Restaurants and other commercial tenants that are unable to pay rent owing to the financial impact of measures to curb the spread of coronavirus infections can hold off rent contractual obligations for at least six months under a proposed law.
If passed in Parliament, the proposed Act would protect individuals and businesses unable to make rent. Landlords would not be allowed to terminate the lease of these tenants or repossess the premises if rent is not paid during the relief period.
At the end of the relief period, which can be extended for up to a year from the date the Act takes effect, businesses would still have to fulfil their original contracts.
The proposed bill covers contracts in which the obligations have to be performed on or after Feb 1. It excludes contracts entered into on or after March 25.
One of the broad categories of business contracts are protected under the Bill is leases or licences for non-residential property, such as the lease for factory premises.
When a commercial tenant is unable to pay its rent owing to fewer customers and lower revenue, it can seek relief from assessors appointed by the Ministry of Law
If relief is given, it would be a criminal offence for the landlord to take any legal or enforcement action against the tenant, like terminating the lease.
Similarly, construction businesses that cannot fulfil their contracts would also not be liable for liquidated damages if the inability was caused by the pandemic to "a material extent".
A contractor would not be liable for any delays or non-supply of goods as well as liquidated damages if its inability to carry out its contractual obligations is caused "to a material extent" by the Covid-19 situation.
Small and medium-sized enterprises would also be protected against legal action for defaulting on loans with specific security such as commercial or industrial property, or plant, machinery or fixed assets for business purposes.
Apart from providing relief from contractual obligations, the Bill also revises the limits for insolvency.
For businesses, the monetary threshold for insolvency is raised 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 extended from 21 days to six months.
Should the proposed bill pass this will provide relief to many businesses
However, other contractual rights of banks like charging fees and interest for non-payment or late payment would still remain and will not be affected