The article provides a quick guide for tenants seeking relief from rental and other lease obligations in Singapore.
1. The Law
The COVID-19 (Temporary Measures) Act ("COVID-19 Act") bars a landlord from terminating a lease or evicting a tenant if the tenant is unable to pay rent or perform lease obligations due to COVID-19, if and only if the tenant has first given a Notification for Relief to the landlord (see notification procedures below).
This moratorium (i.e. ‘freeze’) on legal action allows parties time to negotiate and work out their differences rather than facing legal action immediately on default.
Contrary to popular understanding, the COVID-19 Act does not absolve tenants from paying rent or complying with their lease obligations (such as service charge or maintenance or reinstatement).
Rent and lease obligations are only suspended during the ‘freeze’ and a landlord is barred from terminating the lease or evicting the tenant during this period, provided that the landlord has been duly notified (see notification procedures below).
The key here is that COVID-19 must be the cause for inability to perform, for instance, low footfall resulting in low shop income. The COVID-19 Act is intended to assist companies with cash on hand to seek cost savings. The COVID-19 Act applies only to non-residential properties.
As a first step, tenants who are encountering difficulties in meeting their lease obligations should negotiate with their landlords.
For instance, some tenants offer to extend their lease for 3 more months so that they do not pay rent for 3 months now when cash is tight. Some tenants request for their security deposit to be used to offset the rent and commit to topping up the security deposit later.
It is also common for tenants to ask for temporary rental discounts, rent holidays, partial rent or service charge waivers. The best negotiations typically centre on:
1. Certainty in terms of money - a fixed sum to be waived, offset, deducted or reduced
2. Certainty in terms of time - a fixed period for the temporary state of affairs after which business as usual can hopefully resume (parties can always renegotiate this as needed later)
3. Win-win - neither tenants nor landlords should be taking advantage of the situation and both should work on give-and-take in good faith.
If negotiations are unsuccessful, a tenant may give a "Notification for Relief" to its landlord.
It's quite a simple process, and can by done by the tenants by logging on with their CorpPass at https://www.mlaw.gov.sg/covid19-relief/notification-for-relief. Also have the landlord’s email address for notification on hand. The notification is made by completing the prescribed Form 1.
Completing the Notification is not a guarantee that the tenant will get the relief it seeks; rather, after the Notification is given, the landlord cannot terminate the lease or evict the tenant from the premises as long as the COVID-19 situation is on-going, as determined by government prescription.
After the "Notification for Relief" has been given, hopefully the tenant and its landlord can come together to an amicable agreement.
If, however, there is still no agreement, either the tenant or the landlord can refer the case to an Assessor to make a determination on what relief might be equitable in the circumstances.
Applying to the Assessor is also done by logging on to https://www.mlaw.gov.sg/covid19-relief/application-for-assessor, and using CorpPass to access the application form.
The Assessor will discuss with both parties (via email or other means), and try to come to a solution for both parties.
The Assessor process is currently free of charge, but the Assessor decision is final. It cannot be appealed, except in very limited situations.
This whole process is very new, so the outcome of an assessment is not predictable.
Tenants seeking relief should be prepared to demonstrate that it is committed to honour its lease obligations but needs temporary reprieve and relief to keep the business going, and, that it has acted fairly and reasonably during this challenging COVID-19 situation.
This article is produced by our Singapore office, Bird & Bird ATMD LLP, and does not constitute legal advice. It is intended to provide general information only. Please note that the information in this article is accurate as at 11 May 2020. We will continue to monitor the situation and provide updates on any changes as soon as these are communicated to us. Please contact our lawyers if you have any specific queries.