Covid-19: New laws to compel landlords to pass on property tax rebate

Though rebate is welcome; tenants argue it's insufficient and mall operators have to go further, and will continue negotiating with landlords on this

Fri, Apr 03, 2020

LYNETTE TAN


BUSINESSES on Thursday hailed a newly proposed legislation that will ensure non-residential landlords pass on property tax rebates in full to all tenants, with some saying it's long overdue.

"We appreciate the harsh hand of the law in this matter, but we wished it did not have to come to this," the Singapore Retailers Association (SRA) said.

The legislation will help to ease "a lot of pressure and uncertainties" that most retailers are facing, added Bernard Yang, managing director of Nanyang Optical.

The Ministry of Finance said on Thursday that new legislation will be introduced at the next sitting of Parliament on April 6 to ensure that landlords pass on property tax rebates in full to their tenants.

Property owners who fail to do so unconditionally "without reasonable excuse" will be guilty of an offence.

As part of the recent Resilience Budget, the government expanded earlier-announced property tax rebates such that commercial properties that qualified for Budget 2020's rebates of 15 to 30 per cent will now pay zero property tax for 2020.

Since then, some property owners have passed the rebates on to tenants; some have even reduced rental further than what the rebates amount to.

But others have been seemingly hesitant to do so, drawing ire from tenants. Government agencies are understood to have been mediating between the two parties.

The government is thus taking legislative action to "tackle the current challenge decisively", said Deputy Prime Minister Heng Swee Keat in a Facebook post that night.

"Landlords and tenants have a win-win relationship - when the tenants do well, landlords benefit too. So landlords must do their part for tenants during these times," he stressed.

Tenants have welcomed the move, although some would like more clarity on what this means for previous offers of rebates, and whether this would clash with a new Bill that seeks to relieve them of rental obligations.

Lyn Lee, founder of Awfully Chocolate, shared that some tenants have been offered rebates with conditions following talks with landlords. As an example, some offers are subject to rent being current and paid.

Hence, Ms Lee questioned: "With the potential rent holiday from the upcoming Bill, will it mean that previous offers become null? Also, do tenants reject previous agreements that come with conditions, and take up new agreements?"

Others wondered if the rebates might end up being too little, too late. For most, the 100 per cent property tax rebate works out to about 1.2 months' rent.

Jinjja Chicken founder Bernard Tay said the legislation is "a bit late, but better than nothing", but rebates should be passed on within two months in order to be helpful.

Wild Rocket Group's chef-owner Willin Low also pointed out that the rebates alone won't be enough to save tenants, as what they have lost is "nothing" compared to it. For some F&B tenants, rental costs have risen to at least 50 per cent, and even up to 80 per cent, of total revenue, the Restaurant Association of Singapore noted.

The association and SG Tenants United for Fairness, an informal group of over 400 retailers, thus argue that help from mall operators has to go beyond just rebates, and will continue negotiating with landlords on this.

Some quarters are thus hoping the new legislation could pave the way for fairer tenancy agreements to be in place. "Most of us know the Fair Tenancy Framework has no teeth," said Pure Senses founder Logan Wong. "I see this (upcoming) legislation as a step towards some sort of legislation around fair tenancy."

In any case, the new law, if passed, is unlikely to have material impact on property owners. A property analyst noted that most retail or commercial landlords have committed to passing on full rebates to all tenants and so, won't have to make further provisions.

A number of landlords like CapitaLand, Frasers Property, Mapletree, Lendlease, YTL Starhill Global Reit Management and APM Property Management have said they intend to pass on the property tax rebates fully to all tenants.

City Developments Ltd said it has also disbursed rental rebates to retail tenants in March and will continue to "provide further assistance" from April to June.

"In view of new legislation requirements, we will adjust our processes and frameworks for compliance accordingly," the group added.

Mercatus Co-operative Ltd, NTUC Enterprise's real estate arm, has credited the first 15 per cent of the property tax rebate in March to offset April's rent, and will use the remaining 85 per cent to offset April's rent as well.

UOL Group declined comment. The Reit Association of Singapore (Reitas) is likely to put out a statement soon.

The Real Estate Developers' Association of Singapore (Redas) said it would urge its relevant members to comply with the new legislative framework. It also advised members to provide further assistance to tenants "on a win-win approach to ensure business sustainability and continuity".

If passed, the new legislation will ensure that property owners pass on to their tenants the full amount of property tax rebate received for each property tax account that is attributable to the tenanted property.

It will also ensure that the rebate is passed on in a timely manner according to a prescribed timeline, and prevent property owners from imposing conditions.

A valuation review panel - comprising members from the Valuation Review Board constituted under the Property Tax Act - will settle disputes between the property owner and the tenant.