Lease Agreements for Retail Premises Bill

Order for Second Reading read.

2.49 pm

The Minister of State for Trade and Industry (Ms Low Yen Ling) (for the Minister for Trade and Industry): Mr Speaker, Sir, on behalf of the Minister for Trade and Industry, I beg to move, "That the Bill be now read a Second time."

Sir, when the Code of Conduct for the Leasing of Retail Premises in Singapore, or the Code, in short, was launched in March 2021, I reiterated the Government's support of the industry's recommendation to legislate compliance with this industry-developed Code. We recognise that the Code enables a fair and balanced lease negotiation process that will support the growth of retail businesses and strengthen the symbiotic relationship between tenants and landlords in the long run.

This Bill will make the principles of the Code mandatory for the leasing of all retail premises in Singapore.

This Code would not have been possible without the leadership, efforts and contributions of the trade associations and chambers (TACs) from the retail and property sectors. So, on behalf of the Ministry of Trade and Industry (MTI) and on behalf of the Government, I want to say a big thank you to the various trade associations and industry groups that came together to develop this Code and chart a new and fair future for the leasing of retail premises. And these include the Singapore Business Federation (SBF), Restaurant Association of Singapore (RAS), SG Tenants United for Fairness (SGTUFF), Singapore Retail Association (SRA), Association of Small and Medium-sized Enterprises (ASME), the Real Estate Developers' Association of Singapore (REDAS) and the REIT Association of Singapore (REITAS).

Sir, during the COVID-19 pandemic, leaders from these associations, along with the industry experts, came together amidst rising tensions between tenant and landlord communities to form the Fair Tenancy Pro Tem Committee. They sought to promote fair and balanced leasing negotiations by setting out a framework for industry norms on tenancy practices and terms, which are now spelt out in the Code. After the Code was launched, a Fair Tenancy Industry Committee was formed in May 2021 to act as custodian of the Code.

We commend the industry and the leaders for their courage and tenacity in charting the path forward towards fair leasing practices. Sir, this is an unprecedented achievement and a laudable demonstration of the Singapore spirit and the determination to work as one for the future of our retail sector. Sir, it took months of painstaking collaboration between the tenants and the landlords to develop this Code, which underpins their growing symbiotic relationship. In fact, around the table, the stakeholders have shown tremendous maturity and resilience in their discussions as well as admirable willingness to give and take, as they worked towards achieving the common goal for the retail sector.

This spirit of trust and strong partnership between tenants and landlords was forged in the early days of the pandemic. For example, when retailers had to pivot to e-commerce channels, if you remember, back in the circuit breaker days, to keep their businesses afloat, landlords, such as CapitaLand, stepped up by launching the eCapitaMall platform to help their tenants sell their products or services online. CapitaLand also provided marketing and promotional assistance to enhance the e-commerce capabilities of its traditional retailers on the e-mall. This innovative move and collaboration helped CapitaLand and their tenants to continue to generate revenue during the challenging circuit breaker period – generating revenue even as there were restrictions on dining in and other safe management measures.

It is with this spirit of partnership between the tenants and the landlords that the Code was established.

In the larger scheme of things, the Code not only benefits tenants and landlords but also supports a vibrant and healthy lifestyle sector and contributes to our tourism industry.

Sir, the retail sector alone makes up more than 4% of our total workforce, hiring 160,000 people in Singapore, while the food services and accommodation sectors employ about 7% of the total workforce, employing more than 260,000 workers in Singapore.

At this point, allow me to highlight how the Code is expected to benefit the industry.

The Code provides tenants and landlords with greater clarity on industry norms for key terms in retail lease agreements. This makes the negotiation process more transparent for both parties and addresses tenants' concerns over imbalances in bargaining power.

Since the Code's introduction on 1 June 2021, the Government has been a lead adopter, with all Government landlords voluntarily adopting the Code. In addition, nine major private sector landlords have also adopted the Code voluntarily since June 2021.

These early movers have found the Code helpful for their lease negotiations. In my various engagements with many tenants and landlords, their overall feedback has been positive and constructive. For example, in the last few weeks, there was one landlord representative who recently shared with us that adopting the Code has made negotiations with tenants simpler and swifter, simply because both parties signing the agreement were Code-compliant. And this, in fact, has helped the landlord to establish good relationships with tenants and vice versa. Tenant representatives also shared that the Code has helped to level the playing field somewhat and enabled parties to find more common ground in lease negotiations.

Sir, we are now ready to move forward with legislation for the Code. The Bill will: one, mandate compliance with the leasing principles in the Code; two, establish the Fair Tenancy Industry Committee and provide for its role, among other things, as custodian of the Code; and three establish an accessible and affordable dispute resolution process for parties to address matters of non-compliance.

Sir, for the sake of clarity, throughout this debate, I will refer to the Fair Tenancy Industry Committee established under the Bill as the FTIC, and to the Fair Tenancy Industry Committee that was formed in May 2021 as the "current Committee."

I wish to assure the House that industry consultations will not stop after the Bill is passed. We expect the Code to be a "living document" that continues to evolve based on the feedback and suggestions from the industry. As custodian of the Code, the FTIC will update the Code as necessary to ensure its continued relevance.

Sir, I will now explain the key features of the Bill.

First, the Bill requires all tenants and all landlords of retail premises to comply with the leasing principles that are set out in the Code. Deviations from selected leasing principles are permitted with mutual consent by tenants and landlords. This keeps the Code from being overly restrictive and this will allow for the usual commercial negotiations and considerations. The Bill also requires tenants and landlords to make declarations of some of the deviations. The current Committee has made the process of submitting declarations an easy one via its website and this will continue to be the mode of submission after the Bill is passed.

