SINGAPORE – Restaurants and other commercial tenants that are unable to pay rent due to the financial impact of measures introduced to curb Covid-19 infections will be able to hold off such contractual obligations for at least six months under a proposed law. When passed, landlords would not be allowed to terminate the lease of these tenants, or repossess the premises if rental is not paid during the relief period.

Meanwhile, construction contractors who are unable to meet their contractual obligations would also not be liable for liquidated damages, if the inability was caused by the pandemic to “a material extent”. These measures are included in the Covid-19 (Temporary Measures) Bill, which will be introduced in Parliament next week by the Ministry of Law (MinLaw). At the end of the relief period, which can be extended to up to a year from the date the Act kicks in, business would still have to fulfil their original contractual obligations.

The proposed law covers contracts where obligations have to be performed on or after Feb 1. It excludes contracts that were entered into on or after March 25. One of the broad categories of business contracts protected by the Bill is leases or licences for non-residential property. For example, the lease for factory premises.

When a commercial tenant is unable to pay its rent due to fewer customers and less revenue as a result of the outbreak, it can seek relief from assessors appointed by MinLaw. If relief is given, it would be a criminal offence for the landlord to take any legal or enforcement actions against the tenant, such as terminating the lease. Similarly, a contractor would be protected under the proposed law from not being able to carry out its contractual obligations, if this was caused “to a material extent” by the Covid-19 situation. This means that the contractor would not be liable for liquidated damages, as well as any delays or non-supply of goods.

Apart from providing relief from contractual obligations, the Bill also revises the limits for insolvency. For businesses, this would increase the monetary threshold for insolvency from $10,000 to $100,000. The time period in which a business must satisfy a statutory demand or for the setting aside of statutory demands would also be increased from 21 days to six months.

The Straits Times,  01 Apr 2020