ADJUDICATORS may step in to resolve disputes over non-compliance with the code of conduct (COC) in the leasing of retail premises, under a new Bill that proposes to make following the code mandatory.

The Lease Agreements for Retail Premises Bill was tabled for its first reading in Parliament on Tuesday (Jul 4). If passed, the legislation is expected to be implemented six months later, said the Ministry of Trade and Industry (MTI) in a press release.

The industry-wide COC was introduced in an attempt to resolve long-standing structural issues between tenants and landlords, which escalated during the Covid-19 pandemic. It came into effect on Jun 1, 2021.

The COC contains 11 key leasing principles that aim to foster fairer and more balanced lease negotiations.

These include prohibiting landlords from unilaterally pre-terminating leases except under specific circumstances; passing on marked-up electricity costs to tenants; having a rental formula that changes during a lease except by mutual agreement; and holding more than three months’ security deposit except by mutual agreement.

A Fair Tenancy Industry Committee (FTIC) was also set up to serve as the custodian of the code.

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If the Bill passes into law, it will be mandatory, firstly, for all qualifying retail leases in Singapore to comply with the code. The code will apply to all retail leases – with a tenure of a year or more – signed or renewed from the date that the legislation takes effect, said MTI.

Retail premises are used primarily for the sale of goods by way of retail and/or the supply of services, including food and beverage, retail, and lifestyle uses. The code does not apply to leases for industrial, office or residential uses.

Secondly, MTI will be empowered to appoint a dispute resolution body, such as the Singapore Mediation Centre, to mediate and adjudicate on complaints of non-compliance with the code. Both mediation and adjudication will be “low-cost and expedient”, said an MTI spokesperson.

In a dispute, parties will first be required to undergo mediation to resolve the complaint. This process is already in place; disputes following the signing of the lease agreement may be escalated to the Singapore Mediation Centre within 14 days.

But if mediation fails to iron out the dispute, an adjudicator may be appointed to make a formal judgment to settle the matter.

In such cases, the adjudicator decides whether the lease terms comply with the code and may order the parties to vary the lease agreement to correct any non-compliance. The adjudicator can order compensation for non-compliant conduct and enforce determination as an order of the court.

Thirdly, MTI will have the power to appoint the chairperson and members of FTIC, which will continue to be represented by landlord and tenant communities, as well as industry experts.

The committee’s role will be to review and update the code – which will be a living document – as well as establish processes to administer and promote compliance of the code among landlords and tenants.

To prevent conflict of interest, members of FTIC will not be involved in any mediation or adjudication process, said the MTI spokesperson.

“Should a situation arise where the FTIC needs to address issues involving a specific landlord whose executive is a member of the FTIC (for instance, to publicly highlight any egregious parties), the member will be recused from the decision-making process,” the spokesperson added.

Nine private-sector landlords and all government landlords have voluntarily adopted the code to date. An updated version of the code was issued on Mar 15, 2022, in response to industry feedback.

The current COC allows for mutually-agreed deviations in four areas – exclusivity, sales performance, security deposit and rental structure.

Should a lease agreement contain deviations permitted by the code, a joint declaration of deviation must be submitted to FTIC’s online portal within 14 days of the agreement being signed. Failure to submit the declaration within 14 days will nullify the permitted deviation, unless the permitted deviation relates to rental formula.

The government had earlier accepted industry’s recommendation to mandate compliance with the code, said MTI, and has been working closely with FTIC on the proposed legislation.

A public consultation exercise was held between Jul 18 and Aug 5, 2022, for members of the public to provide feedback on key provisions of the Bill.

“Having legislation that mandates compliance with key leasing principles in the code will help to establish industry norms on tenancy practices and terms,” said the MTI spokesperson.

“This will in turn help to strengthen relations between landlords and tenants and set a strong foundation to support a vibrant retail sector.”

The second or third reading of the Bill is expected to take place during the Parliament sitting in August.