- The Singapore Tenants United for Fairness Group (“SGTUFF”) submits our recommendations to the Fair Tenancy Framework Industry Committee (“FTFIC”) to introduce a Retail Leases Bill 2020. The Bill seeks to regulate the lease relationship between landlords and tenants with the intent to protect the position of tenants of retail shop premises.
- The Bill is an urgent and necessary next step to address the imbalance power of negotiation between a landlord and a tenant. Cash is the lifeblood of every business. One-sided, onerous clauses in commercial tenancy agreements often result in businesses struggling to generate and retain cash. This makes many businesses susceptible to such shocks as COVID-19.
- In 2015, in what then-Minister of State for Trade and Industry Mr Teo Ser Luck called “the first step towards fairer leasing practices”, the Fair Tenancy Framework (“FTF”) developed by the Singapore Business Federation (“SBF”) was launched. The adoption of FTF guidelines is voluntary in nature.
- Ms Cynthia Phua chaired the SBF SME Committee Rental Practices Working Group that developed FTF. In an interview with TODAY on 25 March 2020, she said, “The framework has no teeth and that it was intended to be a roundtable for both tenants and landlords to come together to know the issues facing both parties and discuss a way where leasing practices can be fair and equitable.” She added, “Over the last five years, we have been trying to get landlords to come to the table but they refuse. They did not respond to us.”
- SGTUFF applauds Ms. Cynthia Phua for having the courage to confront the brutal facts. As Dr. Brene Brown, the researcher who espouses vulnerability said, “Brave leaders are never silent around hard things…Our job is to excavate the unsaid.”
- It therefore comes as no surprise that the first public statement by the Reit Association of Singapore (“REITAS”) in the wake of the pandemic came only in April 2020 after MinLaw moves to introduce the COVID-19 (Temporary Measures) Bill to provide temporary relief for inability to perform contractual obligations due to Coronavirus disease 2019 (COVID-19) situation. The nonchalance and self-interested attitude are all too familiar to many tenants.
- This worrying trend goes beyond the REITs. As property managers switch jobs and move around, they spread these unfair practices as best practices. Like the coronavirus, the quick adoption of these attitudes and practices have infected many tenancy agreements, resulting in one-sided, onerous clauses becoming very prevalent.
- SGTUFF is of the opinion that the only way to prevent abuse of landlords’ disproportionate power over tenants is through legislation.
- “Morality cannot be legislated, but behaviours can be regulated. Judicial decrees may not change the heart, but they can restrain the heartless”, said Dr Martin Luther King Jr. His quote is frequently cited by real estate titan Sam Zell, who is a firm believer that “you cannot legislate morality”.
- In submitting these key recommendations for legislation, SGTUFF has the following intentions:
- Uphold the spirit of laissez faire. Refrain from legislating morality. Let the invisible hand do its job. A successful retail leasing Act will unleash the invisible hand and lead to two outcomes: (1) Increased value creation, defined singularly from both the perspective of landlord and tenant as doing more (that is, higher gross turnover) with less (that is, lower operating costs); and (2) Reduction of government assistance (that is, grants, reliefs and bailouts). SGTUFF maintains that what needs to happen is a re-attribution of economic rents to better reflect landlord-tenants’ risks and rewards, not a redistribution of income by the government, which by itself is anti-free market.
- Restrain the heartless. Fix the conditions that prevent free market from producing optimal outcomes, specifically, (1) a lack of transparent access to information and product prices and (2) undue power for oligopolistic corporations to set prices or control distribution.
- Address structural changes in retail real estate. Back in 2016, in a TODAY article titled Time to tackle real estate’s structural change, Mr Ku Swee Yong wrote, “The rise of e-commerce, a weak consumer market and changing shopping preferences have sent the retail sector reeling.” High occupancy costs and manpower shortage are symptomatic of the landlord/tenant inability to capitalise on the opportunities brought about by these structural changes. Landlords are fixated on passing costs over to tenants. Tenants are then fixated on squeezing their vendors and employees while relying increasingly on the government for handouts.
