Relief for Tenants Unable to Vacate Premises

Relief for tenants unable to vacate business premises

The COVID-19 (Temporary Measures) (Amendment) Act (the “Amendment Act”) that was passed in Parliament on 5 June 2020 introduced section 7B of the Act, which is intended to assist tenants who, because of COVID-19, are unable to vacate their business premises after the lease or licence comes to an end.

Under existing law, these tenants may incur significant liabilities (such as double rent) for “holding over” the premises, even though their failure to vacate arose through no fault of their own.

Section 7B therefore provides that such tenants who qualify for relief will not have to pay double rent, but a lower rate that is prescribed in the subsidiary legislation. The rates are set out at FAQ (1). The tenant must first serve a Notification for Relief under the Act apart from meeting other conditions. Please see FAQ (2) for the qualifying conditions.

To ensure that that landlords are treated fairly and are not out-of-pocket for service, maintenance, and utilities charges that they continue to incur during the holding over period, the prescribed rates generally require tenants to pay such charges during the holding over period, if such charges had been provided for under the contract, prior to its expiry.

Click here for a summary of this relief.

FAQs

For tenants

1. What reliefs under the Act are applicable to me?

• Under existing law, you may incur significant liabilities (such as double rent) for “holding over” the premises, even if your failure to vacate arose through no fault of your own.

• Under the Act, you may pay the amounts listed in the table below instead, if you meet the qualifying conditions. See FAQ (2) for the qualifying conditions. The specific amounts depend on the period in which you were unable to vacate the premises after the end of your lease or licence (the “holding over period”), as well as whether you operated your business on the premises during the holding over period.

*Please see FAQ (6) for more details on “rent”.

• Illustration of how the relief may apply

  Tenant’s lease expired on 1 February 2020. Due to COVID-19, Tenant was only able to vacate the premises on 1 August 2020. Tenant continued operating his business on the premises from 1 February 2020 – 1 June 2020, but ceased all business activities from 2 June 2020 onwards.

  Under this relief, Tenant will have to pay the following:

• Please see the following FAQs for more details:

  • FAQ (7) for an explanation of “service, maintenance and utilities charges”
  • FAQ (8) for an more details on “market rent”
  • FAQ (9) for an explanation of “the amount payable by the tenant under the lease or licence for holding over”
  • FAQ (10) for what “operating” your business on the premises means

2. I was unable to vacate my premises. Does the relief apply to me?

• The relief applies if:

  • You are a lessee or licensee of a non-residential (e.g. commercial or industrial) property

  • The lease or licence was:

    (a) entered into or renewed before 25 March 2020; or
    (b) originally entered into before 25 March 2020, and renewed automatically or in exercise of a right of renewal on or after 25 March 2020
    

  • The lease or licence expired, or was terminated, on or after 1 February 2020

  • You were unable to vacate the premises due to COVID-19

  • You could not have avoided the holding over by taking reasonable steps. See FAQ (4).

  • You have served a Notification for Relief on the landlord. See FAQ (3).

3. What must I do to enjoy the reliefs?

• This relief does not take effect automatically.

• If you qualify for the relief, you need to first serve a Notification for Relief on your landlord, using the form at this link (SingPass) or this link (CorpPass).

• Once the Notification for Relief has been served on the landlord, the reliefs explained at FAQ (1) will apply.

• Please see the following FAQs for leases and licences of non-residential property at this page for more information:

  • FAQ (20): I am a tenant and have only interacted with the property agent. I do not know my landlord’s email address or registered address. How do I serve the Notification for Relief?

  • FAQ (21): I served the Notification for Relief on my landlord, but did not get any response or acknowledgement from him. What do I do next?

4. What are the “reasonable steps” that I could have taken to avoid the holding over?

• The “reasonable steps” that you could have taken include:

  • contacting at least one moving company to find out if that company would be able to help with vacating the premises

  • making good efforts to independently engage workers to help with vacating the premises

  • moving small items out of the premises independently, if these items were all that was preventing you from moving out of the premises.

5. How could I comply with the “reasonable steps” during the circuit breaker period (1 February – 6 April, both dates inclusive), when Singaporeans were asked to stay home unless necessary for essential purposes?

• The “reasonable steps” requirement is a safeguard to ensure that only those tenants who were genuinely unable to vacate the premises due to COVID-19 are granted relief from having to pay their landlord double rent for holding over.

• You therefore have to adduce evidence that you could not have vacated the premises even if you had tried.

