There will be safeguards for landlords that help pandemic-hit small and medium-sized enterprises (SMEs) which opt for a statutory repayment scheme for their rental arrears accumulated from Feb 1 till Oct 19, Law Minister K. Shanmugam said in Parliament yesterday.
Under the new Covid-19 (Temporary Measures) (Amendment) Act, arrears are to be paid in equal instalments for up to nine months or the remaining term of tenancy, whichever is shorter, with interest capped at 3 per cent a year.
Payment of the first instalment starts no later than Nov 1 this year. For commercial properties, the maximum amount of arrears that can be paid in instalments will be five months’ base rent. For industrial/office properties, it will be four months’ base rent.
“This means that landlords take on some risk,” Mr Shanmugam said of the legislation that Parliament passed yesterday. “As a safeguard, we will provide that all outstanding arrears (including interest and other charges) will be accelerated, and immediately payable in accordance with the terms of the original contract.”
This happens “if instalment payments under the scheme are not paid within the prescribed time after they become due; if the tenant terminates his lease agreement during the rescheduled repayment period; or the lease agreement is terminated due to other defaults by the tenant”, he added.
Landlords may also draw from the existing security deposits to offset accumulated rental arrears during the repayment period, until there is the equivalent of at least one month of rent remaining. “At the end of the repayment period, the tenant will be obliged to reinstate the security deposit to the contractual amount,” said Mr Shanmugam, who is also the Home Affairs Minister.
In addition, tenants must provide specified documents and information to their landlords if the lease agreement is terminated or repudiated during the repayment period, and there are two or more rescheduled repayment instalments outstanding, he added.
Among other things, the tenant must set out how he proposes to repay the outstanding rental arrears. “This will ensure transparency and accountability,” he said.