17 April 2020
The Singapore government has implemented a series of support measures under the Covid-19 (Temporary Measures) Act (“the Act”). The Act was passed by the Singapore Parliament on 7 April 2020 and is aimed at providing relief to both businesses and individuals during the Covid-19 outbreak.
In this article, we shall look at what the Act means for landlords and tenants.
1. Tenant is entitled to Property Tax Rebate
Section 29(2) of the Act provides financial relief to tenants by ensuring that the benefit of any remission of property taxes enjoyed by the landlord is passed to the tenant, either by way of a payment of monies or by off-set against any rent payable by the tenant to the landlord.
Period of Property Tax Rebate
As part of the Resilience Budget announced on 26 March 2020, qualifying non-residential properties (“qualifying properties”) will be granted property tax rebate for the period of 1 Jan 2020 to 31 Dec 2020.
How much is the Property Tax Rebate?
Non-residential properties will receive a property tax rebate for the property tax payable in 2020 of up to 100% (except for properties under offices which will receive a 30% property tax rebate). The government-granted property tax rebate is intended to help businesses deal with the current pandemic crisis period to directly ease the cash flow and cost pressures faced by tenants. For most properties, the 100% property tax rebate works out to be equivalent to one month rental or more.
How will the landlord know how much Property Tax Rebate to pay tenants?
Landlords will receive the Rebate Notice from IRAS by 31st May 2020 as per IRAS’s e-Tax Guide titled “Property Tax Rebate for Non-Residential Properties in 2020”.
When will the landlord receive the refund back from IRAS?
Landlords will receive the refund from IRAS by 30th June 2020, as per IRAS’s e-Tax Guide titled “Property Tax Rebate for Non-Residential Properties in 2020”.
Is there a deadline for landlords to transfer the benefit in relation to Property Tax Rebate to the tenant?
Yes, there is a deadline of 30 June 2020 set by the Inland Revenue Authority of Singapore as per IRAS’s e-Tax Guide titled “Property Tax Rebate for Non-Residential Properties in 2020”.
What if the landlord fails to pass the benefit to the tenant by the deadline or fails to comply with Section 29(2) of the Act?
If the landlord, without reasonable excuse, fails to pass the benefit in relation to the Property Tax Rebate to the tenant by the time prescribed of 30 June 2020 in accordance with section 29(2) of the Act, the landlord shall be guilty of an offence and shall be liable on conviction to a fine not exceeding S$5,000 under section 29(6) of the Act.
What can the landlord do right now?
The landlord should inform the tenant of the above and that:
What is the mode of payment of the Property Tax Rebate to the tenant?
The landlord should prescribe how the mode of payment of the Property Tax Rebate is passed to the tenant, either by way of a payment of monies or by off-set against any rent payable by the tenant to the landlord pursuant to Section 29(3) of the Act. The latter is of course preferable for the landlord.
Can this passing of the Property Tax Rebate be subject to any conditions?
No. This passing of benefit of property tax reduction must be free from any condition. Section 29(4) of the Act reads as follows:
(4) The owner must 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.
2. Tenant is entitled to 6-month deferral of their contractual rent obligations
The Act assists businesses and individuals to defer certain contractual obligations such as rent in order to provide temporary financial relief during the Covid-19 outbreak.
What are the requirements for the tenant to be granted relief under the Act?
For the relevant section of the Act to apply to grant relief to the tenant, three requirements must be fulfilled under Section 5 of the Act:
What is the cut-off period for contracts which enjoy this relief?
The temporary rental relief of a maximum Prescribed Period of 6 months only applies to a contract entered or renewed before 25 March 2020. As stated previously, the contractual obligation that is to be performed has to be on or after 1 February 2020 for tenants to qualify for this relief.
Section 4(1) of the Covid-19 (Temporary Measures) Act reads as follows:
"4.—(1) This Part does not apply to a scheduled contract entered into or renewed (other than automatically) on or after 25 March 2020."
How long is the Prescribed Period tenants can enjoy this relief?
Under Section 3 of the Act, the Prescribed Period is defined as a maximum of 6 months.
Under the Act, Parliament has announced that the Prescribed Period will be from 20 April 2020 to 19 October 2020 (6 months) in the first instance.
The period of relief may be extended to up to a year.
