Parliament passes wide-ranging Bill to assist those unable to fulfil contractual obligations due to COVID-19 outbreak

SINGAPORE: A wide-ranging Bill that among other measures aims to assist those unable to fulfil contractual obligations was passed in Parliament on Tuesday (Apr 7).

It prohibits landlords from terminating a lease due to non-payment because of the COVID-19 outbreak, and protects those who have placed deposits for weddings.

The Bill will be valid for six months, with Law Minister K Shanmugam given power to extend it up to a year.

Calling the COVID-19 outbreak the most serious crisis that Singapore has faced since its independence, Mr Shanmugam said the COVID-19 (Temporary Measures) Bill was the third part of the response by the Government. 

This follows the Unity, Resilience, and Solidarity Budgets as well as the Monetary Authority of Singapore working with the banks to announce a series of initiatives, he said.

“So we decided to intervene, it’s a major intervention – so three packages by DPM (Deputy Prime Minister Heng Swee Keat), you can compare that with an infusion of blood,” said Mr Shamugam. “This bill seeks to staunch the flow of blood … a reprieve for a certain period, a matter of months. 

“It seeks to give much-needed liquidity to commercial parties, the immediate impact is a redistribution of monies between the parties to the affected contracts … We seek to be targeted and temporary, so I would call this a legal circuit-breaker.”

When it comes to leases of non-residential properties, a tenant who seeks relief must show that he is 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”, said Mr Shanmugam.

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“If he can show that then lease or licence cannot be terminated on the basis that rent has not been paid and legal proceedings cannot be commenced against tenants on the basis that rent has not been paid,” he explained.

However, this does not mean that all tenants do not have to pay rent, stressed Mr Shanmugam.

“Those who have the ability to make rental payments must continue to do so,” he said. “The Bill seeks to help those who are unable to pay and the measures are only for a period.”

When it comes to event and tourism-related contracts such as agreements to hold wedding banquets, should the event have been scheduled to be held on or after Feb 1 and did not proceed due to a “COVID-19 event”, any deposits forfeited must be restored “as if they had not been forfeited”, added Mr Shanmugam.

“This is provided the party seeking relief has served the notification for relief on the other party,” he added. “Deposits that have not yet been forfeited must also not be forfeited. The same applies to tourism-related contracts, non compliance will be an offence.”

However, Mr Shanmugam noted that the Bill does not mandate that deposits be refunded immediately. “If we ask all companies to immediately refund, that could also be serious trouble,” he said.

Contracts which are construction-related, hire-purchase agreements or conditional sales agreements, as well as loan facilities are also covered in the Bill.

The spirit of the law and the essence of contracts – which is trust – will continue to “live” under this “intervention”, he stressed.

“None of us in our lifetime have encountered an economic shock like this. And (the) Government has to do everything to intervene to help keep some structure of the economy,” explained Mr Shanmugam.

The Bill aims to not just address contracts. For one, it has also included provisions to provide the legal basis in order to enforce the enhanced safe distancing measures. 

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PROVISIONS FOR MEETINGS

The inability to hold meetings has caused a “significant degree of uncertainty and disruption” for certain sectors.

As such, part four of the Bill introduces some flexibility to hold meetings in line with safe distancing measures, but also to “maintain the propriety in the conduct of these meetings”, said Senior Minister of State for Law Edwin Tong.

The Minister for Law may prescribe, by order, alternative meeting arrangements that he considers necessary or desirable for that meeting or class of meetings.

Some options include meetings conducted electronically, for instance video conferencing, electronic voting, or for an appropriate period of notice to be provided for the meeting.

This will be applied retrospectively from Mar 27.

More court proceedings will also be held remotely, as court proceedings in physical courtrooms will have to be reduced, said Mr Tong. This applies to the Judiciary and the Syariah Court.

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While the Judiciary and Syariah Court have already adjourned, or will adjourn, hearings unless deemed “essential and urgent”, hearings during this period will “as far as possible” be conducted through electronic means.

However, conditions will apply. Witnesses who appear or give evidence remotely have to do so from a place specified by the court or the Syariah Court. For witnesses of fact, parties to the proceedings must agree to allow the witness to testify remotely.

