Proposed new law to ensure retail lease contracts comply with code of conduct
The code of conduct sets out guidelines and principles to enable fairer and more balanced lease negotiations between landlords and tenants of retail premises.
FILE: People walk inside a shopping mall in Singapore. (AFP/Roslan Rahman)
SINGAPORE: A Bill to make it mandatory for retail lease contracts to comply with a code of conduct was tabled in parliament on Tuesday (Jul 4).
The code sets out guidelines and principles to enable fairer and more balanced lease negotiations between the landlords and tenants of retail premises, said the Ministry of Trade and Industry (MTI) in a press release.
These principles range from landlords not being allowed to mark up electricity rates to not requiring a security deposit that exceeds three months' rent – if the tenanted floor area is below 5,000 sq ft and the lease term is three years or less. Landlords also cannot terminate leases early citing redevelopment works, unless they meet certain conditions, such as giving tenants a notice period of at least six months.
The code also sets out a dispute resolution process for both parties.
According to MTI, the code gives landlords clarity on the terms in the lease agreements and makes the negotiation process easier. At the same time, it addresses the key concerns of tenants through the leasing principles.
All government landlords and at least nine major private sector landlords, including CapitaLand Group and Frasers Property Singapore, have voluntarily adopted the code of conduct since June 2021.
Members of the public were invited to provide feedback on key provisions of the proposed legislation during a public consultation last year from Jul 18 to Aug 5.
The proposed Bill will make compliance with the code mandatory for all qualifying retail leases in Singapore.
If passed, the legislation is expected to take effect about six months later.
This means the code will apply to all retail leases with a tenure of one year or more, signed or renewed from the date of commencement of the legislation, said MTI.
"AFFORDABLE" DISPUTE RESOLUTION PROCESS
The code allows landlords and tenants to deviate from four of the 11 leasing principles by mutual agreement, to allow for "market flexibility", the ministry said.
The four principles include the exclusion clause, which cannot be in the lease agreement unless both parties agree to it.
Clauses on sales performance where landlords can end a lease if certain sales targets are not met can also be deviated by mutual agreement.
Landlords and tenants can also agree to alternative security deposit amounts for leases of up to three years and units of up to 5,000 sq ft.
Both parties may also agree to a rental formula that changes during a lease, unlike the single rental formula as listed in the code of conduct.
A “declaration of permitted deviation” must be submitted to the Fair Tenancy Industry Committee – the custodian of the code of conduct – within 14 days of the signing of the lease.
With the exception of rental formula, the other deviations will be void if declaration is not submitted within the 14-day period.
A dispute resolution process will also be established for landlords and tenants. The process will be affordable and expedient, an MTI spokesperson said in response to media queries.
Parties may be required to undergo mediation to resolve a complaint in a dispute. If mediation does not result in an agreed outcome, the party that filed the complaint may apply for an adjudicator to be appointed to decide the dispute.
The adjudicator’s decision may be enforced as a court order.
The proposed legislation will also empower the Minister for Trade and Industry to appoint the chairperson and members of the Fair Tenancy Industry Committee, which will continue to be represented by landlords, tenants and industry experts.
The committee will review and update the code and establish the process to ensure landlords and tenants comply with the code.
Minister of State for Trade and Industry Low Yen Ling said on Tuesday the proposed Bill will help ensure fair and balanced lease negotiations between landlords and retail tenants.
“Stronger landlord-tenant relationships and understanding will fortify our retail, lifestyle and F&B enterprises and help them weather the future better. This will benefit the retail sector and in the long run, enhance the interest of consumers,” she said.
Representatives from the industry have also shown support for the Bill, MTI said.
Fair Tenancy Industry Committee chairman Max Loh said the committee will ensure the industry "upholds the spirit of the code" during lease negotiations.
