Tenants in malls, such as retail and F&B businesses, already at unprecedented risk of closure since earlier in the year, are feeling the impact of recent safe distancing moves acutely.

While landlords and the government have taken action to save jobs, some tenants have said that landlords need to do more, and to be open to rewrite the relationship between tenants and landlords in a way that is more balanced.

What is the situation for local businesses?

Safe distancing affecting footfall

Singaporeans were advised to stay home as much as possible, and to defer non-essential trips to the ubiquitous shopping malls, after long queues formed outside malls that took steps to comply with the government-mandated safe distancing measures.

F&B operators have been required to seat unrelated diners 1 metre apart, while retail operators have also had to take steps to limit the number of shoppers at a given time.

Some businesses, such as cinemas, bars and enrichment centres, have been required to close entirely, until at least Apr. 30.

Tourism/Travel-related businesses among worst-hit

Retail and F&B businesses which rely on tourists and/or travellers are among the worst-hit.

This is because all short-term visitors have been barred from Mar. 23, 11:59pm, while Singaporeans are currently advised to defer all overseas travel.

Difficulties in cutting cost

Vincent Tan, President of the Restaurant Association of Singapore (RAS) said at a press conference on Feb. 13 that rental and manpower would account for about 50 per cent of an F&B outlet's operation costs.

Tan added that the industry already has a very low profit margin, and a reduction in income will impact businesses greatly.

And, while reducing the cost of supplies could be done relatively easily, reducing manpower cost by laying off workers is not an easy decision.

As one business owner wrote in a Facebook post:

"I have good workers and it pains me to see the possibility of having to let them go. I tried as much as possible to work out a way to provide employment for them; most whom I regard as friends since some of them have been working for more for more than a decade!"

What have landlords done?

Shortened opening hours

Malls have shortened the required opening hours, which allows businesses to save on manpower costs.

However, some F&B businesses are negatively affected by this, since closing malls early has the effect of reducing the after-work dinner crowds, which are "precious" to restaurants, according to Andrew Kwan, restauranteur and vice-president of the RAS.

Kwan, who spoke to The New Paper, said that even if restaurants were to remain open while the rest of the outlets closed, shoppers might still think that the restaurants were closed, or not be willing to spend their time in the malls if only food outlets were open.

Marketing efforts

Landlords have also taken steps to market their malls to patrons. CapitaLand, for example, offered shoppers free parking during lunch and dinner hours.

Orchard Gateway, on the other hand, proposed a voucher scheme where tenants could essentially pay their rent in the form of vouchers, which the mall would then use to incentivise shoppers when the situation improves.

This has the effect of reducing the amount of rent due immediately, though it will still require tenants to bear the costs of these vouchers in future when shoppers seek to redeem them.

Releasing security deposits

Tenants are usually required to place a security deposit with their landlords.

Various landlords, such as CapitaLand, have released the deposit amount to be used to offset rental payments. This helps to alleviate cashflow issues.

Property tax and rental rebates

Owners of qualifying commercial properties will not need to pay property tax for the year 2020, in an expansion of property tax rebates announced since the 2020 Budget speech on Feb. 18.

Some landlords have passed these tax rebates on to their tenants, having been "strongly encouraged" to do so.

Some have also offered rental rebates of up to 80 per cent of monthly rental, on top of passing on tax rebates.

Still, others have yet to act, as tabulated by RAS in a Facebook post:

Trade and Industry Minister Chan Chun Sing said on Mar. 31 that the government will take steps to “make sure” that landlords pass on these rebates to their tenants.

However, these rebates may not be sufficient to counterbalance the heavy losses incurred by businesses.

On Apr. 1, Deputy Prime Minister and Finance Minister Heng Swee Keat told CNA that the Singapore government is prepared to take legislative action against commercial landlords who do not pass on property tax rebates to their tenants.

Tenants take action by appealing directly to landlords

While the immediate measures are not insignificant, local business owners, many of whom are tenants who rent retail or F&B space from landlords, have come out to make public appeals for more help from their landlords and from the government.

