POSTED 3 Jun 2019 - 09:58

Should fair rent terms be enforced in order to level the playing field?

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Is it necessary for Singapore to expand on the Fair Tenancy Framework by introducing fair tenancy legislation?
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Top Response

Lim Soon Hock, Managing Director, PLAN-B ICAG Pte Ltd

Rental is a major cost item for businesses, both big and small. When a company signs a lease, it should take affordability into account, not only during the tenure, but into the future. In other words, future growth in the business must be able to support any potential rental increase and not...

Responses

Terry O'Connor, Group CEO, Courts Asia
3 Jun 2019 - 10:02

More can certainly be done to keep rental inflation in line with retail sales and to facilitate open dialogues across all stakeholder groups for the collective good of the Singapore retail scene.

To be clear, it is not about lobbying for the lowest rent possible. Prime locations in Singapore are scarce and should be priced to market demands. At Courts, we work hard to keep operating costs down and deliver on our value proposition to customers.

However, due to the pressure that landlords face to deliver improving rental yields year on year, retailers can find themselves in situations where they end up paying rental step-ups that are disproportionate to the potential sales revenue upsides. This in turn creates a spiralling effect on household discretionary income.

Victor Mills, Chief Executive, Singapore International Chamber of Commerce
3 Jun 2019 - 10:01

Landlords and their tenants both need to make profits to sustain their businesses. Free market forces certainly give landlords the upper hand.

Real Estate Investment Trusts (REITS) exacerbate this advantage. Their ruthless asset optimisation is great for unit holders but not for tenants and their customers. At the other extreme, rent control often results in removing any incentive for landlords to maintain their property.

What's needed is a win-win and that is clearly the Fair Tenancy Framework. If private sector landlords do not adopt it, then the government should legislate to change behaviour to make the rental market more equitable.

Chia Ngiang Hong, President, Real Estate Developers' Association of Singapore (REDAS)
3 Jun 2019 - 10:00

NO

For long-term business competitiveness and sustainability, it is necessary to have fair business practices. It is understandable for retailers, F&B operators and other small businesses to clamour for some form of framework to help them realise fairer tenancy terms and conditions, better protect their interests and resolve disputes amicably.

REDAS supports fair business practices. The Singapore Business Federation's Fair Tenancy Framework appears to be a step in that direction. The Framework will provide more transparency of business rental data. It will also serve as a useful reference and platform for landlords and tenants to realise fairer leasing practices for the industry and build long-term business relationships. As for legislating fair tenancy practices, we think this may not be necessary nor is it easy to roll out. More studies will have to be done to seek clear justifications of what, when, where and how to regulate for effective implementation and meaningful outcomes without stifling businesses.

Dileep Nair, Independent Director, Thakral Corporation Limited
3 Jun 2019 - 09:59

YES

Small and medium-size enterprises (SMEs) are a significant part of Singapore's economy. They constitute 99 per cent of all enterprises and employ 65 per cent of all workers in Singapore. Critical for SMEs' survival are fair and affordable rental terms.

Typically, though, landlords have the upper hand in rental negotiations.

This is exacerbated by having REIT-landlords who impose steep rental increases to meet their investor demands. While the market can often be relied upon to set fair rentals, we have here a unique oligopolistic structure with major REIT-landlords that results in market distortion and inefficiency. Coupled with the high switching costs they have to bear, tenants have a poor bargaining position with landlords. To ensure adoption of the SBF's Fair Tenancy Framework that will level the playing field, legislation is certainly warranted. Enforcement, of course, should be done with a light touch - in Singapore style.

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