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 such contractual obligations for at least six months under a proposed law.
When passed, 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.
Meanwhile, 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".
These measures are part of the Covid-19 (Temporary Measures) Bill, which will be introduced in Parliament next week by the Ministry of Law (MinLaw).
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 law 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 that is 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 MinLaw.
If relief is given, it would be a criminal offence for the landlord to take any legal or enforcement action against the tenant, like ter-minating the lease.
Similarly, 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 industry property, or plant, machinery or fixed assets for business purposes.
However, the other contractual rights of banks would not be affected, such as charging fees and interest for non-payment or late payment, the Monetary Authority of Singapore said yesterday.
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.
Restructuring lawyer Sushil Nair, who was involved in drafting the Bill, said it has been designed to ensure it can be relied on "in a very simple way".
Mr Nair, who is deputy chief executive of Drew & Napier, added: "I think all parties need to look at this period of relief as an opportunity to work on the longer-term issue.
"What are the accommodations and deals that have to be made to allow businesses to survive in the longer term? Business partners, including landlords and re-tailers, have to have frank discussions on these issues. The Act gives them time to have those discussions sensibly."
Charmaine Ng