What type of contracts are covered under the Act?
The following types of contracts are covered under Division 2 of the Act:
What does the tenant have to do to avail themselves of this relief?
Tenants must first serve a notification of relief on the landlord pursuant to ss 5(1) and 9(1) of the Act by writing in to the landlord to request for a maximum of 6 month’s deferral of payment of rent.
How do tenants confirm they are eligible for this relief?
If the tenant wishes to obtain temporary relief under the Act, they should:
a. First, confirm that they are eligible for relief by taking the self-assessment at http://www.mlaw.gov.sg/covid19-relief
b. Second, serve a Notification for Relief on the other party or parties to the contract, using the form at http://www.mlaw.gov.sg/covid19-relief/notification-for-relief.
What information should the Notification of Relief contain?
The COVID-19 (Temporary Measures) (Temporary Relief for Inability to Perform Contracts) Regulations 2020 (“the Regulations”) has introduced additional requirements for the Notification of Relief.
Under Section 9 (d)(iii) of the Regulations, the tenant must in the Notification of Relief produce “a brief explanation of how a COVID-19 event had caused to a material extent the inability to perform the obligation”.
The information required for the Notification of Relief under Section 9 of the Regulations is reproduced below:
Notification for relief
9.—(1) A notification for relief must be in Form 1, and must contain the following information:
(a) the name, address and telephone number, and email address (if any) of the person seeking relief under section 5 or 7 of the Act (called in this Part A);
(b) the name and address, and (if known to A) the telephone number and email address of each of the following:
(i) the other party or parties to the contract;
(ii) any guarantor or surety for the subject obligation;
(iii) the issuer of a related performance bond, if applicable;
(c) the following information about the contract in question:
(i) the description of scheduled contracts in the Schedule to the Act to which the contract belongs;
(ii) the date of the contract;
(d) the following information about the subject obligation:
(i) the details of the obligation;
(ii) the date the obligation was or is to be performed;
(iii) a brief explanation of how a COVID-19 event had caused to a material extent the inability to perform the obligation;
(e) any proposal by A to perform the subject obligation in another manner;
(f) a declaration by A to the effect that all information provided in the notification for relief is true and correct.
How can the tenant serve the Notification of Relief?
The Ministry of Law has announced that parties can serve the Notification for Relief using the electronic system (if you have the email addresses of the above parties):
More information can be found at the following link: https://www.mlaw.gov.sg/covid19-relief/notification-for-relief
What does this mean for the tenant?
In summary, action cannot be taken against the tenant during the Prescribed Period.
Does this mean that the tenant does not need to pay rent at all?
No, there is no provision in the Act allowing a tenant to cease payment of rent. Do note that the 6 months’ rent is deferred, not waived, and the accrued rents must be paid promptly by the tenant in the 1st week of the 7th month onwards.
Rent will continue to accrue for tenants and is payable immediately upon the expiry of the Prescribed Period of 6 months. The landlord is prohibited from taking action against the non-paying tenant for overdue rent (per s 5(3)(a) of the Act) or terminating the lease (per s 5(3)(l) of the Act).
The Act merely provides relief to a tenant by ensuring that, for the Prescribed Period of 6 months, the lease may not be terminated on the ground of non-payment of rent as a result of Covid-19.
When can the landlord request for payment of rentals?
Only upon the expiration of the 6 months, the landlord can request for the tenant to pay the rental arrears owing from the first week of the 7th month onwards.
What if there is non-compliance with the Act?
Section 8 of the Act provides that non-compliance with section 5 of the Act will constitute an offence punishable by a fine not exceeding $1,000.
3. Termination of the Lease
Can the lease be terminated due to inability to pay rent due to Covid-19?
Section 5(3)(l) of the Act prohibits the termination of a lease where a tenant is unable to pay rent as a result of COVID-19. There is no provision in the Act which allows a tenant to terminate a lease on the grounds of inability to pay rent as a result of COVID-19.
Is there any other way that the tenancy agreement can be terminated under the Act?
Yes. It is provided in the Act that tenancy agreements may also be terminated pursuant to the Frustrated Contracts Act or a force majeure clause in the contract. Section 5(13) of the Act states that such actions are not prevented by section 5 of the Act.