The Bill also offers a dispute resolution process to address complaints of non-compliance with the Code's leasing principles. So, if a landlord or tenant files a complaint of non-compliance, the parties will, first, be required to undergo mediation to resolve the dispute. However, if the mediation does not lead to an agreed outcome, the Bill provides for an adjudicator to be empowered to decide on the dispute. The adjudicator will be able to order the parties to vary the lease agreement or pay compensation, where applicable, for their non-compliant conduct. The adjudicator's determination will be enforceable as an order of the Court once permission from the Court is granted. I wish to assure the House that both the mediation and the adjudication processes will be kept low-cost and expedient.

Lastly, the Bill formally establishes the FTIC as the body appointed by the Minister for Trade and Industry to, first, periodically review and, with the Minister's approval, modify the Code; second, to monitor and promote compliance by tenants and landlords with the Act and the Code; and third, to establish the process for submission of declarations of permitted deviations from the leasing principles that are set out in the Code.

The Government thanks the efforts of the Fair Tenancy Pro Tem Committee and the current Committee and welcomes the FTIC in continuing the role of custodian of the Code under the Bill. We would also like to express our appreciation to the apex business chamber in Singapore, SBF, for agreeing to take on the role of secretariat to FTIC.

Sir, let me now turn to the scope of the Bill. The Bill will apply to all leases of retail premises, or extensions and renewals of such lease, with a tenure of one year or more. Under the Bill, retail premises are those that are used primarily for the retail sale of goods or the supply of services. This includes businesses, such as eateries, restaurants, supermarkets, clinics, pet shops, walk-in bank branches, tuition centres, cinemas and gyms. In general, businesses in the shopping malls are also covered under the Bill, unless the premises are mainly used for backend office functions.

On the other hand, premises used primarily for conducting administrative work in connection with the supply of services are not covered under the Bill. Likewise, industrial, office and residential spaces are excluded unless the space is tenanted to a shop supplying retail goods or services. For example, a mini-mart that operates in an office or industrial building will be covered under the Bill, while the rest of the building that is used as office spaces or for industrial activities will not be covered.

We are greatly heartened that many major landlords have already adopted the Code since it was established two years ago. Together, they make up a sizeable proportion of all retail premises in Singapore.

To provide additional time for other landlords to come on board, the Bill will take effect about six months from now, in early February 2024. All new lease agreements, extensions or renewals of lease agreements, signed on or after this commencement date, will be covered by the Bill.

Sir, the COVID-19 pandemic has taught us many valuable lessons. It has also shown that with unity, we can overcome adversity. This Bill was forged from the resilience and determination of tenants and landlords to turn their difficulties into opportunities for partnership and success. I trust that the industry will continue to uphold this exemplary spirit of cooperation between tenants and landlords in our journey ahead. As we strive to build on this firm foundation of partnership and trust, we seek to create a robust and thriving economy that continues to provide good jobs and a bright future for Singapore. Sir, I beg to move.

Question proposed.

Mr Speaker: Ms Jessica Tan.

3.03 pm

Ms Jessica Tan Soon Neo (East Coast): Thank you, Mr Speaker. Sir, with the trends and disruptions that businesses face, predictable and fair tenancy conditions and environment are key for businesses to better plan and manage. This is especially so for businesses in the retail sector, both large and small, as rental of premises forms a significant part of business cost.

This fact was acutely felt when retail businesses were heavily impacted by the COVID-19 pandemic when the ability to operate from their retail premises had to be restricted or even halted. Likewise for landlords, both large and smaller landlords, as rent is the source of income.

While I do agree that the balance of power does tend to favour landlords, as we give due consideration for the needs of retail businesses, we have to take a win-win approach for both landlords and tenants. If this is achieved, retail businesses can have fair and predictable rents and terms and conditions to allow them to operate in a highly competitive market while landlords can benefit from the occupancy and continue to invest in the quality of their properties and marketing programmes.

As Minister of State Ms Low has outlined, the Bill seeks to mandate compliance with the key leasing principles in the Code, with permitted deviations that have to be jointly declared by landlord and tenant for all retail lease agreements with a tenure of one year or more. It also seeks to establish the dispute resolution process and officially establish the functions of FTIC.

I am supportive and agree that it is timely to move ahead with legislation and compliance with the Code.

Let me share why I think that it is timely to move ahead with legislation.

One, the Code enables a fair and balanced lease negotiation process benefiting both landlords and tenants. It sets out clear leasing guidelines and negotiation principles for landlords and tenants of Qualifying Retail Premises in Singapore. This is an effort by industry comprising landlord and tenants, who are the key stakeholders, and supported by the Government, industry experts and academia.

The Code was developed and released in 2021 by the Fair Tenancy Pro Tem Committee which was formed in 2020 under the auspices of the SBF. The Code contains 11 leasing principles for key tenancy terms, confidentiality clauses and data transparency. This is important as it provides clarity on the terms in the lease agreement, easing the leasing negotiation process for landlords and, more importantly, for tenants, the Code addresses key concerns over an imbalance in bargaining power.

The second reason is that there has been positive voluntary adoption of the Code. After the release of the Code in 2021, it is positive that over the last two years, major industry landlords and all Government landlords have voluntarily adopted the Code. So, that is a positive sign because, clearly, the Code is fair and for both parties.

Third, support in place for ease of compliance. FTIC has taken several actions to ease compliance for landlords and tenants with the launch of a sample lease agreement template and a portal to facilitate joint reporting by landlord and tenants on deviations and FTIC has also developed a checklist for lease negotiations.

Fourth, there has also been very active engagement with industry stakeholders. Through outreach and briefing sessions with industry stakeholders, which included the TACs, the Law Society and real estate agencies, FTIC has received feedback and has updated the Code. The Government has conducted industry and public consultation on key provisions in 2022.

