Property consultants point to snags in fair tenancy framework recommendations
Industry players say legislation needs to take care of both tenants and landlords
THE proposals suggested by the Fair Tenancy Framework Industry Committee (FTFIC) might face some road bumps, as property consultants point to potential snags in the list of recommendations. The committee comprises five business groups that have come together to call for the adoption of legislation and establishment of a new commission for enforcement and dispute resolutions.
Christine Li, Cushman & Wakefield's head of research for Singapore and South-east Asia, acknowledged that some of the recommendations - such as promotion of transparency of rental information - can be more easily implemented but others such as making the termination of the retail leases unenforceable, could be going against the principle of free market and somewhat restrictive.
"It doesn't allow landlords to respond swiftly to structural changes such as the rise of e-commerce; this could become a stumbling block if landlords are not able to re-position the retail assets in time to keep pace with the changes," she said.
"The interference of free market practice could have serious repercussions downstream in terms of credit ratings, valuations, loans etc. Hence, the legislation needs to take care of both the tenants and landlords in order for the eco-system to work harmoniously in a sustainable manner."
Ethan Hsu, head of retail at Knight Frank Singapore, said that the government may want to review the recommendations of the FTFIC but added that he does not foresee government intervention in regulating private-commercial lease contracts. He also pointed out that there should be a distinction made between major corporate landlords of shopping malls and strata landlords of individual retail units.
"Smaller retail outfits in strata or mixed developments could face more challenges in negotiating for fair practice between landlord and tenant. Where a strata landlord only owns one retail unit in a mall, building or shophouse, there is less motivation to consider tenant's profitability and circumstance as the interest is confined to maximising rental returns for the landlord's investment," he said.
Having a platform to articulate and discuss these nuances is ultimately what is most required.
Singapore Business Federation chief executive officer Ho Meng Kit echoed this sentiment in emphasising that tenants are just one of the stakeholders involved.
"I think the government needs to be very measured and balanced because in the near term, it can be a zero sum game," he said.
SBF had "weighed in with a little bit of moral pressure" on some of its larger members, he added. "We, in fact, wanted to call in all the developers plus the Reits (real estate investment trusts) . . . to discuss this, but we couldn't do it because of the circuit breaker. We need to find that balance; and in the chamber, we have a platform for such conversations to take place."
But even as FTFIC stakeholders too call for more immediate discussion and dialogue in the recognition that legislation - even if implemented - will not solve the immediate pains felt by SMEs, they point to efforts made by SBF's SME Committee and other associations over the years to make overtures to landlords, to no avail. Their position paper was presented to the Ministry of Law and the Ministry of Trade and Industry (MTI) on Thursday morning.
A MTI spokesperson said it has received the report, and will "closely study the detailed recommendations that FTFIC has proposed".
Source: Business Times, 23 May 2020