Landlords should share pain, but tenants also shouldn't take advantage: Shanmugam

COMMERCIAL landlords should take on their fair share of the pain that businesses are now facing, but tenants also should not take advantage of the situation, said Home Affairs and Law Minister K. Shanmugam in Parliament on Tuesday, in the second reading debate of a Bill to temporarily shield businesses from contractual obligations such as paying rent.

The Bill will allow a tenant whose business is affected by the coronavirus outbreak is defer rental payments for up to six months, and protect the tenant from legal action or lease termination due to unpaid rent.

This "substantial" intervention by the government is intended to give tenants breathing space to adjust their businesses and survive in the medium term. 

It should also be seen together with other measures that the government and the financial industry have announced to provide cash flow relief for businesses, Mr Shanmugam added. 

Tenants must show that they are unable to pay rent during the prescribed period, and that the inability to pay is to a "material extent" caused by a Covid-19 event. Those that are able to pay rent do not qualify. 

For example, Mr Shanmugam cited how Adidas was widely criticised for taking advantage of a similar legislation in Germany so as to not pay rent - despite reportedly making billions of euros in profit last year. 

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However, the provisions for tenants have drawn concerns from industry players, including the Reit Association of Singapore (Reitas), for the potential impact to landlords' income and financial obligations, and subsequent ripple effects on the banking and real estate sectors. 

Mr Shanmugam said that the government is not being "anti-landlord". In acknowledging some of the worries, he noted that landlords will benefit from the support packages announced by the government. They also have two to three months of security deposits to partly offset any rent losses.

Landlords have also enjoyed years of low taxes and good governance in Singapore. He thus urged them to now look at broader concerns beyond financial returns. If hurting businesses are not helped, the "entire business ecosystem could crash". 

That said, if landlords find that tenants are taking advantage of the situation, they should inform the Ministry of Law, he noted.