So, before I conclude, I would like to say that while we recognise the benefits and should go ahead with legislation, we should not expect legislation to be the panacea for all issues. Lease agreements are between two parties, landlord and tenants. Ultimately, as in every good relationship, we must adopt a win-win approach, one that is fair and predictable for the tenant so that he or she can focus on growing the business, while aligned to market conditions so that landlords can continue to make investments to maintain the property and promote vibrancy.

I am glad that the Minister of State has just reassured us that FTIC will continue to review and engage landlords and tenants to obtain feedback and, with the appropriate approvals, update the Code and this is important to ensure its relevance. Mr Speaker, I support the Bill.

Mr Speaker: Mr Louis Chua.

3.09 pm

Mr Chua Kheng Wee Louis (Sengkang): Mr Speaker, the relationship between landlord and tenant has always been a symbiotic one where both parties rely on each other to survive and thrive. Yet, it is often also a relationship which is hugely imbalanced, with landlords having a significant advantage over tenants when it comes to lease negotiations.

It is this power imbalance which we should strive to address and ensure a more level playing field for tenants, especially small and medium enterprises (SMEs), who are beholden to landlords, and with rents being a critical overhead cost for retailers. As what some retailers would say, "We are merely working for the landlord”.

The power disparity and helplessness of tenants came to the fore in recent years as a result of the COVID-19 pandemic, where mandatory lockdowns and safe-distancing measures put the retail landscape under significant strain. However, the silver lining, of course, was the formation of self-help groups, such as the Singapore Tenants United for Fairness (SGTUFF), the formation of the Fair Tenancy Pro Tem Committee and, eventually, the Code of Conduct for Leasing of Retail Premises and the legislation we see today.

To this end, I am supportive of the Bill in its efforts to address certain pain points and unfair leasing terms and conditions that used to be prevalent in the retail landscape. At the same time, however, I will speak broadly on areas for improvements, particularly as they relate to data availability and transparency, which, in my view, are the core issues that need to be addressed in enabling a more diverse, inclusive and level playing field for the sustainability of our retail landscape.

One way that landlords could wield a disproportionate amount of power at the negotiating table is by exploiting the information disparity between them and the tenants. This enables them to command higher rents during lease negotiations.

While clauses 5 and 6 of the Bill codify the leasing principles set out in the Code of Conduct for the Leasing of Retail Premises in Singapore, the current code and, hence, legislation, does not include data transparency guidelines as a requirement for all qualifying leases.

The Code’s data transparency leasing principle only applies to landlords who collect sales data from tenants as part of the GTO Rent formula. The guidelines call for landlords to share sales data metrics according to trade category with existing tenants on a bi-annual basis and on a one-on-one basis before the signing of the lease agreement.

However, there is much room for improvement here, especially when I believe the majority of rents today do not incorporate GTO rent arrangements and, hence, this leasing principle may not apply to many leases in practice. Can I confirm with the Minister that this is true, and what is the expected percentage of qualifying leases that would require the data transparency principle to be complied with?

Retailers which The Business Times spoke to for an article dated 19 July 2023 further mentioned that data, such as fine-grained footfall and rental data, would be useful for tenants during lease negotiations. Furthermore, they noted that the sales data provided by landlords should be broken down by floor and sub-category as well. In accounting, there is a concept called "decision usefulness" which comes to my mind; without granular data, the information provided by landlords would be neither useful nor relevant for tenants or potential tenants.

For example, if one is a small F&B kiosk operator on the highest floor of a shopping mall, of what use is the total F&B sales for the entire mall if the McDonald's outlet on the ground floor is doing brisk business and likely dominates the consolidated sales figures? Will the Minister consider providing for more fine-grained data to be presented and at a higher frequency versus the current bi-annual basis?

Additionally, lease agreements may contain confidentiality clauses within contracts, prohibiting tenants from sharing information regarding their lease agreements, including rental rates, with their counterparts.

Landlords, however, could have access to comprehensive data from their tenant’s Point-of-Sales (POS) systems, be it across multiple tenants from within the same mall, or the same tenant across different malls, thus enabling them to maximise potential rents and, hence, occupancy costs from the perspective of tenants, without causing them to vacate their space.

While the new Bill certainly helps to reduce the power differential between landlords and tenants, enhancing data transparency would certainly help to further reduce this gap.

I believe the data transparency guidelines set out in the Code should be mandated under the new legislation, rather than applying only to landlords who collect sales data from tenants as part of the GRO rent structure. May I ask the Minister what are the Government’s concerns should the data transparency principles be applied to all qualifying retail leases?

To take it one step further to truly enable fair and equal access to information for landlords and tenants alike, I hope that the Government would also consider launching a public rental information database, similar to that mooted by the Fair Tenancy Framework Industry Committee back in 2020.

Back then, the Committee shared that it recommends two levels of rental data be made available, namely, a public rental info database that is uploaded on a monthly basis, and mall-level productivity and performance data made available by landlords to tenants from whom they require data, such as monthly sales data.

Not only would such information benefit tenants, especially SME tenants, who may not have the ability to compare rents and key retail metrics across locations, smaller landlords would also benefit from the ability to better position their mall in a market dominated by key players.

To use an example which, arguably, is not related to a shopping mall, if you look at the recent concerns over the Geylang Serai Ramadan Bazaar, for example, while many have expressed concerns over high rental costs, especially for certain food types, in my mind, it is the uncertainty in the ability to make enough revenue to cover rents and other costs that weighs heavily on tenants’ minds throughout the tenure of the bazaar. So, past sales information, footfall and other related metrics provided would then help in this decision-making.

Is the Government actively considering such a database and whether or not the Housing and Development Board (HDB), as one of the largest landlords of retail space, would be willing to lead by example and provide such information? While I understand that there are various retail indices being compiled by the Urban Redevelopment Authority (URA), the overall market index may not accurately reflect the nuances of the different geographical submarkets and, certainly, not the individual shopping malls.

