SINGAPORE - More landlords are complying with a code of conduct for the leasing of retail premises that lays out fair tenancy practices following its introduction in March last year.

The initiative, which aims to ensure that retail tenants are given a fair deal in their lease agreements, is pending legislation.

Compliance with the code is currently voluntary. The code provides for deviations in the areas of sales performance, security deposit rental structure, and exclusivity.

Both landlord and tenant must submit a declaration to the Fair Tenancy Industry Committee and verify that they have agreed to the deviation.

Over the past 13 months, the committee has received declarations of mutually agreed deviations from 21 private-sector landlords.

Eight private-sector landlords and all government landlords committed to abide by the code last year.

This shows that at least 29 private-sector landlords are adhering to the standards for some or all of their leases, said the Singapore Business Federation (SBF) on Monday (July 18). The SBF is the Fair Tenancy Industry Committee's secretariat.

The code's guidelines include charging rent based on a single computation. This means that the rent structure must not have a "either/or, whichever is higher" clause.

Lease agreements must also not contain a "catch-all" provision requiring the tenant to pay all unspecified and generic third-party costs. Such costs, which could include consultant fees, to be borne by tenants must be communicated upfront and clearly set out in the agreement.

SBF said it also received inquiries from an additional 14 private-sector landlords on the code - an encouraging sign that more landlords are looking to comply with the code of conduct ahead of the legislation.

The Ministry of Trade and Industry, in a separate release on Monday, called for feedback on the key provisions of the legislation. Members of the public can give their feedback from now till Aug 5. They can go to www.mti.gov.sg/Legislation/Public-Consultations for details.

Minister of State for Trade and Industry Low Yen Ling said the code has been a significant step forward for the retail sector, and landlords and tenants have found it to be very helpful for their lease negotiations.

The guidelines have also been fine-tuned since last year to minimise ambiguity of clauses and better cater to the industry's needs, said SBF.

Revisions which took effect from June 1 include allowing for an exception to be made when the security deposit is $500 or less, although it may be more than three months' gross rent.

The code specifies the three-month cap on the security deposit paid by tenants for leases involving floor areas of up to 5,000 sq ft and a lease term of up to three years.

A requirement to submit invoices if the landlord accepts a pre-agreed estimated value of the tenant's fit-out works can also be waived. The code requires tenants to submit these invoices within three months of the works' completion so that they can be compensated in the event of the lease's pre-termination by landlords.

Commonwealth Capital Group managing director Andrew Kwan, who sits on the Fair Tenancy Industry Committee, told reporters on Monday that the revisions are subtle but significant.

Highlighting the invoice requirement waiver as an example, he said: "It saves a lot of time and reflects the growing trust between a landlord and tenant."

The committee comprises landlords, tenants and other industry stakeholders.

Mr Low Chee Wah, chief executive of Frasers Property Retail which adopted the code in June last year, said the code has helped smaller tenants who might not be as familiar with lease negotiations compared with larger tenants.

Other landlords such as CapitaLand Group, City Developments and UOL Group have also complied with the code.

The Fair Tenancy Industry Committee has received over 1,100 declarations of mutually agreed deviations allowed under the code. Most of these were deviations on rental structure.

Mr Chris Chong, chief executive of CapitaLand Retail and Workspace for Singapore and Malaysia, said tenants might prefer a different rental structure if their business is seasonal with more unpredictable business cycles.

Association of Small and Medium Enterprises (SMEs) president Kurt Wee said it is important for SMEs involved in leases, whether they are retailers or food and beverage operators, to benefit from market transparency and understand whether situations are reasonable.

He said: "In no way does this code try to intervene in the price mechanism of the market. It's really about balanced conduct between landlords and tenants, and there is a long journey of work we need to do to help SMEs apply the code to their leases."

Key revisions

1. An exception can be made to a cap on the security deposit paid by tenants for leases involving floor areas of up to 5,000 sq ft and a lease term of up to three years.

2. A requirement to submit invoices can be waived if the landlord accepts a pre-agreed estimated value of the tenant's fit-out works.

3. Cost of a compatible point-of-sales system must be shared equally between landlord and tenant if there are limited options and it is substantially higher.

4. Both parties can waive a requirement to survey the unit's floor area if it does not exceed 300 sq ft. Either can also terminate the lease if the area is smaller than that specified in the agreement by over 10 per cent.