Covid-19: Bill to implement rental waiver framework for businesses impacted by Phase 2 (Heightened Alert) passed

24 September 2021

On 14 September 2021, the Covid-19 (Temporary Measures) (Amendment No. 4) Bill (“Bill”) was passed in Parliament. The Bill introduces a rental waiver framework (“Framework”) to assist small and medium-sized enterprises (“SMEs”) and specified non-profit organisations (“NPOs”) affected by the tightened safe management measures during Phase 2 (Heightened Alert) (“P2(HA)”). Under the Framework, landlords will be required to provide a rental waiver of two weeks of gross rent to eligible SME and NPO tenant-occupiers of qualifying commercial properties. This measure is aimed at ensuring fair co-sharing of rental obligations over the P2(HA) periods between the Government, landlords and eligible tenants.

The Ministry of Law (“MinLaw”) states that the Framework complements the suite of support measures earlier introduced by the Ministry of Finance to cushion the economic impact of P2(HA) on workers and businesses. This included one month of rental support in total under the Rental Support Scheme (“RSS”) paid to qualifying tenants in privately owned commercial properties. Landlords were also encouraged to provide rental support.

Taken together with the RSS cash payouts, eligible tenants will benefit from a total of about 1.5 months of rental support. MinLaw expects to implement the Framework in October 2021.

Provisions for tenants

Eligibility criteria

An SME or NPO tenant-occupier (including a subtenant and a licensee) of a qualifying commercial property must meet all of the following criteria to qualify for the rental waiver:

• Its annual revenue does not exceed S$100 million in FY2019.
• Its lease or licence must be:
  • entered into or renewed before 20 July 2021; and
  • in force for the entire period from 5 to 18 August 2021 (both dates inclusive).
• Its lease or licence must have been stamped on or before 2 August 2021. (An SME or NPO tenant-occupier who meets all eligibility criteria but has an unstamped lease or licence may make a manual application for rental waiver. Such cases will be assessed by a rental waiver assessor.)
• It must have suffered at least a 20% drop in average monthly revenue during both P2(HA) periods (16 May 2021 to 13 June 2021 and 22 July 2021 to 18 August 2021, all dates inclusive), as compared to the Phase 3 period (28 December 2020 to 7 May 2021, both dates inclusive).
• If the business is part of a Singapore group of entities, the group’s annual revenue must not exceed S$100 million in FY2019. (This does not apply to SMEs that are not part of any group of companies, or NPOs.)

Claim procedure

Tenants who received the second payout under the RSS will receive a Notice of Rental Waiver (“Notice”) from MinLaw in October 2021. Prior to receiving the Notice, tenants should continue to honour their existing contractual obligations.

Tenants who receive the Notice and wish to claim the rental waiver will have to assess whether they meet the eligibility criteria. If eligible, they must:

• prepare the supporting documents (e.g. profit and loss statements) to prove their eligibility and complete the declaration form attached to the Notice; and
• send copies of the Notice, the completed declaration form and the supporting documents to their immediate landlord, via email or registered post, within 28 calendar days from the date of the Notice.

The rental waiver will apply once an eligible tenant sends all the above documents to their landlord. It will apply first to any rental arrears owed (including any associated interest or charges) for the period 5 to 18 August 2021 (both days inclusive). If the tenant has already paid rent for 5 to 18 August 2021, the tenant’s rent for the next most immediate month will be reduced by two weeks.

If the tenant rents the property through an intermediary landlord (i.e. a landlord who is not the property owner), the intermediary landlord will also receive the same amount of rental waiver from their immediate landlord (i.e. the landlord of the intermediary landlord), up to a cap of two weeks of the gross rent of the intermediary landlord. This applies regardless of whether the intermediary landlord meets the eligibility criteria. To claim the rental waiver, the intermediary landlord must send copies of all the documents they receive from their tenant to their immediate landlord, via email or registered post, within seven calendar days of receiving the documents from their tenant.

Landlords who have provided rental support to their tenants during P2(HA) may offset from their rental waiver obligations any direct monetary assistance or rental waivers provided to tenants from 16 May 2021 up to the date the landlord receives all the tenant’s supporting documents.

Tenants and landlords are encouraged to work out mutually agreeable arrangements based on their specific circumstances. However, if they are unable to reach a compromise, they may make an application to an independent rental waiver assessor for a determination.

Provisions for landlords

Landlords who face financial hardship in having to provide the mandated rental waiver can apply for relief to be assessed by an independent rental waiver assessor, who will take into account specific factors in each case. In his second reading speech on the Bill, the Minister for Law, K Shanmugam, explained that there will be objective criteria, including:

• the annual value of their property; and
• whether the rental income forms a substantial part of their total income.

If the landlords meet the criteria, the assessors can exempt them from providing the rental waiver.  

There may be different circumstances on the part of landlords which warrant special consideration, such as landlords who gave their tenants flexibility and relief by providing short term lease extensions with significantly reduced rent. As it is not possible to define criteria to account for all these circumstances in full within the legislation, the Bill includes a provision to give the assessors greater flexibility and discretion to take into account exceptional circumstances of landlords and determine if it is just and equitable to make appropriate adjustments to the rental waiver obligations between the landlord and tenant.

Reference materials

The following materials can be found on the Parliament website www.parliament.gov.sg and the MinLaw website www.mlaw.gov.sg:

• Covid-19 (Temporary Measures) (Amendment No. 4) Bill
• MinLaw press release: Rental waiver framework for businesses impacted by Phase 2 (Heightened Alert)
• Annex A - Supporting documents required to claim rental waiver
• Annex B - Process to claim rental waiver
• Annex C - Determinations by a rental waiver assessor
• Second reading speech by the Minister for Law, K Shanmugam, on the Covid-19 (Temporary Measures) (Amendment No. 4) Bill

Further information

Allen & Gledhill has a Covid-19 Resource Centre on our website www.allenandgledhill.com that contains knowhow and materials on legal and regulatory aspects of the Covid-19 crisis.

In addition, we have a cross-disciplinary Covid-19 Legal Task Force consisting of Partners across various practice areas to provide rapid assistance. Should you have any queries, please do not hesitate to get in touch with us at covid19taskforce@allenandgledhill.com.