• During the circuit breaker period, you would meet the “reasonable steps” requirement if:

  • you enquired with MTI, or sought advice, and was told that you could not take the steps required to vacate the premises

  • you applied to MTI for a Time-Limited Exemption or a General Exemption in order to take the steps required to vacate the premises, and were rejected

  • MTI approved your application for a Time-Limited Exemption or a General Exemption to take the steps required to vacate the premises, but, despite you taking such steps, you could not vacate the premises for other COVID-19 related reasons

6. Are service charges included in the rent that I have to pay to my landlord for the holding over period under this section?

• For the purposes of this relief, “rent” is the amount payable for the lease or licence of the property, and includes all service, maintenance, and utilities charges.

• The amounts are to be calculated based on the last rent payable by the tenant under its lease or licence.

• See FAQ (7) for more information on service, maintenance and utilities charges.

7. What are “service, maintenance and utilities charges”?

• Your contract should specify the service charges, maintenance charges and utilities charges that you must pay the landlord.

• Depending on the terms of your contract:

  • Service charges may include charges for lifts, security, and cleaning services

  • Maintenance charges may include charges for general maintenance and repairs

  • Utilities charges may include charges for water, electricity, air conditioning, telecommunications network, gas and any sewerage or conservancy charges

8. How do I verify my landlord’s claims of the “market rent”?

• The landlord has to show proof of the market rent if he chooses to charge “market rent” instead of “rent”.

9. What is “the amount payable by the tenant under the lease or licence for holding over”?

• Certain contracts may already stipulate the amount that a tenant must pay if the tenant holds over. “The amount payable by the tenant under the lease or licence for holding over” refers to this amount.

• In case of doubt, you should seek legal advice on whether your lease or licence agreement contains such a clause.

• Thus, for instance, where you are required to pay the following (S/N 2 and 4 in FAQ (1)):

  The lower of:

  i. The amount payable by the tenant under the lease or licence for holding over (if provided for); or
  ii. At landlord’s option: 100% of rent or 100% of market rent of the premises during this period.

  You should check if your contract stipulates the amount that you must pay if you hold over. If your contract contains such a clause, you will not be required under the Act to pay more than that amount.

10. What does “operate your business on the premises” mean?

• You may be considered to have operated your business on the premises during the holding over period, if activities were performed on the premises that went towards the functioning of your business.

• If the only activities performed were in connection with the maintenance of the premises, or activities necessary for health or safety reasons (e.g. cleaning, servicing), you would not be considered to have operated your business on the premises.

• Some examples of what it means to operate (or not operate) on the premises are set out below.

Examples of what it means to operate the business on the premises

Example 1

The tenancy for a warehouse expired during the Circuit Breaker period. The warehouse was used for the sole purpose of storing frozen food. Even though the tenant was not able to access the warehouse during the holding over period (e.g., because of Circuit Breaker restrictions), the tenant is still considered to have operated its business on the premises. This is because the storage of frozen food in the warehouse is an activity that goes towards the functioning of the tenant’s business.

Example 2

The tenancy of a corporate office expired during the Circuit Breaker. During the holding over period, the tenant, which usually operates with 500 staff on-site, obtained the requisite regulatory exemptions such that 10 of its essential staff went back to the office on a daily basis. These essential staff were deployed to receive and send out documents for business purposes. The tenant is considered to have operated its business on the premises, as the receipt and sending out of documents went towards the functioning of the tenant’s business.

Example 3

The tenancy of a car sale and repair business expired during the Phase 1 period. The tenant’s staff worked onsite during the Phase 1 period to operate its corporate office (located on the same premises), although tenant did not resume the selling or repairing of any cars during this period. The tenant operated its business on the premises during this period, as the operation of the office is an activity for the functioning of the business.

Examples of what it means to not operate the business on the premises

Example 4

The lease of an industrial premises expired during the Circuit Breaker. The tenant did not operate on-site during the holding over period as it was not classified as an essential business. However, its staff continued to work from home and its business was not severely affected. The tenant is not considered to have operated its business on the premises during the holding over period.

Example 5

The tenancy of a clothing retail store expired during the Circuit Breaker. The tenant was unable to move its stock out of the premises and was unable to deliver vacant possession of the premises. However, some of its staff went back to the premises to clean and disinfect the premises ahead of its reopening after the Circuit Breaker. The tenant is not considered to have operated its business on the premises during the holding over period, as these are not activities for the functioning of the tenant’s business.