The measures will only apply during the specified period The Minister of Law may also, in consultation with the Chief Justice or the minister in charge of Muslim Affairs declare that this clause will cease to apply to any Court or Syariah Court proceedings.

FIGHTING THE SPREAD OF COVID-19

The Bill also will seek to further bolster Singapore’s defences against the COVID-19 outbreak. 

For one, the Government has included provisions to provide the legal basis in order to enforce the enhanced safe distancing measures, said Health Minister Gan Kim Yong.

“These are temporary measures specific to the COVID-19 situation we are facing currently,” he added.

In particular, all social gatherings of any size in both private and public spaces have been banned under the Bill.

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This would include private parties or gatherings with families or friends not living together, at home or in public spaces such as HDB void decks, said Mr Gan. 

The Bill will empower the minister or any public officer authorised by the minister to appoint enforcement officers to take action against individuals, business owners or entities that flout the orders and requirements. 

These enforcement officers include police officers, public officers and health officers appointed under the Infectious Diseases Act.

LANDLORDS TO PASS PROPERTY TAX REBATES TO TENANTS

The Bill also mandates property owners who have not passed on the full rental rebates to tenants to do so in a timely manner.

“We will require the property owner to pass on the rebate by making a cash payment to his tenant or by reducing or offsetting future rental payments,” said National Development Minister Lawrence Wong.

Property owners are prohibited from imposing conditions when passing on rebates, and they are required to keep a proper record that they have passed on the rebate.

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“Failure to properly pass on the rebate or to keep a proper record is also an offence,” said Mr Wong, who is also Second Minister for Finance.

An avenue of redress will be available to tenants and property owners should there be any disputes. However, all disputes relating to the transfer of the property tax rebate granted this year has to be brought up by Dec 31, 2021.

SMALLER LANDLORDS AFFECTED BY RENT DEFERMENT MEASURES

Members of Parliament (MPs) welcomed the additional measures, even as some raised concerns on the burden the rent deferment measures may impose for smaller landlords.

Bishan-Toa Payoh MP Chong Kee Hiong found that there is a “mismatch” between the obligations of tenants and property owners, as a tenant’s lease collateral is a one- to four-month security deposit, while the landlord’s collateral with the bank is their property.

“This security deposit is insufficient to ensure that the tenants pay after the six-month rent deferment period, which may be extended to a year,” he said.

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“In the worst-case scenario, when the tenants go bust after six months, there is little that the landlords can do to recover their outstanding debt. In reality, landlords have little legal recourse when a private limited company goes belly-up.”

This leaves landlords with the “bad debt”, and small landlords with less resources would have problems meeting their obligations to their bank, said Mr Chong.

Instead, he suggested that deferment measures be reduced to three months “so that risks are balanced out between landlords and tenants”.

Mr Shanmugam clarified that the Bill does not alter the payment obligations of tenants to their landlords.

“The landlord can tell the assessors, show the assessors, that the tenant in fact, has the financial capacity to pay a part, if not all of the rent. 

“If the assessor finds that the tenant is able to pay all or part of their rent, he may determine that the tenant pays that part or in full, either immediately, or after the expiry of a prescribed period,” he said.

CONTRACTUAL OBLIGATIONS OF COUPLES

Several MPs also said the current six-month provision for suspension of the right against forfeiture may not be sufficient to protect people like couples due to wed.

“Some couples have stated that they are unable to postpone their wedding to another date within the next six months. There is no certainty whether the COVID-19 situation can be resolved by then and whether their wedding can then proceed,” said Mountbatten MP Mr Lim Biow Chuan.

READ: COVID-19: Couples due to get married postpone weddings, livestream small celebrations

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Contracting parties should be allowed to cancel the contract instead, and pay for “whatever reasonable expenses” have been incurred to date by the venue provider, suggested Mr Lim.

Some couples have also elected to cancel or postpone their wedding venue booking even before the Bill was passed, said Bishan-Toa Payoh MP Saktiandi Supaat.

“I wonder if the Government would consider making some concessions for them should they make an appeal,” he said.

“One possibility … if you have booked an event at a certain venue, if now you can’t have it because of COVID-19, the fairest is to postpone, if that is possible,” said Mr Shanmugam, adding that cancellation of events should not mean a 100 per cent refund.

“If the event companies have spent some money, if they’ve done some work, and so on, they need to be compensated for that,” he said.

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