Knowledge Highlights 26 November 2024
Bill passed to mandate compliance with Code of Conduct for Leasing of Retail Premises for qualifying leases of retail premises, expected to take effect in February 2024
On 3 August 2023, the Lease Agreements for Retail Premises Bill (“Bill”), which mandates compliance with the Code of Conduct for Leasing of Retail Premises in Singapore (“Code”) for qualifying leases of retail premises, was passed in Parliament. The Code enables a fair and balanced lease negotiation process that will support the growth of retail businesses and strengthen the symbiotic relationship between tenants and landlords in the long run. The new legislation is expected to take effect in early February 2024.
By way of background, the Code was introduced by the Singapore Business Federation on 26 March 2021. The current version (Version 2) was issued on 15 March 2022 and incorporates updates to better cater to industry needs. The third version of the Code is in draft form and is expected to be finalised in the coming months and take effect on the same day as the date of commencement of the new legislation.
Application of the Bill
Under the Bill, the landlord and tenant of a qualifying lease must ensure that the lease agreement for that qualifying lease complies with the leasing principles in the Code which are in force at the time the lease agreement is signed.
A “qualifying lease” refers to a lease for retail premises with a tenure of one year or more where the agreement for the lease, or extension or renewal thereof, is signed on or after the date of commencement of Part 3 of the legislation, whether or not the lease, extension or renewal is expressed to be governed by Singapore law. Premises are retail premises if they are used primarily for the sale of goods by way of retail or the supply of services. It is stated in the speech delivered by Minister of State for Trade and Industry Low Yen Ling at the second reading of the Bill that this includes businesses such as eateries, restaurants, supermarkets, clinics, pet shops, walk-in bank branches, tuition centres, cinemas, and gyms.
Deviations from selected leasing principles are permitted with mutual consent by tenants and landlords. This keeps the Code from being overly restrictive and will allow for the usual commercial negotiations and considerations. Where there is a permitted deviation in the lease agreement, the landlord must, if required by the leasing principle in question, submit to the Fair Tenancy Industry Committee (“FTIC”) within the prescribed period a declaration of permitted deviation. Failure to do so may render the permitted deviation void in certain situations.
Facilitated dispute resolution process
The Bill provides for the appointment of an authorised dispute resolution body and a dispute resolution process comprising mediation and adjudication. On receipt of a complaint of non-compliance with any leasing principle in the Code, the authorised dispute resolution body must appoint a mediator from its panel of mediators to mediate between the parties and help them settle the dispute, including any variation to the lease agreement. If the mediation does not result in a settlement agreement, the complainant may apply to the authorised dispute resolution body to appoint an adjudicator from its panel of adjudicators to hear and determine the dispute. The adjudicator will be able to order the parties to vary the lease agreement or pay compensation, where applicable, for their non-compliant conduct.
A mediated settlement agreement or an adjudicator’s determination may be enforced in the same manner as an order of court provided certain conditions are met.
Role of the Fair Tenancy Industry Committee
The Bill sets out the requirements relating to the composition of the FTIC and its decision-making process. The Bill also sets out the functions of the FTIC which include periodically reviewing and modifying the Code, monitoring and promoting compliance by tenants and landlords with the new legislation and the Code, and establishing the process for submission of declarations of permitted deviations from the leasing principles that are set out in the Code.
Implementation timeline
It is stated in the second reading speech that the new legislation will take effect in early February 2024, which is about six months after the Bill was passed. This is to provide landlords with more time to comply with the Code. All new lease agreements, extensions or renewals of lease agreements signed on or after the commencement date will be covered by the new legislation.
Reference materials
The following materials are available from Singapore Statutes Online sso.agc.gov.sg, the Singapore Parliament website www.parliament.gov.sg, and the Fair Tenancy Industry Committee website ftic.org.sg:
