Thursday 22 January 2015

SBF launches fair tenancy framework

Guidelines aim to create a more balanced playing field between landlords and tenants
By Lee Yen Nee, TODAY, 21 Jan 2015

The Singapore Business Federation (SBF) yesterday laid out guidelines aimed at putting a stop to unfair leasing practices, in a move that should create a more balanced playing field between landlords and tenants here.

The guidelines under the voluntary Fair Tenancy Framework were developed after companies reported surprise jumps in rents when renewing leases, which add considerable pressure to already escalating business costs in a tough economic restructuring environment.

“Over the past few years, businesses have seen continuous increases in rental costs. This is not confined to just retail and F&B shop spaces, but also for office, commercial and industrial spaces. While it is a reflection of a healthy economy where demand far outstrips supply, at some point, it becomes unsustainable as businesses find it difficult to make ends meet,” said SBF chairman Teo Siong Seng.

SBF hopes that the framework will help businesses, particularly small and medium enterprises (SMEs), to better understand tenancy terms and conditions, thereby leading to a fairer negotiation ground between both landlord and tenant.

As part of the framework, an SBF-led committee has published a guidebook on common terms and conditions found in leasing agreements, as well as explanations on what they mean and their implications.

The guide also include clauses that tenants may opt for to better protect themselves, such as using mediation as a primary choice for dispute resolution.

The committee is also working with the Government to release more detailed rental data that businesses can refer to when negotiating leases.

This data can be broken down in terms of street, size and floor level, said Ms Cynthia Phua, chairman of the Rental Practices Working Group under the SBF-led SME Committee.

In addition, rental rates can also be presented in the price range of the 25th percentile, median and 75th percentile.

However, as a guide, the framework is intended to be voluntary. Legislation in this area would require greater in-depth studies on the implications, noted Minister of State for Trade and Industry Teo Ser Luck, who was also present at yesterday’s briefing. Nevertheless, he said this is the first step towards fairer leasing practices.

“Singapore’s reputation is important. While we develop our business sector to be more vibrant, I think it is important to have fair practice not just on the consumer side, but also between businesses. This framework adds on to the good reputation and goodwill of Singapore in terms of a pro-business government, pro-business economy and that is exactly what we are trying to promote,” he said.

Mr Kurt Wee, president of the Association of Small and Medium Enterprises, said: “One of the things we hear is when you have a landlord that is aggressive, every incremental dollar of margin that a business makes ends up paying the rent and over the long term, this kind of characteristic actually compromises value creation, entrepreneurship and risk taking.

“So this is about sustainability; this is not about tenants coming back against the landlords … There’s also a huge responsibility on the end of the SMEs to learn about lease and not just sign blindly.”

More rental data to help track market rates
Aims are to improve transparency, help businesses in decision-making
By Cheryl Ong, The Straits Times, 22 Jan 2015

DETAILED numbers on rent rates in the retail, industrial and office segments will be made available this week, in a move to improve transparency for businesses.

The data - for periods ranging from the first quarter of 2012 to the fourth quarter of last year - is being released by the Urban Redevelopment Authority (URA) and JTC Corporation.

The move is a "milestone" that the Government hopes will help businesses make "informed decisions" before signing on the dotted line, said Minister of State for Trade and Industry Teo Ser Luck at a briefing on the initiative yesterday.

"We hope that with more detailed data, businesses will have a better idea of market rental rates, which can in turn help them decide where to site their shops, offices and factories," added Mr Teo.

Only data on median rents sorted by the relevant street is available now.

The new set of figures, which will be compiled from stamp duty submissions to the Inland Revenue Authority of Singapore, will include specifics not accessible before.

These include refining retail and industrial rents by postal district as well as giving information on floor level and area.

Office rents will be further defined by location, such as the central region, city-fringe region and outside the central region, as well as by building classes.

Spaces in the Downtown Core and Orchard Planning Area are considered "Category 1" buildings, while the remaining office space is in "Category 2".

The new data will also include additional information on rents at the lower and higher ranges - called the 25th and 75th percentiles.

This is to give stakeholders a better sense of whether median rents are on the low or high side, said Ms Cynthia Phua, executive vice-president of Singbridge Corp and chairman of the Rental Practice Working Group set up by the Singapore Business Federation (SBF).

The SBF has been working with the Ministry of Trade and Industry, the URA and JTC for the past year to devise the best format for presenting the data.

The move underpins the SBF's Fair Tenancy Framework initiative unveiled on Tuesday that sets leasing guidelines and negotiation principles to help smaller firms and landlords understand what they are committing to.

Mr Teo pointed out that there are limits to what can be disclosed, given privacy rules, while only data points supported by at least three rental contracts in the quarter will be available.

Though the information will include rents at malls managed by real estate investment trusts, commercial office buildings and industrial factories, it excludes information on shophouse leases in both the private and public markets.

Mr Sin Lye Chong, group director of land sales and administration at URA, said he would look into this omission if the number of rental contracts grows.

Mr James Teh, whose firm is in an industrial building, said the changes were "helpful".

"There's no way of telling if you're paying the market rent, unless you go around asking your neighbours what kind of rates they're getting," he said. "It's always good to have more transparency because it helps us make decisions."

Updated industrial data for the fourth quarter of last year will be published on JTC's website today, while the URA will publish retail and office data for the same period on its website tomorrow.

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