One Facebook user uploaded a screenshot of what appears to be an email to his landlord, stating in the caption that "during good times Landlord called you business partners... then in unprecedented times, they use legal [action] against you despite we are struggling."

One part of the screenshot informs the landlord, Jurong Point, that the tenant has disabled auto-deduction of rental payments, implying that payment might not be made from April onwards:

"I have informed you that I have terminated all Giro auto-deduction for rental payments after Jurong Point deduct a Full month rent for March

As much as you explained you need time to digest and process, time is not on our side as tenants incur costs daily

My bank balances are depleting low without sales coming in and I need a close watch on the irresponsible outgoing deduction."

Yuan Oeij, chairman of The Prive Group, which runs more than 10 restaurants and nightspots, hoped that landlords would "[do] more than just passing on the property tax rebate and token gestures, but to help from the sense of community spirit, and at the same time seeing clearly that it makes commercial sense to do so."

Tenants banding together

These tenants have congregated online, and on Facebook, to seek out solutions.

A petition on change.org calling for the government to "work with landlords to curb rental fees" has gathered over 13,000 signatures in just 3 days.

A recently-created Facebook group titled "SGTUFF SG Tenants United for Fairness" having gathered around 1,400 members since it was created just over a month ago, on Feb. 24.

Besides exchanging information on their plans and the action taken by their landlords, tenants in the group have been organising themselves according to the malls where they operate, in order to negotiate with landlords.

Issues with current arrangement between landlords and tenants

One of the posts in the group invited members to share unfair clauses in contracts they had encountered, which attracted significant engagement. These are some of the issues highlighted in the group:

How rent is calculated

An issue cited by many tenants was the practice of calculating monthly rent on the basis of gross turnover (GTO, or, in other words, revenue) as well as a minimum "base" rent.

This means that if tenants do well and generate more revenue, will pay more rent. However, in a hypothetical scenario where they have little or no revenue, they would still need to pay rent.

This has led some, including the RAS, as well as the Singapore Retailers Association (SRA) to take the view that landlords should do away with the base rent, and charge rent solely as a percentage of gross turnover, at least for the next six months.

One user pointed out the fact that tenants providing essential services are in fact doing well in the current situation, and might not be as receptive to this proposal.

However, another user pointed out that charging rent as a percentage of gross turnover would not need to apply to all tenants, although it would likely benefit most of them:

Unbalanced contracts

Tenants also raised examples of contracts which give landlords and tenants unequal rights, such as landlords's right to serve a notice asking them to move out, while tenants can only serve such notice by paying off the rent for the remainder of the lease:

While some contracts did not reflect any requirements for landlords to come through on their promises for things like marketing:

Unreasonable asks

Tenants also pointed out some unrealistic or unreasonable requests by landlords when negotiating agreements, such as:

Asking for a cut of the tenant's online sales:

Requiring tenants to connect point-of-sales (POS) systems to their landlord's system, and to pay for auditing of such records, and requiring that tenants use assigned contractors for renovation works.

And even looking to increase rental amid a global pandemic:

"Common" does not mean "right"

One user pointed out that while many practices had been accepted as "common", they were not necessarily "right", although established policies would likely prove difficult to change.

What else has been done?

A new bill announced on Apr. 1 also gives business owners some temporary relief from contractual obligations which they are unable to fulfil because of restrictions imposed in the Covid-19 crisis. This includes the obligation to pay rent.

The bill, when it is passed, would make it an offence for a landlord to terminate a lease, repossess premises, or start court or insolvency proceedings against a tenant who has requested for deferral of rental payments as temporary relief because of the Covid-19 situation.

The bill would also allow tenants to defer rent payments for a prescribed period of six months, which could be extended up to a year by the Minister for Law.

The bill could be passed as early as mid-April, according to Law Minister K Shanmugam.

Top photo by ALBERT RENN on Unsplash

 

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