Lease Agreements for Retail Premises Bill

Mr Speaker Sir,

The Lease Agreements for Retail Premises Bill being debated today will make it mandatory for retail lease contracts to comply with the Code of Conduct for Leasing of Retail Premises in Singapore, which seeks to level the playing field between landlords and tenants of retail premises in Singapore.

The Bill is a step in the right direction. Among other things, under the Code of Conduct, retail landlords will no longer be allowed to include clauses in leases to force tenants to pay for unspecified costs. Landlords and tenants will both have the right to pre-terminate the lease, unlike previously when only landlords typically had this right. Landlords can also no longer include exclusivity clauses that restrict tenants from opening another outlet within a certain radius, unless there is mutual agreement between tenant and landlord. An affordable dispute resolution process will also be set up to mediate disputes between tenant and landlord.

All these will strengthen Small and Medium Enterprises (SMEs) in the retail and F&B sectors in Singapore, which, for too long, have been at the mercy of landlords. Rent accounts for more than 25% of the cost of doing business in the retail and F&B sectors, and for many years, SME tenants have bore the brunt of unfair leasing practices by landlords who have taken advantage of them. During the Covid-19 pandemic, for example, there were many cases of landlords refusing to reduce the rent while their tenants were in dire straits or failing to pass down savings from property tax rebates to their tenants. The bill is therefore an encouraging first step to create fairer and more equitable leasing practices in the retail sector.

My colleague Hazel Poa and I have spoken in this House many times before about the need to curb excessive property speculation and rein in property prices and rental in Singapore. For example, during the housing debate in February this year, I said that “the more important property investment and speculation become in an economy, the more likely that economy will become less competitive because property speculation and rent seeking are easier and better alternatives to innovation and entrepreneurship”.

At the time, I was speaking about the residential property market, but the same thing applies to the commercial property market in Singapore, where we also see the emergence of a rentier economy. The power balance has always been tilted in favour of landlords because there is a limited pool of landlords that tenants in the retail sector can choose to rent from, given that many shopping malls are now owned by commercial REITs or real estate investment trusts.

For many years, these big institutional landlords have had the market power to extract rent from tenants through unfair rent structures, such as charging tenants a base rent or a percentage of gross sales, whichever is higher. This rent computation structure means that landlords enjoy the good times with as rent increases in tandem with sales, and are still protected during bad times as tenants must continue to pay the base rent to the landlords. Even large retail and F&B chains must play by these rules, not to mention SMEs in the retail sector.

Such rental computation structures sap at the vitality of the retail and F&B sectors in Singapore. The House should note that even under the proposed legislation, landlords are still allowed to impose such rental computation structures, provided there is mutual agreement between landlord and tenant.

We call on the Government to consider asserting its influence and encourage the Fair Tenancy Industry Committee to outlaw such rental computation structures altogether in the next iteration of the Code of Conduct.

The Bill gives teeth and enforcement power to the Code of Conduct by enshrining it in law and obliging all retail landlords in Singapore to come on board. However, more work needs to be done to reduce rent-seeking in the retail sector in Singapore.

Singapore needs more innovation and entrepreneurial spirit to continue competing effectively with the rest of the world in the Information Age. Such innovation and entrepreneurship are unlikely to be forthcoming if the business environment in Singapore favours rent-seeking property owners.

High rents also limit the wage growth for local workers and perpetuate the need to bring in the cheaper foreign workers in order to maintain the profit margin for entrepreneurs.

Small business owners in Singapore face a multitude of challenges, such as the rising costs of goods, utilities, and labour, which have not abated since the pandemic ended. A reset of our current policies is needed to create an environment that is more favourable to small businesses to ensure that jobs are created and our economy remains vibrant for many years to come.

Singapore does not need an economy with high property prices and high rents but a dearth of innovation and creativity. Addressing the power imbalance between retail landlords and tenants is only a small step in that direction. Much more needs to be done.

Mr Speaker, the Progress Singapore Party supports the Bill. Thank you.

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