15 April, 2020
It is expected that many businesses in Singapore will face difficulty paying rent during this period. As such, the government has sought to encourage landlords to be lenient with tenants who are unable to pay rent by ordering a remission of property tax under section 6(8) of the Property Tax Act (Cap. 254) in response to COVID-19. The Singapore government has also determined that commercial tenants will experience greater uncertainty arising from COVID-19 and has passed legislation on the suspension of the obligation to pay rent under commercial leases.
1. Property Tax Remission Must Be Passed On By Landlords To Tenants
The COVID-19 (Temporary Measures) Act (the "COVID-19 Act"), effective as of today 9 April 2020 orders all Singapore landlords to pass along the property tax remission to tenants by way of lump sum, instalment payment, or, set-off against future rent payable.
Landlords must also not subject the passing of the benefit to any condition (whether a condition precedent or subsequent), including any change to any term or condition of the lease or licence agreement with the tenant; and any such condition which the owner purports to impose is void.
In the event of disputes relating to the transfer of the property tax remission, the owner or tenant may apply for the dispute to be heard and determined by a Valuation Review Panel pursuant to the COVID-19 Act.
The deadline for review is not the usual seven year limitations period, but much shorter, being 12 months after the end of the remission period.
If a party disagrees with the Valuation Review Panel, disputes may be appealed at the Singapore High Court level.
2. Temporary Relief from Rental Payment Obligations
Commercial tenants are also considered exceptionally exposed to economic pain arising from COVID-19. As such commercial leases have been specially protected under the COVID-19 Act.
If, on account of cashflow issues, a tenant is unable to pay rent, it may seek relief by issuing a notice to the landlord that it is unable to pay rent due to COVID-19. The notice should also be sent to guarantors or sureties (if any). As a result of issuing such notice, and pursuant to the COVID-19 Act, the landlord cannot take action to foreclose the lease, re-enter the premises or evict the tenant for non-payment of rent during the COVID-19 period. We expect tenants in the retail sector, hard hit by the safe distancing measures, to welcome this respite.
Any disputes on such suspension of obligations can be referred to an Adjudication Panel. This is intended as a temporary measure and typical legal dispute resolution mechanisms such as litigation in court over rental non-payment pursuant to the COVID-19 Act cannot be accessed for this specific set of circumstances.
Rental remains payable – the measures are not a rent waiver. The suspension relates to the COVID-19 period only, and once the authorities determine that the threat has passed and the economy is recovering, the suspension will likely be lifted. The COVID-19 (Temporary Measures) Act applies for a prescribed period of six months, but this period may be extended or shortened by the authorities.
We recommend that landlords and tenants monitor the situation and keep communications channels open. The return to normalcy and the obligation to abide by contractual obligations may not occur evenly across all tenants and contractual variations or adjustments will require early discussion and negotiations so that both parties ease back into the contract at the end of the special relief period.
For further information, please contact:
Sandra Seah, Partner, Bird & Bird
sandra.seah@twobirds.com
