligible commercial properties cash grants amounting to about 0.8 months’ worth of rent and 0.64 months’ worth of rent for qualifying industrial and office properties.
The government is trying to “strike a balance” between the reliefs being granted to tenants and the difficulties faced by the landlords as well. “Together, with a bit of sharing of the pain, we hope that as many as possible can pull through,” said Shanmugam.
Additionally, the proposed amendments will also allow SMEs to pay a “specified portion” of rental arrears accumulated from 1 February to 19 October via instalments.
Tenants will first have to notify their landlords before paying in equal instalments over an extended period of up to nine months or the remaining term of their tenancy agreements, whichever is shorter, with the first instalment to be paid on 1 November, subject to an interest capped at 3% per annum.
Lastly, the amendment also includes temporary reliefs, particularly in terms of penalties imposed for failing to vacate the premises on time at the end of the tenants’ leases.
“This relief will apply where, due to COVID-19, the tenant is unable to vacate a non-residential property after the end of the lease or licence and before the expiry of the prescribed period i.e. before Oct 19, 2020,” said the Ministry of Law.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg