COVID-19: The COVID-19 (Temporary Measures) Act: What it means for Landlords and Tenants

17 April 2020

Luke Lee

*Updated caa 15 November 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. 

This article covers the following measures in place thus far as of 4 August 2020:

1. Property Tax Rebate for Tenants
2. 6-month Deferral of Contractual Obligations for Tenants
3. Government assistance of Rental Relief for SMEs and NPOs
4. Moratorium on Enforcement Actions
5. Termination of Lease
6. Re-Align Framework
7. Simplified Insolvency Programme


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:

• For most properties, the 100% property tax rebate works out to be equivalent to the tenant’s one month rental or more;
• The landlord is not required to submit any claims for the rebate including any calculations;
• The landlord makes no representations or warranties of any kind whatsoever, be it express or implied, as to the accuracy of the estimated amount of Property Tax Rebate herein; and
• The landlord will only know the confirmed amount of Property Tax Rebate when they have received the Rebate Notice setting out from IRAS by 31st May 2020.

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:

• The contractual obligations to be performed on or after 1 February 2020;
• The inability to perform is to a material extent caused by a COVID-19 event; and
• The tenant has served a notification for relief in accordance with section 9(1) on the landlord.

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:

• Secured loan agreements to SMEs
• Construction contracts and supply contracts
• Event and tourism-related contracts
• Hire-purchase and conditional sales agreements
• Leases and licences of non-residential property

 
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):
 
• For parties who are individuals, please use this link (SingPass).
• For parties which are business entities, please use this link (CorpPass).
 
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. Government assistance of Rental Relief for SMEs and NPOs

The COVID-19 (Temporary Measures) (Rental and Related Measures) Regulations 2020 (“the Rental Regulations”) came into force on 31 July 2020. The Rental Regulations provide a structured framework for relief to Small and Medium Enterprises (SMEs) and Non-Profit Organisations (NPOs) and enhance the existing measures for eligible SME and NPO tenants who are unable to fulfil their contractual obligations due to the COVID-19 pandemic, by providing a mandated co-sharing of the rental obligations between landlords, tenants and the Singapore government. 

What are SME tenants under the Rental Regulations?

Tenants with not more than S$100 million in annual revenue for the Financial Year 2018 or a later appropriate period where applicable, at the individual or entity level, under Regulation 4 of the Rental Regulations. 

What are NPO tenants under the Rental Regulations?

NPOs with not more than S$100 million in annual revenue for the Financial Year 2018 or a later appropriate period where applicable, at the entity level:

a. Registered or exempt charities (as provided in the Charities Act);
b. Members of the National Council of Social Service;
c. National sports associations;
d. National disability sports associations;
e. Specified arts and culture societies; or
f. Specified trade associations.

What kind of leases / licences qualify for this rental relief?

Tenants’ leases or licences must be in writing, or evidenced in writing, and:

a. Entered into before 25 March 2020; or entered into before 25 March 2020 but expired and renewed automatically or in exercise of a right of renewal in the contract; and

b. In force at any time between 1 April to 31 July 2020 (qualifying commercial properties), or between 1 April to 31 May 2020 (other non-residential properties).

How will the annual revenue be determined for SME tenants?

This determination of which businesses are SME tenants will be based on their Corporate Tax and Individual Income Tax returns for the Year of Assessment 2019.

What relief can SME tenants enjoy?

Eligible SME tenants can receive a total of 4 months’ waiver of their base rental for qualifying commercial properties and a total of 2 months’ waiver of their base rental for industrial and office properties. The rental waivers above will apply to eligible SME subtenants as well.

This relief is from assistance from the Singapore government and additional rental relief to be borne by the landlord. The breakdown of the reliefs are set out below.

3.1 Rental relief assistance from Singapore government

As part of the Fortitude Budget presented on 26 May 2020, the Singapore government will provide additional cash grants of 0.8 months of rent for qualifying commercial properties, and 0.64 months of rent for industrial and office properties.

Combined with the Property Tax Rebate from the Resilience Budget presented on 26 March 2020, owners of qualifying commercial properties will thus receive 1.2 months through the Property Tax Rebate, and owners of industrial/ office properties will receive 0.36 months through the Property Tax Rebate. Therefore, in total the Singapore government is granting SME tenants a total of 2 months of rental waiver of their base rental for qualifying commercial properties and a total of 1 month of rental waiver of their base rental for industrial/office properties. 

For SME tenants in qualifying commercial properties, the 2-month rental waiver will apply to the months of April and May 2020. For SME tenants in industrial/office properties, the 1-month rental waiver will apply to the month of April 2020. 

When will the Singapore government provide the cash grants to property owners?

IRAS will start issuing notices of cash grant to qualifying property owners, and disbursing the cash grant. The notices will be available on IRAS’ myTax Portal by mid-August 2020 and will also be sent via hard copy to property owners with eligible tenants, who should receive them by mid-August 2020. 

What do landlords have to do once they receive the notices of cash grant?

The applicable rent and any interest payable on the rent is waived and the tenant does not need to pay rent for the period covered.

If the tenant has already paid rent to the landlord, the landlord should apply the waivers to the next immediate month(s). If that is not possible, the landlord is to give the tenant a refund.

Note that the moratorium for the tenant-occupier from 31 July 2020 onwards ends upon receipt of the notice of cash grant by the property owner, unless the tenant-occupier has filed a Notification for Relief (in which case the moratorium will end on 19 October 2020). 

The landlord must serve a copy of the notice on the immediate tenant in person, via registered post or email, within 4 days of receipt of the IRAS notice. If possible, serve a copy on the end-tenant-occupier directly as well.

How will the landlord know if the tenant is eligible?

Landlords can ask for proof of eligibility for the rental waivers from the tenant before the receipt of the notice of cash grant from IRAS. Tenants are encouraged to provide the supporting documents for eligibility in order for the landlord to know early regarding the tenant’s eligibility. 

Upon the receipt of the notice of cash grant from IRAS, landlords may send a written request to the tenant-occupier to share relevant information on their eligibility, e.g. financial statements for the relevant period. The tenant-occupier should do so within 5 working days.

What can the property owner do if they do not receive the notice from IRAS after 21 August 2020?

If you have not received the IRAS notice, the property owner or the tenant-occupier can make an application at www.go.gov.sg/governmentcashgrant.

What if the landlord has provided assistance out of goodwill to the tenant before?

In the event that a landlord has provided previous assistance to the tenant or reached an agreement previously to provide financial assistance to their tenants, in the form of either monies paid or reduction of payments due under the lease agreement, this assistance can be offset from the landlords’ rental waiver obligations.

Landlords may offset the rental waivers with any previous financial assistance already provided to their tenants, such as:

a. Any payment, or deduction of any amount due under the lease agreement:
 (i) given by the landlord to the tenant on or after 1 February 2020 but before the date of receipt of the copy of the notice of cash grant by the tenant; or 
 (ii) undertaken by the landlord, before the date the notice of cash grant is issued to the property owner, to be given to the tenant; and/or

b. Any benefit of the Property Tax Rebate for Year 2020 that has been passed on or is obliged to be passed on by the property owner in respect of the property.

The property owner is still required to provide the remaining rental waiver after taking into account any offsetting of the rental waiver above.

What if the tenant has already paid the rent for the relevant relief period?

In the event that the tenant has already paid for the rent for the relevant relief period, the tenant can either apply the rental waivers to the next immediate month(s) of rent, or if this is not possible, the tenant can receive a refund from the landlord.

3.2 Additional rental relief to be borne by landlords

The landlord will bear the additional rental waivers which will be applied to the months of June and July 2020 for SMEs in qualifying commercial properties, and the month of May 2020 for SMEs in industrial/office properties. This is provided that the property leases or licences are in force on 1 April 2020.

What criteria do SME tenants have to fulfil to enjoy the additional relief to be borne by landlords?

SME tenants must fulfil ALL of the following criteria to be eligible for the additional rental relief:

1) Must be an SME at the group level (≤S$100 million turnover in 2019);
2) Must have a substantial drop in SME’s average monthly revenue during COVID-19, i.e. the average monthly revenue from April to May 2020 on an outlet level is reduced by 35% or more compared to April to May 2019; 
3) The tenancy must have been entered into before 25 March 2020.  

What does the landlord do if the SME tenant is clearly eligible?

Grant the rental waivers to the tenant early, if the tenant is clearly eligible for the waivers.

Note that there is a moratorium is in place for the tenant-occupier from 31 July 2020 onwards. If the tenant-occupier cannot pay rent, the landlord cannot take enforcement action against them, e.g. terminating the lease, evicting the tenant. This moratorium ends when IRAS issues the notice of cash grant to the property owner, or on 31 December 2020 if no such notice is received before then, under Regulation 9 of the Rental Regulations read together with section 19G(3) of the Act.

Can the rental waivers be offset against any previous monetary assistance by the landlord?

Yes, rental waivers can be offset against any previous direct monetary assistance from February 2020 onwards and/or any passing on of the Property Tax Rebate from the landlord to the tenant.

How can landlords determine a tenant’s eligibility for rental relief?

The landlord can make an application for an assessment of the SME tenant’s eligibility for the rental relief. The case will be examined by an appointed assessor, who will ascertain the SME tenant’s eligibility.

Within 10 working days of receipt of the notice of cash grant from IRAS, landlords may make an application, to have a Rental Relief Assessor ascertain any of the following:

a. Whether the tenant is eligible for Rental Relief and/or Additional Rental Relief; and/or
b. Whether the applicant landlord qualifies to provide only half the Additional Rental Relief, on the basis of financial hardship.

There is no application fee and the application must be supported by information and documents required by the Registrar’s directives which can be accessed here.
 
More information on the details for an application for an Assessor’s Determination can be accessed here.

How can the tenant show a substantial drop in average monthly revenue if the tenant had commenced business only after 1 April 2019? 

If the tenant had commenced business after 1 April 2019, the point of comparison will be against the period from the date of commencement of business to 24 March 2020 (both dates inclusive) to ascertain the decrease of 35% or more.

What if landlords are financially unable to bear the cost of the additional rental relief?

Landlords can make an application for an assessment of their own eligibility for a reduction of the required additional rental relief on the grounds of financial hardship.  

What criteria does the landlord have to meet to be eligible to apply for a reduction of the required additional rental relief?

The landlord applying for the reduction must fulfil the following criteria:

a. must be an individual or a sole proprietor, and the owner of the prescribed property;

b. The aggregate of the annual value of all investment properties (including the prescribed property) owned by the landlord (whether directly or through one or more investment holding companies) is not more than S$60,000 as at 13 April 2020; and

c. The rental income derived from the property in question in Year of Assessment 2019 constituted 75% or more of the landlord’s gross income in that year.

What are the criteria that the Rental Relief Assessor will consider for the landlord’s application for reduction?

Criteria that the appointed assessor will consider are inter alia as follows:

• Whether the landlord’s rental income forms a substantial part of the landlord’s total income; and
• The annual value of the landlord’s properties. 

What documents must a landlord submit in the application in order to prove its eligibility?

The supporting documents required to be submitted will be provided for in the Registrar’s directives, upon any application by the landlord. 

The supporting documents will include the following:
a. landlord’s latest income tax or corporate tax returns; and
b. Relevant bank account statements (where applicable). 

The application must be supported by information and documents required by the Registrar’s directives which can be accessed here.

What happens when the landlord is found to be eligible for the reduction by the Rental Relief Assessor?

If the landlord is found to be eligible for the reduction, the landlord is only required to give half of the additional rental waivers to be provided by the landlords, i.e. 1 month’s waiver of base rental for qualifying commercial properties, and 1/2 a month’s waiver of base rental for industrial and office properties.

What about the remaining rent relief which was supposed to be provided by the landlord?

The remaining rent payable will be borne by the tenant.

The exact details of the application and the assessment criteria have not been released by MinLaw and Parliament yet and the information herein is based on the information available to us as of 4 August 2020.  

What other assistance is there for landlords apart from reduction of rental relief?

Individual landlords who have to provide rental waivers to their tenants and are current in their repayments as at 1 February 2020 can defer both principal and interest payments on their commercial property loans up to 31 December 2020. 

They can also opt to extend their loan tenure by up to the corresponding deferment period. Their credit scores will not be affected when they take up payment deferments.

For more information, please refer to: https://www.mlaw.gov.sg/covid19-relief/further-information-on-application-for-assessment and https://www.mas.gov.sg/regulation/covid-19

What other assistance is there for SME and NPO tenants under the Rental Regulations?

There is the Statutory Repayment Scheme and the relief for tenants unable to vacate business premises as a result of COVID-19. 

Statutory Repayment Scheme for Rental Arrears

Once the assessor has determined that the SME or NPO tenant is eligible for the additional rental relief from the landlord, the eligible SME and NPO tenants can additionally take up a new Statutory Repayment Scheme for repayment of a specified portion of their rental arrears owed to the landlord that are accumulated for the period of 1 February 2020 up to 19 October 2020 in equal instalments over a 9 months or the remaining duration of the tenancy, whichever is shorter) with the interest payable on the arrears capped at 3% per annum.

When does the SME or NPO tenant have to serve notice on the landlord under the Statutory Repayment Scheme?

Notice must be served (in written form) upon the landlord by the tenant before 19 October 2020 and the 1st instalment payment must be made by the tenant before 1 November 2020. 

If the SME or NPO tenant fails to make its payment under the Statutory Repayment Scheme, or the SME and NPO tenant terminates their lease, the said Scheme will be deemed as cancelled, and the landlord will be entitled to the following: 

• Payment of the full amount of arrears immediately;
• To exercise any of its rights under the lease or licence agreement; and
• To enforce the lease agreement for rentals which have not been paid. 

What if the tenant terminates their lease and has two or more outstanding repayment instalments under the Statutory Repayment Scheme?

The tenant-occupier will have to provide specified documents and information to their landlord, including the balance sheet, profit and loss statement, cash flow statement and statement of changes in equity of the tenant-occupier from 1 April 2020 to the date of termination or repudiation of the lease agreement (both dates inclusive). 

These documents must be accompanied by a statutory declaration. The tenant-occupier will be required to provide a reasonable proposal on how it proposes to resolve the outstanding rental arrears.

Please refer to Regulation 41(2)(b) of the Rental Regulations for a full list of the prescribed documents above to provide to the landlord.

What are the maximum accumulated rental arrears eligible for the Statutory Repayment Scheme?

For qualifying commercial properties, the rental arrears would be 5 months’ rent and for other non-residential properties (e.g. industrial/office properties) the rental arrears would be 4 months’ rent.

Relief for tenants unable to vacate business premises as a result of COVID-19

Tenants who are not able to vacate their non-residential property after the end of the lease or licence and before the expiry of the prescribed period (i.e., before 19 October 2020) as a result of COVID-19 may serve a notification of relief on their landlord, provided insofar that they meet the prescribed statutory criteria. 

Once the notification of relief is served, the tenant will not be liable to their landlord for the failure to vacate their premises. 

The exact details of the notification of relief and the prescribed criteria have not been released by MinLaw and Parliament yet and the information herein is based on the information available to us as of 4 August 2020. 

More info can be found at the following link: https://www.mlaw.gov.sg/news/press-releases/new-rental-relief-framework-for-smes#fn1


4. Moratorium on Enforcement Actions

From 31 July 2020, landlords are prohibited from taking the following actions (among others) on tenant-occupiers under section 19G of the Act, in relation to non-payment of rent:

• Terminating the lease or licence agreement;
• Evicting the tenant-occupier;
• Exercising the right of re-entry or forfeiture under the lease agreement;
• Starting or continuing court or insolvency proceedings

This moratorium ends when IRAS issues the notice of cash grant to the property owner, or on 31 December 2020 if no such notice is received before then, under Regulation 9 of the Rental Regulations read together with section 19G(3) of the Act. 

