Gov’t To Amend Law To Prevent Undue Burden On Lessors

SINGAPORE – The Ministry of Finance plans to revise the COVID-19 (Temporary Measures) Act 2020 to ensure there is “no undue burden” on commercial property lessors when they pass on the mandatory property tax rebates to lessees.

This was announced by Second Minister of Finance Lawrence Wong in Parliament on Tuesday (3 November) when discussing the COVID-19 (Temporary Measures) (Amendment No. 3) Bill.

The revision passed on Tuesday will make sure that the rental waivers that lessors grant to tenants under the rental relief framework will be deemed part of their obligations.

Explaining how the revised rules will help commercial property landlords, Wong shared an example in which there was a change in tenants, with one terminating their lease in July, while the second rented the space since August.

If the first lessee is a small- and medium-sized enterprise (SME), the lessor will have to waive 4 months’ worth of rent from April to July due to the rental relief framework. The landlord will have performed his or her obligation to pass on the property tax rebate benefits to the tenant, which is around 1.2 months’ worth of rent, as well as some of the cash grants, he noted.

However, Wong pointed out that under current property tax rebate rules, the commercial property owner will also need to pass on the property tax rebate benefits to the 2nd tenant, prorated to roughly 0.5 months’ worth of rent.

“This is not the intended outcome. This is because the owner had already waived four months of rent for Tenant A under the rental relief framework and passed on the benefit of the property tax rebate to Tenant A.”

“So, the owner should not need to pass on any benefit of the property tax rebate to Tenant B. That’s why the Bill provides regulations to be made retrospectively, to ensure that this position is maintained,” Wong asserted.

As such, the COVID-19 (Temporary Measures) (Amendment No. 3) Bill will enable the landlord to recoup the excess amount from the 2nd lessee if the property tax rebate benefits have already been passed on.

Previously, the property tax rebate was announced in February as part of the government’s budgetary measures. It was later improved in March so that owners of commercial and industrial properties will get a rebate of 30 to 100 percent based on their payable real estate tax.

Under the rental relief framework, cash grants were also provided to eligible owners of non-residential properties who are mandated to grant rental relief to qualified tenants, namely SMEs and non-profit groups.

Details of the amended rules will be provided through subsidiary laws, and information will be posted at the website of the Inland Revenue Authority of Singapore (IRAS), Wong added.