Besides enhancing data and information transparency, I believe efforts should also be put into ensuring that tenants are better informed when negotiating their leases and signing the lease agreement.

Clause 4E of the Bill states that one of the functions of FTIC is "to conduct outreach and education relating to this Act and the Code of Conduct and matters relating to the leasing of retail premises." I am supportive of this move.

Even while the code of conduct has already been introduced on a voluntary basis, smaller retailers today who lack the resources and awareness to vet through contracts could simply sign it without understanding its terms and conditions and any exceptional clauses to be wary of.

Therefore, I hope the Minister could provide further information, such as the amount of resources dedicated to outreach and education efforts, especially for our SME retailers.

An adjacent point worth considering is whether such a code of conduct can also be extended to non-retail leases, to other commercial leases, such as those for offices or even those for industrial and business park spaces.

SME tenants that are the beneficiaries of the retail code of conduct could also benefit from fairer and more balanced lease negotiations between landlords and tenants of workspaces. Given that significant effort had already been put in by various parties to refine the retail code of conduct, it would be worthwhile, in my view, to look into extending this to other commercial and industrial sectors. May I ask the Minister if this is in the works and, if not, what are the concerns or considerations in this regard?

Finally, there seems to be a sentiment among Singaporeans that our retail scene has gone stale, with comments made about how our shopping malls are essentially cookie cutter malls. A quick scroll through the tenant directories of the numerous malls that populate our island shows that the same chain stores and eateries repeatedly pop up.

As someone who frequently patronises McDonald's and Uniqlo, I can understand why these retailers are doing so well and why many malls would want these ubiquitous names as anchor tenants for their malls. Moreover, such brand-name tenants or other international F&B or fashion retailers could potentially also afford higher rents as opposed to the local SMEs, thus enabling landlords to command higher rentals at their malls and thereby uplifting the valuations of their properties.

This could, however, potentially have a stifling and crowding out impact on our local SME and retail scene.

The passing of this Bill is a step in the right direction, but by enhancing data transparency and information sharing and narrowing the gulf in information between SME tenants and retail landlords, I hope more can also be done to better effectively bridge the power differential between landlords and tenants, thus providing our smaller retailers with a better fighting chance to sustain their businesses.

After all, the shopping mall, of which many populate our island, forms a key backdrop to the everyday experiences and lives of Singaporeans. Fostering an environment that encourages our smaller retailers to flourish could bring greater vibrancy and character to these places and Singapore as a whole. I support the Bill.

Mr Speaker: Order. I propose to take a break now. I suspend the Sitting and will take the Chair at 3.45 pm. Order. Order.

Sitting accordingly suspended

at 3.18 pm until 3.45 pm.

Sitting resumed at 3.45 pm

[Mr Speaker in the Chair]

Lease Agreements for Retail Premises Bill

Debate resumed.

Mr Speaker: Mr Leong Mun Wai.

3.46 pm

Mr Leong Mun Wai (Non-Constituency Member): 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. It seeks to level the playing field between landlords and tenants of retail premises in Singapore.

The Bill is a step in the right direction and I commend the Government for this.

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 the tenant and landlord. An affordable dispute resolution process will also be set up to mediate disputes between tenants and landlords.

All these will strengthen SMEs in the retail and F&B sectors in Singapore, which, for too long, had 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. For many years, SME tenants have borne 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.

This Bill is, therefore, an encouraging first step to create fairer and more equitable leasing practices in the retail sector.

My colleague Ms 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, "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."

This also means that the total factor productivity of Singapore will remain low – an issue which we have debated during the National Productivity Fund (Amendment) Bill just now.

While I was talking about residential property previously, 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 their rent from, given the many shopping malls that are now owned by commercial real estate investment trusts (REITs).

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 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 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 the landlord and tenant.

We call on the Government to consider asserting its influence and encourage FTIC 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 wage growth for local workers and perpetuate the need to bring in cheaper foreign workers in order to maintain profit margins 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 for 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 needs to be done. Mr Speaker, the PSP supports the Bill.

Mr Speaker: Mr Edward Chia.

3.55 pm

Mr Edward Chia Bing Hui (Holland-Bukit Timah): Mr Speaker, Sir, at the heart of this Bill is the support it offers to retail sector SMEs, addressing the imbalances they have faced in lease agreements. The Bill aims to create a fairer and more equitable industry overall and, as a result, fosters sustainable growth.

As we delve into the Bill's intricacies, some important concerns and suggestions come to light. I would like to share four concerns and suggestions, which would mostly centre on information transparency.

First, with regard to advertising and promotion (A&P) and service charges under leasing principle 3.2, which states that the landlord is entitled to adjust the service charge and advertising and promotion charges, provided that the overall rents payable by tenants do not increase, can I clarify whether A&P and service charges are based on cost recovery principles? If so, does the Bill mandate landlords to provide detailed breakdowns of service charges and A&P spending?

Transparency in these matters will ensure fair dealings and build trust among all parties. Additionally, landlords may face mounting cost pressures for third-party services like cleaning and lift maintenance, which may not align with tenancy terms. This situation might tempt landlords to price in a buffer or front load service charge costs, potentially affecting tenants' financial burdens.

Conversely, the Bill should also address the concern of landlords backloading an increase of service costs during lease renewals to recover the difference from the initial term. Such practices would contradict the principle of no overall gross rent increase. This requires careful consideration and clarification.

Furthermore, there is a risk of under-accounting or an under-declaration of rent revenue due to price-in buffers of the service charge component. This could lead to reduced stamp duty collections, impacting Government revenue.

Second, with regard to material adverse changes, this Bill compels parties to renegotiate the lease agreement when the tenant is prevented, obstructed or hindered from performing its typical business activity at the leased premises due to events beyond their control.

Does the Bill provide clear guidelines and principles for conducting these renegotiations, ensuring equitable outcomes for both parties involved?