- Future-proof our economy. Singapore needs to act as a fertile biome and create a conducive environment that enables innovations. The Report of the Committee on the Future Economy proposes to develop a vibrant and connected city of opportunity (Strategy 5). SGTUFF believes that pro-business, pro-competition and pro-innovation practices in commercial leasing that enable entrepreneurs and businesses to thrive, not just survive, are vital to making Singapore a city of opportunity. Getting these environmental factors right precedes any government programmes and initiatives in the report.
- Fairness and conscionable conduct, as guiding principles, may work well for FTF, designed to be voluntary. For the purpose of legislation, SGTUFF finds reciprocity more applicable as a guiding principle. Reciprocity takes away morality and adds flexibility to ensure that the contract is not one-sided.
- The FTF outlines a three-pronged initiative:
- Part A: Rental Data Transparency – Work with the relevant government agencies to develop rental data information for businesses;
- Part B: 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;
- Part C: A Preferred Dispute Resolution Channel – Facilitates partnerships between trade associations and chambers (TACs) and the Singapore Mediation Centre (SMC) for mediation to serve as a preferred dispute resolution channel to resolve issues between tenants and landlords.
- Perhaps SBF is looking to review FTF and/or looking to improve the adoption of FTF. SGTUFF views the Bill as distinct from FTF. The introduction of the Bill, which pertains primarily to retail shop premises, does not render FTF obsolete.
- There are also three parts to SGTUFF’s key recommendations:
- Part A: Mall Turnover Transparency – Make it compulsory for landlords collecting tenants’ turnover information to publish aggregate mall turnover information;
- Part B: Regulation – Pass a Retail Leases Act to protect the position of tenants of retail shop premises against landlords charging non-core fees and fines and passing costs incurred in the ordinary course of business to tenants.
- Part C: A Proactive Industry Watchdog – Bestow power upon Enterprise Singapore to advocate the Act.
SGTUFF looks at the practices in Australia, Hong Kong, U.K. and U.S.A. for precedents and references. Singapore is more similar to Hong Kong, which offers no prescribed form of commercial leases and parties are free to negotiate and agree on the terms of commercial leases. Perhaps what is different between Singapore and Hong Kong is that the Singapore’s commercial leasing market is characterised by many buyers, few sellers whereas Hong Kong commercial leasing market is characterised by many buyers and relatively more sellers compared to Singapore. Hong Kong represents one end of the continuum.
On the other end of the continuum, SGTUFF looks to Australia, whose economic system is still based on capitalism. Many of our key recommendations for regulation takes reference from the South Australia’s Retail and Commercial Leases Act 1995 (“RCLA”), designed to protect small businesses (applicable to leases with annual rents no more than AUD400,000). RCLA represents the other end of the continuum.
SGTUFF considered whether Part B: Regulation should be designed to protect all businesses or simply protect small businesses. The key recommendations are applicable to all businesses in commercial leasing, regardless of business size.
Key Recommendations – Transparent Access to Information
- A Confidentiality clause that is common in tenancy agreements is not covered in FTF. Typically, it stipulates, “To keep confidential and shall not at any time disclose or permit to be disclosed to any third party the provisions of this Lease, or any negotiation or discussion relating to this Lease, or any information in respect of, arising from or in connection with this Lease, unless the disclosure is required by law or made with the prior written consent of the Landlord or its agent.”
- This is often a tenant’s covenant but not a landlord’s covenant, meaning it imposes unilateral obligations on the tenant and not mutual obligations on both the landlord and the tenant. Given that the tenancy agreement discloses confidential information of both parties, one would imagine that it shall be mutually binding.
- Page 22 Basic Reference Lease Agreement for Business Space of FTF has 70 sections. A broad definition of confidentiality with a catch-all clause – “…the provisions of this Lease, or any negotiation or discussion relating to this Lease, or any information in respect of, arising from or in connection with this Lease…” – is unreasonable.
- In the U.S., a broad confidentiality clause is viewed as a restrictive covenant, that is, it restricts commercial trade. Restrictive covenants are frowned upon by law or public policy because they hinder free trade and commerce. The restrictions should be sufficiently narrow, otherwise the covenant may be unenforceable or illegal.
- Landlords may argue that their tenancy agreement contains many trade secrets, hence the need for a unilateral confidentiality clause. SGTUFF finds this argument weak and indefensible. A trade secret is defined as any practice of a company that is generally not known outside of the company and that practice gives the company an economic advantage over its competitors. Judging by how homogenous tenancy agreements are across landlords, SGTUFF argues that landlords’ practices and processes are already shared rampantly and even systematically among landlords, who are supposedly competitors.
- Confidentiality clause also shows up in the correspondences many landlords send to their tenants during this economic crisis. Typically, it stipulates, “Unless disclosure is required by law or permitted by our prior written consent, you shall not disclose to any third party any information relating to, arising from or in connection with the Rent Rebate or the terms and conditions of the Lease contained in this letter, failing which you shall pay us on demand the amount of the Rent Rebate granted.” During a time when business owners are trying to make sense and cope with many emerging issues on a daily basis, such methods of communication are not helpful. In fact, it is undesirable. It erodes trust and destroys our social capital as a nation.
- Unfair contracts shrouded in secrecy will not propel our economy into the future; business relationships based on fear will not breed pioneers of the next generation.
- SGTUFF argues that owners and unitholders who have their properties managed externally by a third party will benefit from a higher level of transparency. Would they really want to rely on a third party property manager as their only source of information?
- We are in agreement that the Confidentiality clause be omitted from the landlord’s covenants, which is the current practice. They should also be omitted from the tenant’s covenants.
- SGTUFF proposes that a retail shop lease must not contain a broad Confidentiality clause.
- Section 1.6 Point of Sale System of FTF describes, “Typically for retail malls, the landlord would install POS systems at the tenants’ costs, which include monthly servicing and maintenance cost. The POS system collects the shops’ sales data for analysis of customer spending patterns and mall patronage. Some landlords use the data collected to guide their tenants in improving their business.”
- The collection of sales data is used to calculate the Gross Turnover Rent (“GTO”), which is increasingly being charged in addition to base rent. Knowledge of the daily or monthly sales data of tenants allows landlords to charge higher and higher rents upon every renewal even when tenants’ sales are falling year on year. What ends up happening is, with every renewal, rent is negotiated closer and closer to the breakeven point of tenants.
- SGTUFF proposes that a landlord must not require a tenant to provide to the landlord information about the tenant’s turnover unless the retail shop lease provides for the determination of rent, a component of rent by reference to turnover.
- To counter this information asymmetry, SGTUFF takes reference from Part 8 Section 52 of RCLA. It stipulates, “If a retail shop lease requires the lessee to pay an amount in respect of outgoings on account of expenditure incurred in obtaining statistical information, the lease is taken to include provision that the lessor must make information so obtained by the lessee available to the lessor.”
- SGTUFF proposes if a retail shop lease requires the tenant to provide information to the landlord about the turnover of the business of the tenant, the landlord must make the following information available to the tenant in a written report on a quarterly basis:
- Monthly aggregate turnover by Merchandising Category; and
- Monthly average turnover per square feet of leasable space by Merchandising Category; and
- Monthly average occupancy cost ratio (rent to sales ratio) by Merchandising Category.
Tenants that are not required contractually to provide sales data are excluded.
- Andrea Daniels and Patricia McDonnell wrote an article titled A Guide to Occupancy Costs that is published by the US National Real Estate Investor. They wrote, “…tenants that are operating in the most productive malls are generally willing to pay more rent for the benefit of being located in top-tier properties with high sales capture rate. As sales per square foot increase, so do operating efficiencies, putting the retailers in a position to tolerate higher rents.”
- SGTUFF argues that a shopping centre’s turnover information is a better signal than rent information not only for investors, but also for tenants. It forces property managers to focus on value creation. Systematically passing on more costs to tenants (in the form of rent) while creating little or no value (in the form of gross turnover) will certainly be unsustainable in the long run. The retail apocalypse is real. What is unreal is how many landlords can deliver high yields while their tenants’ brick-and-mortar sales are adversely affected. Landlords are a part of the retail ecosystem. It is time for property managers to take responsibility and tackle the structural changes happening in retail and not simply leech off the tenants’ efforts.
- SGTUFF proposes the confidentiality of turnover information as both a Tenant Covenant and a Landlord Covenant.
