Committee formed to address unbalanced relationship between landlords and tenants
SINGAPORE — Business associations in Singapore have formed a Fair Tenancy Framework Industry Committee (FTFIC) to address the “growing imbalance” in the relationship between institutional landlords and tenants as the COVID-19 pandemic continues to severely hurt businesses.
Announcing the formation during a media conference on Thursday (21 May), FTFIC president Kurt Wee said the committee has come up with a position paper as well as recommendations for fair tenancy legislation, which was submitted to the Ministry of Law and the Ministry of Trade and industry on Thursday morning.
“COVID-19 brought to glaring views the dominant position that landlords wield,” he said in the virtual media conference held over Zoom.
“It first highlighted how landlords enjoyed good income in good times but the relationship was not symmetrical in bad times. When tax rebates were announced for the purposes of rental rebates to tenants, there was so much tussle between whether the landlords will issue the rental rebates to tenants, to how much they will release.”
Passing property tax rebates in full to tenants
This led to a Parliament speech that saw Trade and Industry Minister Chan Chun Sing beseech that landlords would be “short-sighted not to pass on property tax rebates to tenants”. Deputy Prime Minister Heng Swee Keat eventually announced that the government would legislate the passing of the property tax rebates in full to the tenants.
Nonetheless, Wee said the gravity of the situation exacerbated the need for legislation to save businesses and the livelihood of the workforce, leading to FTFIC’s formation five weeks ago to propose the adoption of landlord-tenant legislation in Singapore.
It was formed with representation from the Singapore Business Federation SME Committee, Association of Small & Medium Enterprises, Restaurant Association of Singapore, Singapore Retailers Association and Singapore Tenants United for Fairness.
15 key recommendations guided by 5 principles
FTFIC has made a total of 15 key recommendations guided by five principles – incentivising value creation, transparency, protecting tenants from unfair tenancy practices, building a more sustainable ecosystem and instituting the concept of reciprocity:
Incentivising value creation: Effective Fair Tenancy Legislation will provide a more balanced system of incentives and power of negotiation that will keep both tenants and landlords equally motivated to work together to create value, instead of the predatory rent-seeking behaviour from the side that holds an unfair advantage.
Transparency: Transparency provides the conditions that foster better and informed decision-making leading to a fairer and more efficient ecosystem that operates through (i) having sufficient market rental data for current and prospective tenants to use in rental terms negotiations (ii) prohibiting behaviour that leads to overt oligopolistic behaviour in the setting of rental terms.
Protecting tenants from unfair tenancy practices: FTFIC highlights unfair tenancy agreement practices that comprise lopsided clauses highly in favour of landlords. Such clauses include practices like forcing tenants to do renovation works that go way beyond the needs of the tenancy. These unfair clauses have resulted in the difficult situation during the COVID-19 crisis, where tenants are completely helpless and powerless to negotiate with landlords to take on their fair share burden or to give fair treatment to businesses who are in big financial trouble.
Building a more sustainable ecosystem: This paper seeks to rebuild and rejuvenate a frontline business sector based on symbiotic partnership between landlords and tenants. FTFIC recognises that for tenants to thrive, landlords must do well and vice versa. It seeks to eliminate rent-seeking behaviour on either sides but instead reinstate fair trading practices that incentivise creativity and mutual value creation by both parties.
Instituting the concept of reciprocity: FTFIC proposes the concept of reciprocity as the key mechanism to deliver fairness between landlords and tenants in the specific terms within tenancy agreements. It has identified three main areas that the concept of reciprocity between landlords and tenants should be applied: early termination, data sharing, and the parameters established in the enforcement of “force majeure” clauses between parties.
Three-pronged initiative for fair tenancy
The fair tenancy framework also outlines a three-pronged initiative of rental data transparency, education and awareness, and a preferred dispute resolution channel:
Rental data transparency: Work with the relevant government agencies to develop rental data information for businesses;
Education and awareness: Develop a Business Leasing Guide and a Basic Reference Lease Agreement for Business Space to help small businesses understand lease terms and conditions;
A preferred dispute resolution channel: Facilitate partnerships between trade associations and chambers and the Singapore Mediation Centre for mediation to serve as a preferred dispute resolution channel to resolve issues between tenants and landlords.
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