5.— (13) This section does not affect the taking of any other action in relation to the subject inability, including an action pursuant to the Frustrated Contracts Act (Cap. 115) or a force majeure clause in the contract where applicable.
Frustrated Contracts Act or Force Majeure clause can be used to terminate
Thus, tenants may use the Frustrated Contracts Act or a force majeure clause in the contract to terminate a tenancy agreement where the purpose of the agreement, such as the conduct of business at the rented premises, is rendered impossible.
Frustrated Contracts Act: Requirement of impossibility to perform the lease
Firstly, under s 2(1) of the Frustrated Contracts Act, the tenant must persuade the Singapore courts that it has become “impossible” to perform the lease, and not merely that it is impracticable or expensive to do so.
2.—(1) Where a contract has become impossible of performance or been otherwise frustrated, and the parties to the contract have for that reason been discharged from the further performance of the contract, this section shall, subject to section 3, have effect in relation to that contract.
In the Hong Kong case of Li Ching Wing v Xuan Yi Xiong  1 HKLRD 754, the tenant was issued an isolation order during the 2003 SARS epidemic, which the tenant argued made the premises uninhabitable. The Court held that the epidemic did not significantly change the nature of the outstanding contractual rights or obligations under the lease.
In light of the Circuit Breaker measures lasting from 7 April to 01 June 2020, and the COVID-19 (Temporary Measures) Act aimed at alleviating tenants’ financial burdens during this period, a tenant is unlikely to succeed in establishing that it has become “impossible” to pay rent under the lease – merely that it is unprofitable to do so. Therefore, the Frustrated Contracts Act may be of limited assistance to the tenant.
What is a force majeure clause?
Every contract typically has a force majeure clause. This clause serves to remove liabilities under a contract for natural, unavoidable or extraordinary events or circumstances beyond their control which prevents parties from fulfilling obligations.
Can the tenant rely on the force majeure clause to terminate the tenancy agreement?
Unlikely. Even if Covid-19 is an infectious disease under the Force Majeure clause in your tenancy agreement, it does not totally or substantially prevent a party hereto from performing or render or make it impossible for the party to carry out any important obligations required under the tenancy agreement. Hence the Force Majeure clause is unlikely to be successfully relied upon by the tenant due to the Covid-19 outbreak.
For these reasons above, s 5(13) of the Act may not assist a tenant in terminating the tenancy agreement using either the Frustrated Contracts Act or the Force Majeure clause in the tenancy agreement.
What if the landlord or tenant is dissatisfied?
If the landlord or tenant is dissatisfied with the tenant’s Temporary Relief Notification, the landlord can apply for the appointment of an Assessor to determine whether the tenant is entitled to the Temporary Reliefs. An application for an assessor’s determination must be made in the form and manner under Section 19 of the Act.
What are the factors the Assessor considers in making the determination?
If the Assessor is duly satisfied that the tenant is in a position to pay the rent owing despite the Covid-19 outbreak, the Assessor may order that the tenant pays rent (or part thereof) to the landlord. Factors that the Assessor will take into account include inter alia the following:
Assessor’s determination is non-appealable and binding
The Assessor’s determination is non-appealable and binding on all the parties to the application and all parties claiming through them as per Section 13(9) & 13(10) of the Act.
Can parties be represented by lawyers during the proceedings with the Assessor?
No. No party may be represented by lawyers in the proceedings with the Assessor, and each party must bear its own costs as per Section 14 & 15 of the Act.
Can the landlord or tenant enforce the Assessor’s Determination?
Yes. The Assessor’s Determination or Further Determination may (with the court’s leave) be enforced in the same manner as a court judgment as per Section 13(7) of the Act.
If you have questions or comments on this article, please contact:
Foo Soon Yien
Senior Director, BR Law Corporation
Associate, BR Law Corporation
Post date. Edit this to change the date post was posted. Does not show up on published site. 17/4/2020
The materials in these articles have been prepared for general informational purposes only and are not legal advice or a substitute for legal counsel. If you require legal advice for your particular circumstances, please consult a suitably qualified legal counsel. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not rely or act upon this information without seeking professional counsel. Whilst we endeavour to ensure that the information in these articles is correct, no warranty, express or implied, is given as to its accuracy and we do not accept any liability for error or omission.
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