The full list of restricted actions under the moratorium can be found in Section 19G(2) of the Act.


5. 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 [2004] 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.
 
In Summary
 
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:

• Ability and financial capacity of the tenant;
• Whether it is just and equitable for rent (or part thereof) to be paid;
• Tenant’s previous years’ tax returns and accounts;
• If landlord is able to find replacement tenants for the premises; and
• Whether the current tenant is taking advantage of the situation.

 
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.


6. Re-Align Framework

The Singapore Government will be introducing a new Re-Align Framework which was tabled in Parliament on 2 November 2020 under the COVID-19 (Temporary Measures) (Amendment No. 3) Bill.
 
What is the purpose of the Re-Align Framework?
 
Due to the substantial impact of COVID-19 on businesses, underlying assumptions and / or circumstances which had led businesses to enter into their contracts prior to COVID-19 have changed and as such, businesses may need to review their contractual obligations. However, these businesses may be deterred from renegotiating or terminating their contracts due to the early termination penalties or possible damages incurred.
 
The Re-Align Framework is thus aimed at providing small / micro-businesses with an opportunity to realign and move forward by allowing selected contracts to be renegotiated and for one party to come to a mutual agreement with the counterparty. If the parties are unable to agree, the contract may be terminated.
 
In a MinLaw press release here, the Singapore Government stated that “The framework will provide a quick and fair way for businesses to realign and move forward by allowing selected contracts to be renegotiated and to come to a mutual agreement. If they are unable to agree, the contract may be terminated. Businesses will remain liable for outstanding obligations but will not need to pay early termination penalties.” (emphasis our own)
 
The exact details of how the Re-Align Framework will be carried out have not been released by MinLaw and Parliament yet and the information herein is based on the information available to us as of 15 November 2020. The answers to FAQs can be found here and the details will be set out in due course in subsidiary legislation.

How can one party notify the other party if they wish to renegotiate or terminate a contract?
 
Under the Re-Align Framework, a contractual party who wishes to renegotiate or terminate a contract, must serve a notice on the other party or parties to the contract.
 
What happens once the notice is served on the counterparty to the contract?
 
Once the notice is served on the counterparty, it will mean parties are required to enter into renegotiations with the counterparty. If the parties are unable to reach a successful renegotiation of the contract, then the contract may be terminated.
 
What if the counterparty disagrees that the business is eligible under the Re-Align Framework or disagrees with the penalties to be paid upon termination of the contract?
 
If there is a disagreement on the above issues, either party may serve a notice to have an independent Assessor ascertain and decide on these issues.
 
The exact details of how the notification via the Re-Align Framework will be carried out have not been released by MinLaw and Parliament yet and the information herein is based on the information available to us as of 15 November 2020 and the details will be set out in due course in subsidiary legislation.
 
So what are the contracts covered by the Re-Align Framework?
 
The framework will only apply to a contract which meet the following conditions:
(a) Is governed by Singapore law;
(b) Was entered into before 25 March 2020;
(c) Has at least one party who has a place of business in Singapore; and
(d) Falls within the following five categories (“Scheduled Contracts”), which are likely to have long-term obligations that may need renegotiation or restructuring:
 (i) Leases or licences for non-residential immovable property which have a term of 5 or less years;
 (ii) Hire-purchase and conditional sales agreements for commercial equipment or vehicles (except agreements entered into with banks and finance companies regulated by the Monetary Authority of Singapore (MAS)1);
 (iii) Rental agreements for commercial equipment or vehicles;
 (iv) Contracts for sale and purchase of goods; and
 (v) Contracts for sale and purchase of services.
 
