Landlords will have to pass on property tax rebates in full to their tenants, an upcoming law will ensure, in a move that aims to help businesses.
Those that fail to do so could face fines of up to $5,000.
Almost 60,000 commercial properties, including 58,000 retail and food and beverage properties, qualify for Budget 2020’s rebate of 15 per cent or 30 per cent.
This means they would pay zero property tax for the year.
The rebate is intended to help businesses deal with the fallout from the coronavirus pandemic, but some tenants say some landlords are dragging their feet in passing on the savings.
This has prompted the Government to introduce new legislation, the Covid-19 (Temporary Measures) Bill, which will be introduced in Parliament next Monday, to make landlords pass on the savings to their tenants.
For most properties, the 100 per cent property tax rebate works out to more than one month of rent.
Deputy Prime Minister Heng Swee Keat urged property owners to pass on the rebates to their tenants by reducing rents.
“Landlords and tenants have a win-win relationship – when the tenants do well, landlords benefit too. So landlords must do their part for tenants during these times. But some have chosen not to,” he said on Facebook last night.
“I have said that if the need arises, the Government will not hesitate to take legislative action, to make it mandatory for landlords to pass on these rebates to their tenants. To tackle the challenge decisively, the Government will be introducing legislative action.”
Many retailers cheered the new law because it holds landlords accountable. “Some landlords were using the property tax rebates as leverage to force tenants to be up-to-date with rent payments,” said Mr Bernard Yang, managing director of Nanyang Optical.
In addition, another proposed law that allows commercial tenants affected by the pandemic fallout to defer paying rent temporarily for at least six months also helps.
Mr Yang said: “That means I don’t have to lay off anyone. From Dorscon (Disease Outbreak Response System Condition) red, retailers are now hovering between Dorscon orange and yellow.”
TSMP Law partner Jennifer Chia said property tax rebates cannot be passed on directly to tenants as property taxes are not payable by them in the first place.
“Lease contracts generally do not make it mandatory that landlords share property tax rebates with tenants. The proposed new law brings much-needed transparency as to what rebates businesses can expect, so they can plan their expenses,” she added.
Subject to Parliament’s approval, the proposed law will impose an obligation on landlords to pass on to their tenants the full amount of rebate attributed to that property.
The rebate has to be passed on in a timely manner, with a prescribed timeline, and the landlord is not allowed to impose any conditions.
Mr Kurt Wee, president of the Association of Small and Medium Enterprises, said the new law will help to clear up tension between landlords and tenants. “The landlords have been receiving good rent for many years from tenants. They now have to be part of the solution,” he added.
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