Businesses call for fair tenancy law to solve ‘growing’ imbalance in landlord-tenant relationship amid COVID-19 outbreak
SINGAPORE: Five business groups in Singapore have banded together to call for landlord-tenant legislation to be adopted to address a “growing imbalance” of power that has brewed years of unfair leasing practices.
In a position paper put out on Thursday (May 21), the newly established Fair Tenancy Framework Industry Committee (FTFIC) raised 15 recommendations, including the passing of a Fair Tenancy Bill and the setting up of a new commission for enforcement and dispute resolutions.
The paper was presented to the Ministry of Law and the Ministry of Trade and Industry on Thursday morning, the committee said.
The FTFIC, which includes the Singapore Business Federation SME Committee (SBF SMEC), Association of Small and Medium Enterprises (ASME), Restaurant Association of Singapore (RAS), Singapore Retail Association (SRA) and the Singapore Tenants United for Fairness (SGTUFF), represents more than 10,000 firms.
It was formed five weeks ago after the COVID-19 pandemic left businesses reeling and highlighted how landlord-tenant relationships were “not symmetrical in bad times”.
FTFIC chairman Kurt Wee pointed to the months-long tussle for rental relief with landlords that were granted property tax rebates by the Government.
“Many institutional landlords even advantaged themselves with taxpayers’ money by imposing conditions on tenants when giving rebates and it almost always came with an imposed gag order,” Mr Wee said during a virtual press conference.
“Some did not even care about how urgent the SME tenants needed the speedy help, and proposed delayed and time-staggered payments through months ahead,” he added.
The Government stepped in last month with legislation to make it compulsory for landlords to pass on rebates, but the episode showed landlords “taking advantage of the lack of legislation", the committee said.
Prior to this, unfair rental situations have been going on for years, said Mr Wee. These include various “strong-handed” clauses that are imposed upon retail tenants, such as those that require personal guarantees or allowing landlords to pre-terminate leases.
Some landlords also require their tenants to buy electricity from them at a 20 to 30 per cent mark-up and pay for sub-metering infrastructure. This, according to Mr Wee, has resulted in “hundreds of thousands of extra energy costs” for some businesses.
There were attempts to level the playing field, with a committee under SBF introducing a voluntary Fair Tenancy Framework in 2015. But the framework received support from only Jurong Town Corporation, with no private landlords endorsing it, Mr Wee said.
SBF CEO Ho Meng Kit said: “We would have preferred if a fair and sustained outcome can be achieved without legislation.
“But we had an industry code, the Fair Tenancy Framework, that was not well supported so we are now pushing for legislation for greater effectiveness and enforcement.”
“LONG OVERDUE COURSE OF ACTION”
The committee’s recommendations cover three broad aspects: transparency of information, regulation of conduct, and enforcement.
On access to information, it recommended having a public rental information database that is updated every month and for landlords to provide mall-level productivity and performance data.
Landlords currently have access to their tenants’ sales data through the point-of-sale systems yet tenants receive scant information on footfall or how the mall is performing, said Mr Wee, noting that the lack of information reciprocity has resulted in “lopsided” rental negotiations.
The FTFIC also wants the Government to legislate and pass a Fair Tenancy Bill to prohibit undesirable or unfair tenancy practices and behaviour by either landlords or tenants.
The recommendations include the mandatory addition of an “adverse circumstances clause” in leases, having a limit on security deposits and for retail rents to be calculated using a formula of base rent and a negotiable gross turnover component.
The committee also proposed the establishment of a Fair Tenancy Commission that will oversee the creation and generation of market rental data.
The commission can also provide guidance on gaps and disputes, regulate matters between landlords and tenants, and undertake periodic review and revision of the legislation, the position paper stated.
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Mr Terence Yow, a business owner and a representative of the SGTUFF grouping, said fair tenancy law is “a long overdue course of action”. If there was one in place, many businesses on the frontline could have been spared the “unnecessary pain” of having to close or lay off employees amid the COVID-19 outbreak, he added.
FTFIC co-chairman Andrew Kwan said about 26 per cent of the revenue made by an average restaurateur goes to rental payments, with the costs of manpower and goods accounting for another 65 per cent or so.
Help from the Government has helped to alleviate labour costs, while restaurateurs have also taken on cost-cutting measures in line with dramatic falls in revenue.
This leaves rent the “elephant in the room … (that) is dragging operations down”, said Mr Kwan who is also the vice president of RAS.
“If there is no light in sight, there is a grave danger that many SMEs would rather cut losses at this point in time,” he said, noting that there could be a “sudden and severe uptick” in unemployment when that happens.
On how confident it is in engaging landlords at this time, Mr Wee said the Fair Tenancy Framework was made voluntary in 2015 on hopes that the unfair practices was a “behavioural issue that could be corrected”.
But with no private landlords on board and the disparity in power between landlords and tenants made worse by the COVID-19 outbreak, the committee decided to push for legislation.
Ms Cynthia Phua, who led the committee behind the Fair Tenancy Framework in 2015, offered a glimmer of hope.
“Recently, we had a (representative) from CapitaLand to sit in our workgroup so that’s a start,” she said. “We hope that we can engage more of the landlords to work further on the Fair Tenancy Framework.”
Moving forward, Mr Wee said the committee is open to further consultations with policymakers and will also work on educating more business owners about fair tenancy.
“But (even if tenants are aware), the power balance remains lopsided … so we certainly hope that not only will the Government consider fair tenancy legislation, they will act on it speedily,” said Mr Wee.
Separately, the Competition and Consumer Commission of Singapore (CCCS) has begun studying the leasing of private retail space in Singapore.
The competitive watchdog conducted a survey earlier this month to seek views from retail tenants about the competitiveness of the local private retail space and leasing terms, as seen in links to the survey posted on the Facebook pages of RAS and SGTUFF.