During the challenging times of the COVID-19 pandemic, certain rent waivers provided by the Government were not efficiently passed through to tenants, requiring substantial efforts from relevant authorities to ensure proper implementation. In exigent situations like these, having agreed on guidelines and principles for renegotiations becomes even more critical.

Third, regarding deviations in leasing principles, the Bill allows for leasing principle deviations wherein landlords and tenants can mutually agree to deviate from the principles.

What recourse and remedy are available if landlords do not comply with the 14-day filing requirement, especially concerning deviations in the rental model?

To address non-compliance by errant landlords, what regulatory powers and levers are vested in the Government or the FTIC? Further, how will the FTIC be informed if a landlord has filed a deviation or not, ensuring proper oversight and compliance with the leasing principles?

Fourth, with regard to cost, this Bill includes essential prohibitions and norms. The Bill strictly prohibits profiteering from the sale of electricity. Landlords are mandated to pass through electricity costs without any mark-up or price discrimination. This move aims to shield SMEs from additional burdens and foster a more equitable business environment.

However, I have received feedback from SMEs which shared that they are being charged for additional miscellaneous costs, such as "meter reading fees", in addition to electricity charges. Tenants are now being charged monthly recurring charges, such as meter readings, tenant management charges and meter leasing fees. Due to advances in digital metering technologies, recurring charges for tenant management charges and meter readings are not justified.

In this regard, the following points need further clarification.

One, can the Bill explicitly specify the types of charges that can be reasonably passed through to tenants to prevent unwarranted additional costs?

Two, with regard to the meter leasing fees, can tenants have the option to purchase the meter instead of being bound by leasing arrangements?

Three, can the Bill specify specific technology adoption, such as digital meters, which do not require manual or physical on-site meter readings? This will not only increase overall productivity but also support Singapore's Green Plan 2030, empowering tenants with real-time data on power usage and insights to reduce energy consumption.

Four, do tenants have the option to enter into direct purchase agreements with electricity retailers? This provision would grant tenants more flexibility in managing their electricity costs.

As we continue to finetune the Lease Agreement Bill, addressing these crucial points regarding (a) A&P and Service charges; (b) clear guidelines and principles for conducting re-negotiations during adverse situations; (c) deviations of leasing principles, its remedies and oversight; and (d) clarifications on electricity charges will contribute to establishing a more transparent framework for both landlords and tenants.

This Bill's significance lies in its commitment to fostering win-win outcomes and promoting compromise, ensuring a conducive environment for sustainable growth for our SMEs. I would like to thank various stakeholders, including landlords, tenants and SBF, who have worked diligently to develop this comprehensive Code of Conduct. Let us continue to engage in constructive discussions to achieve win-win outcomes. Mr Speaker, Sir, I support the Bill.

4.02 pm

Mr Murali Pillai (Bukit Batok): Mr Speaker, I support the Bill, which, in my opinion, is a mountain appearing as a molehill.

Its title is the Lease Agreements for Retail Premises Bill. Its spirit, though, is a deep rethinking of the moral limits of markets.

Markets in Singapore, as in almost every country in the world, are created not only by supply and demand but by the laws that regulate them. Being one of the most competitive countries in the world, Singapore takes a light touch towards constraining the freedoms of markets. And most of the time, this has been the case, both because of the need for efficiency and the belief in the wise decisions of a relatively unfettered marketplace.

But let us make no bones that, in Singapore, a nation founded on the back of a socialist political philosophy, the market bends for the public good. And through this Bill, the Government has demonstrated that it is not shackled by the positions it took in the past and is willing to constantly review its policies to ensure that they address the needs of our people and enterprises.

Five years ago in this House, in my Adjournment Motion speech entitled “Power Imbalance in Contracts Involving Small Businesses”, I highlighted the onerous nature of contractual clauses which were, as a matter of course, imposed by the dominant players in the market against the small businesses. I specifically highlighted landlords of retail malls, particularly the REITs, as one category of dominant players.

In my speech, I recounted how a “demolition clause”, which is a clause that allows a landlord to pre-terminate a lease with a tenant on the basis that it has decided to undertake renovation work without any compensation to the tenant, works unfairly against many tenants. These tenants would have invariably incurred capital expenses to fit out the premises and they were left to bear the loss themselves. This does not appear to be a fair sharing of business risks.

I also highlighted other onerous clauses imposed by landlords in my speech. This asymmetry adds insult to injury when we remember that tenants are small businesses and landlords are owners of large assets. I advocated those small businesses to be provided with statutory protection in Singapore beyond the Unfair Contract Terms Act 1977. I shared the examples of small business protection modes in the UK, Hong Kong, the US, Germany and Australia.

In response, the hon Senior Minister of State for Law, as she then was, Ms Indranee Rajah, stated that whilst the Government was, and I quote, “empathetic to the challenges faced by SMEs”, the Government’s underlying philosophy is that, quote again, “in general, free-market principles should apply and the Government should only intervene when necessary, for example, to address systemic market failures”. She also said: “enacting such legislation in Singapore can cause market distortion and, eventually, market inefficiency, to the detriment of all”.

She also said to the effect that an answer to what constitutes a fair dealing is not something that is always clear-cut because different parties may have different views. Finally, she recognised that, fundamentally, the issue is that of bargaining power and suggested that SMEs leverage the Government’s schemes to scale up their business capabilities and use business and trade networks, such as SBF.

The introduction of this Bill, five years since, represents, in my respectful view, a significant shift in the Government’s position which I welcome. I listened to the hon Minister of State and I noted that the pandemic posed to be a catalyst for this change. And this is a great example of how one turns crisis into opportunity. It recognises that free market principles are not the holy grail of public policy, that these principles must bend to larger principles of public life.

Let me point out what these are now.