- SGTUFF proposes that if a retail shop lease requires the tenant to provide information to the landlord about the turnover of the business of the tenant, the landlord must not divulge or communicate information provided by the tenant except:
- with the consent of the tenant; or
- in a document giving aggregate turnover information about a retail shopping centre in a manner that does not disclose information about the turnover of an individual tenant’s business, or
- to a court or arbitrator, or for the purposes of a mediation; or
- in compliance with a requirement made by or under an Act; or
- to the landlord’s professional advisers (such as legal or financial advisers), or to the proper officer of a financial institution for the purpose in good faith of enabling the landlord to obtain financial accommodation; or
- in good faith to a prospective purchaser of the retail shop or the building of which it forms part.
- SGTUFF proposes that if a retail shop lease requires the landlord to provide information to the tenant about the aggregate turnover, average turnover per square feet of leasable space, and average monthly occupancy costs of the landlord, the tenant must not divulge or communicate information provided by the landlord except:
- with the consent of the landlord; or
- to a court or arbitrator, or for the purpose of a mediation; or
- in compliance with a requirement made by or under an Act; or
- to the tenant’s professional advisers (such as legal or financial advisors), or to the proper officer of a financial institution for the purpose in good faith of enabling the tenant to obtain financial accommodation; or
- in good faith to a prospective purchaser or franchisee of the tenant’s business.
Key Recommendations – No Undue Oligopolistic Power
- Section 1.3 Restriction of Trade Within a Radius of FTF describes, “The landlord may include a clause that prohibits the tenant from operating a branch or franchise within a certain radius of the leased premises. Nicholas Seng, in his article Restraint of trade covenants in commercial agreements, he concluded by saying, “…some of the cases cited above (Goldsoll, CLASS Medical, Vancouver Malt, Kall-Kwik, Convenience Co. and Harcus Sinclair v Your Lawyers LLP) make clear that the courts will not enforce covenants that do not protect a legitimate proprietary interest or go beyond what is reasonably necessary to protect that interest.
- The Restriction of Trade Within a Radius imposed by a landlord is unlikely to be enforceable in court. Yet it continues to be permissible for a landlord to include this covenant in the tenancy agreement. Ms Sandra Booysen, in her article Twenty years (and more) of controlling unfair contract terms in Singapore published by the Singapore Journal of Legal Studies, argues, “Although such exemptions would be struck down if challenged in court, they are insidiously harmful to those who assume, in ignorance, that the terms are binding. Rather than waiting for individual challenges to such terms after an incident, it is preferable for them to be eradicated, and this is more likely to be achieved by the intervention of a proactive industry watchdog.”
- Section 59(1) Geographical restrictions of RCLA stipulates, “A retail shop lease must not contain a provision which has the effect of preventing or restricting the lessee from carrying on business outside the retail shopping centre, either during the term of or after the expiry of the lease.
- SGTUFF proposes that a retail shop lease must not contain a provision which has the effect of preventing or restricting the tenant from carrying on business outside the retail shopping centre, either during the term of or after the expiry of the lease.
- Section 1.5 Total Leasing Cost of FTF describes, “In general, besides rent, there are other leasing costs to be considered. For example, the landlord’s legal fees for the lease agreement and the landlord’s professional consultants’ vetting charges for fitting out works, among others.” The guide adds, “Both parties should agree upfront on all costs to be borne by the tenant.” In Singapore, the leasing costs are typically paid by the tenant. In Hong Kong, the leasing costs are typically shared equally between the landlord and the tenant. Section 14 Lease preparation costs of RCLA regulates lease preparation costs.
- There is a worrying trend that in addition to Legal Fees, Stamp Duty and Utilities, tenants have to pay what appears to be landlord’s business expenses, that is, costs incurred in the ordinary course of business. Increasingly, Administrative Fee is charged as a lease preparation cost. This is a fee charged by the landlord for handling the administrative matters relating to the commencement or renewal of a lease. A Design Vetting Fee is charged for the landlord’s design team to look through a tenant’s fit out submissions. To what end is a landlord allowed to pass on to the tenant the costs incurred in the ordinary course of running a leasing business?
- SGTUFF proposes that if the tenant is liable to pay an amount to the landlord or other expenses incurred by the landlord in connection with the preparation, stamping and registration of a retail shop lease (preparatory costs), the tenant cannot be required to make the payment until provided with a copy of any account given to the landlord for the expenses.
