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The guidelines cover 11 areas of negotiations, from rental structure to pre-termination clauses, and is aimed at ironing out long-standing issues around the practice.
Retail tenants and landlords will soon be covered by new rules on leasing negotiations as the government eyes to legislate a new code of conduct for the industry, reported Channel News Asia (CNA).
Crafted by the Fair Tenancy Pro Tem Committee, which comprises landlords, tenants and industry experts, the code of conduct sets out guidelines on leasing arrangements as well as dispute resolution.
The guidelines cover 11 areas of negotiations, from rental structure to pre-termination clauses, and is aimed at ironing out long-standing issues around the practice.
The issues were brought to the fore last year when the COVID-19 pandemic resulted in tussles between landlords and tenants.
Currently, the guidelines are voluntary but the committee had recommended making compliance mandatory via legislation, said the Singapore Business Federation (SBF), which facilitates the committee’s work.
Minister of State for Trade and Industry Low Yen Ling revealed that the government supports the recommendation.
“In the next few months, we will be working closely with stakeholders, the landlords and the tenant associations to scope out details and involve them in this consultation process with a view of effecting the legislation,” she said as quoted by CNA.
“In fact, the government will be a lead adopter of this code of conduct and all government landlords will lead by complying with this code of conduct, unless there are other statutory obligations that we need to abide by.”
SBF noted that the new guidelines require landlords and tenants of retail premises to base rental formulas on a single computation, instead of using an “either/or, whichever is higher” formula.
As such, rental can be based on the amount of sales, floor area or a combination of both. However, clauses allowing tenants to be charged whichever amount is higher is prohibited.
The only exception is when both parties have agreed to include it in the lease agreement and made a joint declaration to the Fair Tenancy Industry Committee (FTIC) – a body that is set to be established to monitor compliance with the guidelines.
Landlords are also not allowed to pre-terminate a lease based on a tenant’s failure to achieve a certain sales target. SBF explained that such clause may only be included in the lease agreement if both parties have agreed to it and made joint declaration to FTIC.
The dispute resolution and enforcement process have also been outlined in the code of conduct.
Under the code of conduct, tenants or landlords who have already signed agreements are given 14 days to bring issues to the Singapore Mediation Centre (SMC).
SBF added that the FTIC will be formed by 10 June to “provide advice regarding the (code of conduct) and keep track of instances of non-compliance”.
The code of conduct applies to retail premises with lease agreements that were entered into on or after 1 June 2021, with a term of over one year, among other conditions.
“These retail premises can be housed in standalone commercial buildings such as shopping centres, office buildings, shop houses, MRT stations, or other types of buildings,” SBF said as quoted by CNA.
On why landlords should comply, several members of the committee noted that following the guidelines would boost the reputation of landlords as being responsible.
SG Tenants United for Fairness President Terence Yow said the organisation will highlight landlords who abide by the guidelines.
“We’re going to give that positive reinforcement and incentive to landlords who sign up as preferred or priority landlords for our community to consider when they are thinking of a new lease,” he said as quoted by CNA.
Meanwhile, committee chairman Michael Lim described the jointly developed industry-led code as a “significant milestone”.
“I am confident that it will set the standards for future lease negotiations and raise the vibrancy and competitiveness of the retail industry moving forward,” he said as quoted by CNA.
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this story, email: victorkang@propertyguru.com.sg
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