First, equality. This Bill recognises that landlords and tenants stand shoulder to shoulder, both with legitimate interests. The hon Minister of State referred to the relationship as a symbiotic relationship. They share a mutual goal of collaboration to ensure that Singapore continues to have vibrant and competitive retail, F&B and lifestyle sectors. In this, the Bill gives teeth to a Code of Conduct in which it is expressly stated that one key objective is to provide guidance to landlords and tenants to enable a fair and balanced position in lease negotiations.

The beauty of this Code is that it is put up by a Committee representing both the interests of the landlords and tenants and consists also of neutral parties, too. The expectation is that the Committee can provide holistic guidance on what constitutes fair practices in the context of retail lease agreements.

Earlier, just before the break, the hon Member Mr Louis Chua had suggested that perhaps the Government should consider more data transparency guidelines in favour of tenants. On its own, it is not a controversial point, but my suggestion is this. We have this committee that is supposed to come to a consensus, a collective action plan. In that regard, one would have to not just look at specific issues, but really the net picture. And in that regard, we must always take a give-and-take approach. So, when we take issues or advocate issues pertaining to the tenants, we must also consider what are the landlords’ issues and then we can come to a consensus and, hopefully, we can move forward.

The hon Non-Constituency Member of Parliament Mr Leong Mun Wai had advocated some form of low-rent control. I have been in legal practice long enough to remember the spectre of the Rent Control Act. In those days, because of the Rent Control Act, there was no real investment by the landlords on their premises, leading to dilapidated buildings. And in the end, Singapore suffers because small Singapore would require a high utility of our land.

So, what is fair in the circumstances would have to be determined by the market and now, we have this framework in terms of a committee and we need to take a consensual approach to deal with all these issues.

I come to the second point, fairness. A plain reading of the Code will show that the focus is really to protect the small tenant and not the big landlord. I welcome the Government’s decision to intervene for the small tenant in the retail sector. It is a matter of fairness. It also makes business sense in the long term, because otherwise, we would see a hollowing out of SMEs, which are representative of our nation’s entrepreneurial spirit, within the retail sector.

There is a third principle that this Bill makes provisions for, but, in my view, it has not gone far enough. This is the true freedom to contract. I would like to invite the hon Minister of State to state the Government’s position on power imbalances in contracts involving small businesses which fall outside the purview of this Bill. This is a point that the hon Member Mr Louis Chua also made.

I also wish to draw attention to contracts made by small businesses with other dominant players, such as telcos and utility services providers. Thankfully, where the dominant players are regulated, I see an ability on the part of the regulators to reign in unfair practices and ensure fair dealing outcomes through the exercise of their regulatory powers.

This is done, for example, by the Monetary Authority of Singapore (MAS) which issued Fair Dealing Guidelines in 2013. I suggested in my 2018 speech that other regulators follow suit. What would be useful, in particular, is to ensure that the contracts issued by dominant players, which are regulated, are reviewed for compliance with such guidelines, too. In other words, there should be no gap between regulation and contract.

I now turn to the Bill. Part 4 of the Bill provides the dispute resolution mechanism that may be invoked by a landlord or a tenant should there be a complaint that there has been a non-compliance with a leasing principle set out in the Code of Conduct. This dispute is to be resolved through mediation first. If mediation does not work, then it is proposed that it be dealt with by an adjudicator who will have the power to not just determine whether there is a non-compliance with a leasing principle but also to deal with the issue of compensation.

Under clause 10 of the Bill, the Minister may authorise any person to be an authorised dispute resolution body. In turn, the authorised dispute resolution body must maintain a panel of mediators and adjudicators.

My first question is what are the proposed qualifications of the mediators and adjudicators? Also, why is it felt that the appointments of the mediators and adjudicators should not be done directly by the hon Minister?

My next question concerns the power of the adjudicator. Under clause 25 (4) of the Bill, the adjudicator must make a determination whether there has been a non-compliance with a leasing principle. In such a case, the adjudicator may vary the lease agreement to correct the non-compliance or he may order compensation. May I clarify that, notwithstanding the use of the word “or” in the clause, the adjudicator may, in suitable cases, be able to order a variation of the lease and also order compensation for the period before the order to vary is made?

In addition, may I ask what are the principles upon which the adjudicator is to calculate compensation? Is it based on the law governing damages for breach of contract? Or can the adjudicator decide on compensation in accordance with his own views of what is just and equitable in the circumstances? How would he deal with clauses in the lease agreements that attempt to exclude or limit liability for compensation?

Moving on, it is proposed in clause 13 of the Bill that where there are any proceedings before a Court in respect of a matter that is subject of Part 4 of this Bill, the Court may order a stay of proceedings on terms that it sees fit. If the legislative intent is to ensure that the adjudicator, and not the Court, handles all complaints of non-compliance with leasing principles, would it not be better to provide that the Court must grant a stay, say for limited circumstances, instead of making it discretionary? I would be grateful for the hon Minister’s clarification on this matter.

If, indeed, it is intended that the Court be vested with a discretion, may I ask the hon Minister of State what factors must the Court weigh in determining whether or not to grant a stay, having regard to the legislative objective of this Bill?

I also seek a clarification on the ambit of clause 28 of the Bill. It allows a party to raise challenges to the lease agreement on the basis of whether or not it complies with the proposed Act in separate Court, arbitral tribunal or other dispute resolution proceeding. At first glance, it seems to be that clause 28 may not be congruent with the legislative intent to channel disputes arising from the Act to the adjudicator.

Finally, I deal with appeals from the decisions of the adjudicator. I note that there is no provision specifically providing for an appeal. However, under clause 27(4) of the Bill, it is proposed that a party may commence separate proceedings in the General Division of the High Court to set aside the adjudication determination subject to the provision of security. Under sub-clause (5), a non-exclusive list of grounds is provided for the purpose of setting aside the order. In essence, the grounds are illegality and palpable injustice.

