More rental help for SME tenants with at least 35% revenue fall

Landlords to bear additional rental waivers under Covid-19 Bill to be tabled this week

Thu, Jun 04, 2020

Janice Heng


ADDITIONAL rental waivers - with the cost borne by landlords - will be given to eligible small and medium-sized enterprises (SMEs) that have suffered at least 35 per cent fall in revenue, on top of mandatory waivers funded by the government, under new legislation to be introduced on Friday.

Previous direct monetary assistance given by landlords, including passing on property tax rebates, can be used to offset the mandated waivers. Landlords unable to provide the additional waivers can seek an assessment, with qualifying landlords only having to give half the amount.

The Bill also sets out a repayment scheme for arrears, provides relief for tenants that cannot vacate business premises due to Covid-19, and caps late payment interest or charges for certain contracts. It amends an earlier act that gives temporary relief for some contractual obligations due to Covid-19.

The new legislation, under which the government and landlords share the cost of mandatory rental waivers for SMEs, was announced in last week's Fortitude Budget, with more details given by the Law Ministry on Wednesday. SMEs are defined as firms with turnover of up to S$100 million at the group level in 2019.

With the government funding the equivalent of about two months' rent for qualifying commercial properties, and about one month for industrial or office properties, landlords must in turn grant a two-month waiver of base rent for April and May to SME tenants in commercial properties, and a one-month waiver of base rent for April to SME tenants in industrial or office properties. Base rent excludes any gross turnover payable, maintenance fees, and charges for services such as cleaning and security.

There are additional waivers for SMEs with at least a 35 per cent year- on-year fall in average monthly revenue in April and May, at the outlet level. The tenancy must have been entered into before March 25, 2020.

Eligible SMEs in commercial properties will get two more months' base rental waivers, and those in industrial and office properties, one more month, to be absorbed by landlords. For eligible SMEs which are subtenants, the master tenant must grant these waivers too. Landlords may apply to government assessors to assess a tenant's eligibility for relief.

Among bigger companies, fashion retailer Charles & Keith's chief financial officer Dicky Koh said the firm is thankful for worker-focused support but felt that rental assistance could be improved. "While we agree that SMEs deserve added assistance, we felt businesses which have 'grown up' or graduated from the SME definition have been left out of the cash grants to help businesses with rental."

With the S$100 million cap based on pre-Covid-19 turnover, some businesses may remain ineligible even if their current revenue shrinks below that figure, he added.

Landlords may seek an assessment if they cannot provide the additional waiver, on grounds of financial hardship. Said Law Minister K Shanmugam: "Qualifying landlords, particularly the smaller landlords, with one property and (where rental forms) a substantial part of their income - we will set out the criteria - they will only be required to give half the amount of waiver." The annual value of the landlord's properties will be taken into account. SMEs that qualify for additional relief can also serve notice on landlords for a statutory repayment scheme of outstanding arrears accumulated from Feb 1 till Oct 19 this year, with payment of the first instalment by Nov 1, 2020.

Industrial or office tenants can carry over up to four months of arrears, and commercial tenants, up to five months. Arrears are to be paid in equal instalments for up to nine months or the remaining term of tenancy, whichever is shorter, with interest capped at 3 per cent per year.

The amendment Bill also provides relief for tenants which are unable to vacate non-residential property after their lease expires but before Oct 19, when the temporary relief prescribed period ends. Tenants which serve a notification for such relief and meet certain conditions will not be liable to their landlords for failing to vacate the property, except as otherwise prescribed by the Law Minister.

The Bill will also cap late payment interest or charges for specific types of contracts, with details to come.

The Covid-19 (Temporary Measures) (Amendment) Bill will be introduced on Friday. If approved, the amendments will be implemented in end-July. Eligible tenants will be notified in due course.