Govt considered that rental help may prolong exit of unviable businesses: Shanmugam

THE focus of extending more rental relief is more on supporting businesses that, even though viable, may go down because of the Covid-19 crisis, rather than on holding up unviable ones, said Law Minister K Shanmugam in Parliament on Friday, when the Covid-19 (Temporary Measures) (Amendment) Bill was passed. 

Addressing a question from Member of Parliament Jessica Tan, he said the government did weigh the possibility that the rental help may prolong the exit of unviable businesses at the expense of landlords and taxpayers' monies. 

However, in a situation where businesses have been hit by the virus pandemic and can expect only a slow recovery following Singapore's emergence from quasi-lockdown, some relief ought to be given, he said. 

The risk lies not so much in helping unviable businesses, but in not helping viable businesses that may be felled by the crisis, as it will affect employees and livelihoods, Mr Shanmugam added. 

The government's aid in this case is therefore more like throwing businesses a lifeline, than "asking everyone to go on a cruise liner", he said.  

Under the amendment Bill, additional rental waivers - with the cost borne by landlords - will be given to eligible small and medium-sized enterprises (SMEs) that have suffered at least a 35-per-cent fall in revenue, on top of mandatory waivers funded by the government.

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The Bill also sets out a repayment scheme for arrears, provides relief for tenants that cannot vacate business premises due to Covid-19, and caps late-payment interest or charges for certain contracts. It amends an earlier Act that gave temporary relief for some contractual obligations due to Covid-19.

Mr Shanmugam said the need for more substantive intervention arose from feedback; struggling SMEs had said that they needed more time to recover and that landlords' concessions have been uneven. 

"What's necessary in this situation is a fair sharing of obligations," he said, stressing that "everyone has a stake in the success of SMEs".

But there are safeguards in place. If fraudulent behaviour is revealed - for example, if a tenant uses the period of relief to "fraudulently dissipate assets" - there could be criminal sanctions. 

Landlords will also be allowed to draw on tenants' existing security deposits to offset accumulated rental arrears during the repayment period. They may do so, until at least one month's worth of rent remains in the security deposit.

At the end of the repayment period, the tenant will have to reinstate the security deposit to the contractual amount.

Tenants who terminate or repudiate lease agreements during the repayment period, and who have two or more rescheduled repayment instalments outstanding, will have to provide specified documents and information to their landlords. This includes setting out how the tenant proposes to repay the outstanding rental arrears. 

"Tenants will be expected to negotiate in good faith the terms of repayment," Mr Shanmugam said.