I would like to seek clarification from the hon Minister of State whether the intent behind the provision is, generally, not to allow for appeals from the adjudicators’ determinations, save for narrow and extenuating circumstances. If that is the case, would the hon Minister of State please clarify the reason for doing so?

I ask this also bearing in mind that the adjudicator may have to apply the law governing contracts as determined by the Courts to issues at hand, for example, compensation and dealing with the enforceability of exclusion and indemnity clauses. Since what constitutes such law are matters within the province of the Courts, I would have thought that there should be recourse to the Court system as a matter of right. An alternative option is to allow for an appeal if it raises an issue of law.

Mr Speaker, Sir, I conclude by offering my support for this significant piece of legislation which shows the Government's understanding of the moral limits of the market. It gives life to everything I had imagined in my Adjournment Motion five years ago. I thank the Minister for this important piece of legislation. I should also thank the Minister for Trade and Industry, who is here as well.

To my colleagues in this House, may I be allowed to share that in Parliamentary life, sometimes, time is the secret ingredient. In time, we have recognised that there are power imbalances which do not work, not only because they oppress small businesses, but because they do not respect the general public good. In promoting fairness, equity and true autonomy in contracting, we achieve the rare feat of a "win-win" solution. Surely, this is a very good deal in the marketplace of ideas.

Mr Speaker: Mr Leong Mun Wai, you have a clarification for Mr Murali?

4.16 pm

Mr Leong Mun Wai: Thank you, Sir. Perhaps Member Murali is too happy with this Bill. If I hear correctly, he mentioned that I recommended rent control in my speech. Is that what you mean? I did not say that.

Mr Speaker: Mr Murali Pillai.

Mr Murali Pillai: I thank the hon Non-Constituency Member of Parliament Mr Leong for seeking a clarification from me. I did not assert that the hon Member Mr Leong sought rent control.

What I said in my speech was that he sought lower rents on behalf of SMEs and, as a result of that, it triggered memories of the Rent Control Act. I was in legal practice long enough to remember the Rent Control Act, which was subsequently abolished.

And I recall that where Rent Control Act applies, buildings become dilapidated because landlords have no incentive to invest in these buildings and making it tenantable. And in the end, Singaporeans suffer, because there is no utility that arises from the use of land. I hope that clarifies.

Mr Speaker: Mr Leong, another clarification.

Mr Leong Mun Wai: Thank you, Sir. Can I ask the Member again? What you have said is actually a very dangerous inference into what I say. I think I would ask you to retract what you have said.

Because I have actually agreed with this Bill. And the direction that the Government has taken in this Bill, I totally agree with. It is something that is quite rare, actually, that I agree with the direction of the Government. But for this Bill, I also agree. I am also very happy with you.

But I did not say that I am asking for lower rents. I am just saying that, in general, we should not encourage too much property speculation and we should not encourage a rent-seeking economy or society.

So, you should not bring what I said in my speech to that conclusion. It is very unfair for the inference that you have made. Can you clarify that?

Mr Speaker: Mr Murali Pillai.

Mr Murali Pillai: Mr Speaker, Sir, it is not my intention to be confrontational with the hon Member. The point I made, which does not really need me to repeat, is that, at the end of the day, we need to have a collaborative effort between the tenant and the landlords in the context of the Committee to come up with win-win situations.

So, in the context of that, it is always a give and take. And, to advocate for specific issues for one party may be good in Courts of law. But within the framework that is being proposed in this Bill, that is anathema – because the whole idea here is to have a collaborative, consensual approach; be it in relation to rent or even in relation to sharing of data.

Mr Speaker: Mr Leong.

Mr Leong Mun Wai: Speaker, Sir, I think that explanation is still not enough. You must be very clear that I did not say that I am advocating rent control. Because what you are trying to say is actually, sorry, it is actually quite similar to what the Government has always been saying with regard to what I recommend in this House.

When I talk about we should not encourage too much property speculation; with this Bill, we can have more control over the big property landlord, you say I am advocating, you say what I am saying is going to lead to rent control. That is very dangerous.

Just like whenever I said about protecting the jobs of Singaporeans, the Government accused —

4.20 pm

Mr Murali Pillai: Point of Order, Mr Speaker.

Mr Leong Mun Wai: Yes.

Mr Murali Pillai: I had just now already, in my first clarification, stated that I did not say that the hon Member Mr Leong advocated rent control. I already clarified that.

And against that clarification, why is the hon Member still maintaining that I said he advocated rent control?

Mr Leong Mun Wai: Sir, what I am trying to clarify and I insist that the Member clarifies that. From what I say, I do not like the inference that he has made, that I am trying to recommend pushing down the rent and towards the direction of rent control and, as a result, it will affect the desire, the motivation of the landlords in Singapore to make further investment in property and all that. I think this is too much of inference.

And I am trying to quote that what I say, for example, in jobs, the Government tried to label me as xenophobic. When I talk about lower housing prices, the Government said I am trying to raid the reserves. This is the same pattern of what the Member Mr Murali is trying to do here, in my opinion.

Mr Speaker: Mr Murali, would you like to respond to that again?

Mr Murali Pillai: Well, Sir, I mean, without getting into the emotion of things, let me just assure my hon friend, Mr Leong, that I was not making any specific insinuation about rent control to him. I was just picking up a point that he made in the course of his speech, where he advocated that in light of rent-seeking behaviours of landlords, there should be efforts to make sure that tenants get low rents – I was dealing with that point.

And in that context, I spoke about the mechanism in this Bill which advocates a consensual approach – the Committee itself has representatives from the landlords, tenants and also other neutral parties.

So, with great respect, I fail to see how I am accused of taking his speech out of tangent.

But in any event, the record would prove what I said and, therefore, apart from these comments, I do not wish to take this any further.