Certain contracts will be excluded from the realign framework, even if they fall within the list of Scheduled Contracts (“Excluded Contracts”). These are:
 

• Consumer contracts 
• Employment contracts
• Insurance contracts
• Leases or licences for non-residential immovable property which have a term of more than five years
• Contracts made in connection with a financial transaction, or for the supply of financial services (except hire-purchase)
• Construction and supply contracts
• Contracts for the carriage of goods for freight by sea, land or air, including any contract for freight forwarding and logistic services
• Contracts for the supply, storage, transportation, collection, treatment or disposal of certain hazardous materials
• Commodity contracts
• Contracts for factoring of receivables
• Contracts (or series of contracts) for the transfer for a business or part thereof as a going concern
• Contracts to which section 4 of the International Interests in Aircraft Equipment Act (Cap. 144B) apply
• Contracts to which the Sale of Goods (United Nations Convention) Act (Cap. 283A) apply
• Contracts affecting essential services and national interest

 
Does the Re-Align Framework assist small landlords?
 
Yes, if there is early termination of the lease or licence agreement by the tenant, the tenant must pay the eligible small landlord additional compensation for early termination.
 
The exact details of the application process for small landlords via the Re-Align Framework will be carried out have not been released by MinLaw and Parliament yet and the information herein is based on the information available to us as of 15 November 2020 and the details will be set out in due course in subsidiary legislation.
 
Repayment Scheme
 
Will there be an alternative to contract termination for hirers and renters of commercial equipment?
 
Yes, instead of terminating the contract, there will be a choice to pay their outstanding arrears by instalments for hirers and renters of commercial equipment under the Repayment Scheme of the COVID-19 (Temporary Measures) (Amendment No. 3) Bill.
 
Who qualifies for this Repayment Scheme?
 
Businesses and individuals that meet the eligibility criteria for the Re-Align Framework, and who are party to a hire-purchase or rental agreement for commercial equipment or vehicles.
 
Can I take up the Repayment Scheme and also re-negotiate and / or terminate my contract under the Re-Align Framework as well?
 
No, you cannot have it both ways. If a party chooses to apply for the Repayment Scheme, they cannot utilise the renegotiation or termination reliefs under the Re-Align Framework, and vice versa.
 
More details of the Repayment Scheme can be viewed here.


7. Simplified Insolvency Programme

Due to the substantial impact of COVID-19 on businesses, MinLaw will introduce a Simplified Insolvency Programme under the Insolvency, Restructuring and Dissolution (Amendment) Bill (“the Insolvency Bill”).
 
What is the purpose of the Insolvency Bill?
 
The Insolvency Bill is aimed at helping small / micro businesses which require support in restructuring their company’s debts so as to keep their business afloat, or to wind up their company as the business has ceased to be viable.
 
More information on the Simplified Insolvency Programme can be accessed on MinLaw here.
 
The exact details of how the application process for the Simplified Insolvency Programme will be carried out have not been released by MinLaw and Parliament yet and the information herein is based on the information available to us as of 15 November 2020.



References:

• Covid-19 (Temporary Measures) Act 2020
• Covid-19 (Temporary Measures) (Temporary Relief for Inability to Perform Contracts) Regulations 2020
• Covid-19 (Temporary Measures) (Rental and Related Measures) Regulations 2020
• Annex A on Eligibility Criteria for Rental Relief and Additional Rental Relief
• Annex B on Calculation of Rental Waivers
• Annex C on Support for Landlords
• Annex D on Repayment Scheme for Rental Arrears
• Annex A on Operation of the Business on the Premises
• Annex B on a Worked Example of Cap on Late Payment Interest and Charges
• Key Features
• Rental Relief Guide for Landlords
• Rental Relief Guide for Tenants
• Support for Tenants and Landlords
• Categorisation of properties
• Eligibility criteria for arts and culture societies
• Definition of a specified trade association
• Calculation of rental waivers
• Credit reliefs for landlords
• IRAS e-Tax Guide: Property Tax Rebate for Non-Residential Properties in 2020
• Ministry of Law Press Releases 
• Application for Assessor’s Determination
• Registrar’s Directives
• Re-Align Framework

If you have questions or comments on this article, please contact:
​
Foo Soon Yien
Senior Director, BR Law Corporation
[email protected]

Luke Lee
Associate, BR Law Corporation
[email protected]