Preparatory costs include:
- fees charged by a mortgagee for producing a certificate of title for the land over which a retail shop lease is to be registered or for consenting to the lease;
- the costs of attendances by a lawyer or registered conveyancer acting for the lessor.
The tenant’s liability for the preparatory costs cannot exceed:
- the actual amount of the stamp duty payable on the lease and the government fees for registration of the lease; and
- one-half of the other preparatory costs.
However, this does not limit the recovery of preparatory costs incurred by the landlord from a person who enters into and then withdraws from negotiations with the landlord.
A landlord must not include costs incurred in the ordinary course of business as preparatory costs.
- Section 1.6 Point of Sale System of FTF describes, “Typically for retail malls, the landlord would install POS systems at the tenants’ costs, which include monthly servicing and maintenance cost.” The installation, servicing and maintenance of the POS system are managed by a third party vendor picked by the landlord.
- SGTUFF proposes that if the tenant is liable to pay an amount to the landlord or other expenses incurred by the landlord in connection with the installation, servicing and maintenance of a point of sale system for the submission of turnover information, the tenant cannot be required to make the payment until provided with a copy of any account given to the landlord for the expenses.
The tenant’s liability for the point of sale system costs cannot exceed:
- the actual amount of the fees payable to the service provider; and
- one-half of the installation, servicing and maintenance costs.
- Section 2.1 Gross Rent (Net Rent, Service Charges, A&P Charges, Property Tax and Utility Charges) of FTF describes, “Gross rent typically consists of the base rent, service charge, advertisement and promotion (A&P) fees (applicable for most malls) that are payable by the tenant. FTF cautions, “It is typical for the tenant to bear increases in property tax, service charge and A&P charges during the lease term and the landlord should pre-determine with the tenant the basis and calculation of such increases.”
- A typical Revision of Advertising & Promotion Fund (“A&P Fund”) clause stipulates, “The A&P Fund is established for the purpose of payment of the costs and expenses of all advertising and promoting the trade and businesses carried on in the Building and all ancillary activities thereto. The A&P Fund shall increase over and above the aforesaid sum in the event of any increase in the costs of such advertising and promotion services.”
- Often, in the same tenancy agreement, it includes another Promotion Fund clause that stipulates, “The Landlord shall pay the A&P Fee into a fund (the “A&P Fund”) established and maintained by the Landlord. The monies in the Promotion Fund shall belong to the Landlord and shall be disbursed and utilised by the Landlord at any time as the Landlord shall in its absolute discretion deem fit. The Tenant shall not be entitled to raise any objection, requisitions, or demands on any matter in connection with or relating to the A&P Fund and the conduct and maintenance of the A&P Fund. If there is a surplus in the A&P Fund there shall be no refund to the Tenant and such surplus may be utilised by the Landlord in such manner at its discretion as it deems fit. The Tenant shall have no claims whatsoever to the monies standing in the A&P Fund or any part thereof or for the refund of the A&P Fee or part thereof paid to the Landlord.
- Allowing a landlord to revise the A&F Fee collected during the lease term while having zero accountability for the fund collected makes it susceptible to abuse. A landlord who is incapable of negotiating a higher rent due to, say, poor reputation of having high occupancy costs, may simply obtain the higher “rent” through raising the A&F Fee after the lease agreement is signed.
- To mitigate such abuse, Section 55 Lessor to provide auditor’s report on advertising and promotion expenditure of RCLA stipulates, “A retail shop lease is taken to include provision to the following effect:
- the lessor must give the lessee a written report that complies with this section and details all expenditure by the lessor in each accounting period of the lessor during the term of the retail shop on account of advertising or promotion costs to which the lessee is required to contribute under the lease;
- each report is to be given to the lessee within three months after the end of the accounting period to which it relates;
- the report is to be prepared by a registered company auditor (within the meaning of the Corporations Law) and is to be prepared in accordance with accounting standards (within the meaning of the Corporations Law).
- SGTUFF proposes that any revision to the A&P Fee after the lease agreement is signed be prohibited.
- Section 2.6 Insurance of FTF describes, “In typical lease agreements, buildings are insured for fire, public liability, building damages, among others by the landlord and recovered via service charge. The tenant, on the other hand, is bound to insure the content of the premises against losses and damages in addition to public liability insurance, among others.