Example 6

The tenancy of a food and beverage restaurant business expired during the Circuit Breaker period. During the Circuit Breaker period, the tenant’s stock of canned food and bottled drinks remained stored on the premises. The tenant did not sell any food or drinks during this period. As storing canned food and bottled drinks is not an activity for the functioning of the business, the tenant did not operate its business on the premises during this period.

11. I was unable to vacate the premises at the expiry of my lease as I could not procure contractors to move out my heavy machinery from the premises. Does this relief apply to me?

• It is possible that you qualify for this relief, if you were not able to procure contractors due to COVID-19 (e.g., due to the safe distancing restrictions imposed by the Government). You must show that you could not hire the contractors even with reasonable steps on your part. The other conditions set out in FAQ (2) must also be met.

12. What should I do if my landlord does not agree that the relief applies to me?

• You should engage with your landlord in negotiations, to work out a mutually acceptable agreement. We encourage landlords and tenants to be reasonable and to work out a mutually acceptable solution to the contractual issues that have been created by COVID-19. If, after negotiations, parties are unable to agree on such matters, parties will have to explore other dispute resolution mechanisms, such as, mediation, arbitration, or litigation.

• If you and your landlord are unable to agree whether section 5 of the Act applies (e.g., whether you are unable to vacate due to a COVID-19 event), parties may also apply for an Assessor’s determination.

• Please click on this link for further information on the application process for an Assessor’s determination and the relevant forms.

13. My landlord is threatening to evict me now that my lease or licence has expired. Does the Act offer any relief?

• After you serve a Notification for Relief in accordance with the Act, it is unlawful and an offence for your landlord to exercise a right of re-entry, or start court or insolvency proceedings against you, in relation to your inability to vacate the premises due to COVID-19.

• You may however incur significant liabilities (such as double rent) for “holding over” the premises, unless you meet the qualifying conditions for the relief to apply. Please see FAQ (2) for the qualifying conditions.

• If you meet the qualifying conditions, you will still need to pay the amounts set out in FAQ (1).

• We encourage you to commence negotiations with your landlord to reach a mutually acceptable solution.

For landlords

14. My tenant verbally told me / e-mailed me / sent me an instant message that he cannot vacate the premises. Is that a valid Notification for Relief?

• A Notification for Relief under Part 2 of the Act has to be in the prescribed form found at this link. All other forms of notification are not valid for purposes of the Act.

15. My tenant did not serve on me a Notification for Relief. Can I evict or sue my tenant, or charge my tenant double rent, for its failure to vacate the premises?

• A tenant is only entitled to the relief under the Act after serving a Notification for Relief on his landlord in accordance with the Act.

16. My tenant served a Notification for Relief on me in relation to a residential property that does not fall within the Act. What do I do next?

• The Notification for Relief has no effect as Part 2 of the Act does not cover leases or licences of residential property.

• Even though the Notification for Relief was served in error, this indicates that your tenant has difficulties vacating the residential property. We encourage you to engage with your tenant to work out a mutually acceptable solution to deal with these contractual issues that have been caused by COVID-19.

• If you are unable to reach an agreement with your tenant and wish to dispute the Notification for Relief, you may make an application to the Assessor by following the steps in this link. The Assessor will determine whether relief under the Act applies

17. My tenant’s lease expired on 1 May 2020. How does the relief apply if the tenant is unable to vacate the premises in May, but was able to vacate from 1 June 2020 onwards and did not do so?

• If the tenant is unable to vacate the premises due to COVID-19 from 1 to 31 May 2020 despite taking reasonable steps, the reliefs above at FAQ (1) will apply to the tenant during this period.

• The relief will cease to apply once the tenant is able to vacate the premises on 1 June 2020. The tenant will be liable for the sums provided for under the contract or applicable law from 1 June 2020 onwards.

18. What if my tenant is still not able to vacate after 19 November 2020?

• The relief will not apply after 19 November 2020. Your tenant has no relief from any liability to pay double rent for the period of holding over after 19 November 2020.

• However, we encourage parties to negotiate and work out a mutually acceptable solution to their contractual issues.

• Please note that if the tenant was able to vacate the premises on or before 19 November 2020, the tenant will be liable for its failure to vacate the premises from the date it was able to do so.

19. My current tenant is unable to vacate the premises due to COVID-19 and has sought relief under the Act. The current tenant’s holding over prevented me from delivering vacant possession to an incoming tenant. Does the Act assist me?

• Please refer to FAQ (23) here for more information.