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Tussle over rent rebates thrusts unequal landlord-tenant relationship under spotlight

About 300 mall tenants have united to press for a more level playing field and a review of the Fair Tenancy Framework

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Most rental agreements comprise a high fixed-base rent and a small component - typically 1 to 2% - based on a business' variable gross turnover. This formula shields landlords in times of low sales. Some mall tenants think they could go under with the tepid sales during this virus outbreak.

Singapore

THE ongoing tussle between tenants and landlords over rental rebates and support through the Covid-19 outbreak has thrown the spotlight on what is seen as an uneven relationship between the two; some quarters have called for more fair play through a review of the Fair Tenancy Framework.

More than 300 mall tenants in Singapore have united to press for additional rental help from landlords, but beyond the outbreak, the growing group is calling for a reworking of the Fair Tenancy Framework, representatives of the group told The Business Times on Friday.

The framework was introduced in 2015 but has since been "unsuccessful in creating a level playing field in the rental terms between landlords and tenants", said the group, SG Tenants United for Fairness.

"Our ask for help simply comes from a crisis situation that exacerbated a pre-existing condition," said one representative, who has been in fashion retail since 2003.

"Because of the imbalance in rental charges, a lot of us may go under where we otherwise would not," this retailer added.

They noted that most rental agreements are structured in the form of a high fixed-base rent and a small component - typically 1 to 2 per cent - based on a business' variable gross turnover. This formula shields landlords in times of low sales.

A fairer structure could be rental agreements comprising a higher or full variable gross turnover component, the group suggested.

"We seek to work closely with landlords to fully appreciate each other's situation and come up with win-win solutions for both the short- and long-term good of the industry, thus reflecting the true symbiotic nature of the tenant-landlord relationship," they said.

The group added that it has met and shared its plans with trade associations, including the Singapore Retailers Association (SRA), and government bodies such as Enterprise Singapore. "We have received support for our position and action plans."

Kurt Wee, as the chair of the Singapore Business Federation's SME Committee, thinks the call to action is timely.

"We have promoted rental transparency and have been pushing for landlords to recognise and endorse the framework," said Mr Wee, whose committee had led the development of the framework back then. However, he added, landlords "haven't been forthcoming".

Only government agency JTC Corporation has backed the framework, he said.

Likewise, SRA said a review of the current Fair Tenancy Framework is "definitely in the works", and added that the relationship between landlords and tenants is "symbiotic and needs to be managed on fair, level terms for both parties ... if we want the retail industry to thrive".

For now, the group of mall tenants is also seeking 50 per cent rebates off three months' rent from landlords to help them cope with the hit to their businesses.

Current measures, such as savings from the property tax rebate and using security deposits to offset rent, are helpful - but still insufficient to tide businesses over what may become a prolonged outbreak, the group said. Already, close to half of 53 members surveyed said they have started to lay off staff.

The group intends to negotiate with landlords collectively this month, but said it would not take to the streets in protest or close shops in a strike just like in Hong Kong, noting that tenants in the territory face a different situation marked by political demonstrations.

Their call comes amid pressure this week on landlords to lend more support to tenants, starting with the Restaurant Association of Singapore and later, government leaders. At the heart of contention is a property tax rebate for landlords that was meant to be passed on to tenants; there is also the question of whether landlords can offer more than this.

Mall operators like UOL, CapitaLand and YTL Starhill Global Reit Management have begun giving their tenants rental rebates, but others are understood to be awaiting clarity on whether their malls are eligible for the property tax rebate.