- It is now common to see an Insurance clause as under Tenant’s Covenants that stipulates, “At the Tenant’s own cost and expense at all times during the Term to take out and keep in force in the joint names of the Landlord and the Tenant for their respective rights and interest a comprehensive public liability insurance policy to an amount not less $X or in such higher amount as the Landlord may from time to time prescribe, in respect of any one occurrence. The public liability insurance policy must include a cross-indemnity clause and a waiver of subrogation of the insurer’s right against the Landlord, and must not exclude the property in the care and custody of or control of the Tenant.
- SGTUFF proposes that the tenant’s liability for insurance that are taken up in the joint names of the landlord and the tenant cannot exceed:
- the actual amount of the insurance premium; and
- one-half of the insurance premium.
- Section 3.3 Pre-termination of Lease of FTF describes, “Lease durations are typically fixed without pre-termination rights for both the tenant and landlord.” While a tenant does not have pre-termination rights, increasingly, a landlord is able to pre-terminate a lease without liability to the tenant. This is usually not written as a pre-termination clause but as a Landlord’s Right to Deal with the Premises. Typically, the clause stipulates, “Notwithstanding any other provision in this Lease and notwithstanding that the Tenant has given notice to exercise the option to renew and the Landlord has granted the same, the Landlord may at any time without liability to the Tenant, and without prejudice to the Landlord’s rights and remedies against the Tenant three months’ notice in writing in the event the Landlord determines in its absolute discretion that:
- there is a change in the Landlord’s trade mix policy; or
- the Building or any part thereof is to be renovated, retrofitted, refurbished, reconfigured and/or altered and the Landlord at its sole discretion determines that it requires possession of the Premises for the purpose of or in connection with the renovation, retrofitting, refurbishment, alteration and/or reconfiguration; or
- there is to be a change of use for the Building or any part thereof (a) effecting the Premises and/or (b) such that vacant possession of the Premises is required by the Landlord; or
- the Building is to be demolished or the Landlord requires possession of the Premises for re-development (including but not limited to amalgamation and/or subdivision).
- On the other hand, it is common for the landlord to seek pre-termination damages from the tenant that comprise:
- forfeiture of security deposit, usually 3 months; and
- unrealised gross rent from the date of early termination to the end of the lease; and
- estimated unrealised gross turnover rent from the date of early termination to the end of the lease; and
- full legal fees for the Deed of Surrender; and
- full agent’s commission (not prorated).
- In Hong Kong, a tenant may be forced to leave prior to the date originally agreed if the landlord exercises his right of forfeiture. Many leases include sale and redevelopment clauses which give the landlord a right to terminate the lease by giving a specified number of months’ notice to terminate, if the landlord wants to sell or redevelop the building. Typically, the landlord has to give at least six months’ notice in writing to the tenant.
- With the exception of sale and redevelopment, the landlord must comply with Section 58 Restrictions on and Relief against Forfeiture of Leases and Under-leases of the Conveyancing and Property Ordinance (“CPO”) unless the forfeiture arises because of non-payment of rent or insolvency.
- Section 58 Restrictions on and Relief against Forfeiture of Leases and Under-leases of the CPO stipulates, “A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice –
- specifying the particular breach complained of; and
- if the breach is capable of remedy, requiring the lessee to remedy the breach; and
- specifying the compensation, if any, which the lessor requires in respect of the breach,
and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.
Where a lessor is proceeding, by action or otherwise, to enforce such a right of re-entry or forfeiture, the lessee may, in the lessor’s action, if any, or in any action brought by himself, apply to the court for relief, and the court may grant or refuse relief, as the court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, thinks fit; and in case of relief may grant it on such terms, if any, as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the court, in the circumstances of each case, thinks fit.
A lessor shall be entitled to recover as a debt due to him from a lessee, and in addition to damages (if any), all reasonable costs and expenses properly incurred by the lessor in the employment of a solicitor and surveyor or valuer, or otherwise, in reference to any breach giving rise to a right of re-entry or forfeiture which, at the request of the lessee, is waived by the lessor, or from which the lessee is relieved, under the provisions of this section.
Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture under any covenant, proviso, or stipulation in a lease, or for non-payment of rent, the court may, on application by any person claiming as under-lessee any estate or interest in the property comprised in the lease or any part thereof, either in the lessor’s action (if any) or in any action brought by such person for that purpose, make an order vesting, for the whole term of the lease or any less term, the property comprised in the lease or any part thereof in any person entitled as under-lessee to any estate or interest in such property upon such conditions as to execution of any deed or other document, payment of rent, costs, expenses, damages, compensation, giving security, or otherwise, as the court in the circumstances of each case may think fit, but in no case shall any such under-lessee be entitled to require a lease to be granted to him for any longer term than he had under his original sub-lease.
- SGTUFF proposes that a retail shop lease must not contain a provision that permits or otherwise provides for the termination of the lease on the following grounds:
- there is a change in the Landlord’s trade mix policy; or
- the Building or any part thereof is to be renovated, retrofitted, refurbished, reconfigured and/or altered; or
- there is to be a change of use for the Building or any part thereof (a) effecting the Premises and/or (b) such that vacant possession of the Premises is required by the Landlord.
- Section 58 Termination for inadequate sales prohibited prevents a landlord from terminating a lease prematurely on the grounds of unsatisfactory sales performance. SGTUFF considers this as a frivolous ground to terminate a lease prematurely. Applying reciprocity, if a landlord is allowed to do so, the same right should be extended to the tenant. In fact, it must be a difficult decision for the tenant as he has already invested in the renovations and will also be obliged to bear the full cost of reinstating the premise.
- SGTUFF proposes that a retail shop lease must not contain a provision that permits or otherwise provides for the termination of the lease on the ground that the tenant or the business of the tenant has failed to achieve a particular level of sales or turnover.
Key Recommendations – Industry Watchdog
- Ms Booysen, in her article Twenty years (and more) of controlling unfair contract terms in Singapore published by the Singapore Journal of Legal Studies in 2016, discusses the merits of having a proactive industry watchdog. She wrote, “Anecdotal evidence suggests that unfair business practices do exist in Singapore despite the existing framework: for example, some service providers may purport to exclude liability for injury, howsoever caused. Since such a provision is invalid under the UCTA, it is surely an unfair practice that should be reined in by an industry watchdog of its own initiative. Although such exemptions would be struck down if challenged in court, they are insidiously harmful to those who assume, in ignorance, that the terms are binding. Rather than waiting for individual challenges to such terms after an incident, it is preferable for them to be eradicated, and this is more likely to be achieved by the intervention of a proactive industry watchdog. For a flagrant disregard of s2(1) of the UCTA, consideration should also be given to criminal sanctions.
- She added, “To date, most interventions by CASE are prompted by a complaint, rather than being initiated by the organisation itself. The Ministry of Trade and Industry (“MTI”) has, however, recently consulted the public on proposed amendments to the CP(FT)A, including the establishment of a new agency to support the enforcement of consumer protection measures. The new agency, the Standards, Productivity and Innovation Board or SPRING, will have greater powers than currently available to CASE/STB to investigate and seek declarations and injunctions against recalcitrant suppliers. There are also plans to make injunctions against such suppliers more effective, for example, by requiring the supplier to publicise the injunction and making it more difficult to avoid the injunctions by opening a new business. As MTI has said, such developments ensure to the benefit not only of consumers but also compliant suppliers who will benefit from greater consumer confidence and fairer competition. Hopefully, the new agency will be on the lookout for unfair practices and intervene without waiting for individual challenges. The proposed amendments should enhance the effectiveness of the CP(FT)A and its ability to promote contractual fairness in Singapore; the review is to be welcomed and its outcome keenly anticipated.
- Although Ms Booysen was referring to a consumer watchdog in her article, she painted a vivid picture of what a proactive watchdog may do as compared to a reactive one.
- Once the Bill is passed, SGTUFF assumes that the Competition and Consumer Commission of Singapore will administer the Retail Leases Act 2020.
- SGTUFF proposes that Enterprise Singapore advocates the Retail Leases Act 2020 and be the first point of contact for landlords and tenants. Enterprise Singapore is well-positioned to fulfil the role of a proactive industry watchdog and initiate interventions.