Mr Speaker: I think what both Mr Murali and Mr Leong have said will be recorded clearly in the Hansard. So, I would like to propose that we move on from here. Both Mr Leong and Mr Murali have clarified.

Okay, Mr Leong, I will allow one last clarification.

4.24 pm

Mr Leong Mun Wai: Sir, thank you for your indulgence. I want to clarify here, I never in my speech, mentioned I am asking for lower rent.

Mr Speaker: Mr Leong, I think that point has been clarified. It will all be recorded – what you said and what Mr Murali said.

Mr Leong Mun Wai: Speaker, Sir, so, can I confirm that if afterwards we have confirmed that I did not say that I am asking for lower rent, I am just talking of general approach, Member Murali will apologise to me and correct his statement? Member Murali, can I ask whether you will commit to that?

Mr Speaker: Mr Leong, you can sit down. Mr Murali Pillai.

Mr Murali Pillai: Sir, I am not making any commitment, Sir. Of course, Mr Leong is entitled to his views and I hope that he respects that I am entitled to my views as well. I have already offered that whatever we have said is recorded in Hansard and we stand by what we say.

And I think whatever that we do, our conduct in all these things, would have to be something that would flow from there. So, I am not going to make any commitment.

Mr Speaker: As I have said, Mr Murali Pillai has clarified, as well as Mr Leong, you have also clarified what you have said.

Let me now have the pleasure of inviting and calling on hon Member Ms Jean See to join the debate, as she makes her inaugural speech in Parliament. [Applause.]

4.25 pm

Ms See Jinli Jean (Nominated Member): Thank you, Mr Speaker. The introduction of the Lease Agreements for Retail Premises Bill is timely. Many small businesses were hard-hit during COVID-19. Schemes, such as the Self-Employed Person Income Relief Scheme, which the NTUC had assisted the Ministry of Manpower (MOM) to administer, gave some respite to many self-employed business owners.

Post-pandemic, businesses are starting to find their footing. Some businesses have transitioned to online shopfronts. Others still choose to operate as retail tenants. They include enrichment centres, gyms and photography studios.

Some of these businesses belong to self-employed persons who are also members of NTUC's associations for coaches and instructors and creative professionals. These self-employed business owners support the Bill as the Bill sets out guidelines enabling fairer lease negotiations between retail landlords and tenants. The Bill also deters landlords from terminating lease agreements because of sales performance.

Shop rental is a significant operating cost to self-employed business owners. To move towards fairer rent structures and profit-sharing clauses in the lease agreements, business owners suggest guidance. This guidance could be from the Government and market leaders. Their suggestion stems from three concerns.

First, sudden and drastic increase in rental cost destabilises small businesses. Post-pandemic, some saw steep rental increase of 15% to 40%, compared with pre-COVID-19 levels. This left many small businesses in the deep end. Landlords cited inflation, higher expenses and opportunity costs to justify rental hikes. Self-employed tenants struggled to cope. Many had depleted their savings during COVID-19 and were in a state of financial flux. Self-employed businesses located in non-retail commercial properties also shared this concern.

Second, a vibrant business ecosystem encourages a variety of business forms to co-exist.

We respect landlords' right to pursue profitability. Even so, what must change for small businesses to co-exist with big tenants with deep pockets? For example, landlords could calibrate rental adjustments over a longer period. This would allow small businesses time to adjust their business models. Landlords could also share how they derived various costs like base rent. This would help tenants to appreciate the extent economic factors impact retail rents and provide them with lead time to communicate fee increases with customers.

Third, labour is often the next most significant operating cost following rental. Thus, business owners might shift towards flexible labour to counter higher rental costs.

For instance, staffing might consist of short-term contracts and gig-based freelancing arrangements. While this increases business flexibility, it is at the expense of worker income security. If rent remains an uncertainty for business owners, "flexibilisation" of employment could become more appealing. This is an area of concern as worker precariousness cannot be an outcome of business survival.

Emerging from the pandemic, small businesses have been bracing themselves for various headwinds. The Lease Agreements for Retail Premises Bill is a step in the right direction. It helps to balance the bargaining power between landlords and retail tenants.

Self-employed business owners are aware of their vulnerabilities in a volatile, uncertain, complex and ambiguous (VUCA) environment. They thus look to the Government and market leaders to guide fair play and practices. This is important to the development of a sustainable and vibrant business ecosystem – one where self-employed business owners and their workforce can thrive and where consumers can benefit from the diversity and affordability of goods and services.

Notwithstanding the suggestion, the Bill gives assurance to small businesses. Mr Speaker, I support the Bill.

Mr Speaker: That is the difference between someone who can speak from a small device as compared to me with a big device.

Before I call the next Member, I would just like to remind all Members of what I said right at the start of the Sitting yesterday, which is, by all means, speak with passion, speak with conviction. Please do that. But there is no need, I again remind Members that there is no need to bang on the rostrum or things of that sort. So, I hope Members remember that. I would hate to give reminders every now and then.

Let me now call on Mr Louis Ng.

4.31 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, this Bill will introduce a framework to facilitate fairer negotiations between landlords and tenants in retail.

The Bill will mandate compliance with a Code of Conduct for certain retail leases. The Code was first released by FTIC in 2021. This Bill takes the important step of codifying the Code.

I have three clarifications on the Bill.

My first point is on the effect of non-compliance with the Code of Conduct. The Bill will require qualifying retail leases to comply with the Code and 13 leasing principles under the Code. Can the Minister of State clarify if non-compliance with the leasing principles that is not a permitted deviation will mean that the non-compliant term is void? Can the Minister of State also clarify if there are any situations where non-compliance with the leasing principles that is not a permitted deviation will void the entire lease? These clarifications will help parties clearly understand the legal consequences of non-compliance. In situations where a non-compliant term or the entire lease is void, can the Minister of State clarify how the Court should determine what sums are due to parties?

My second point is on modifications to the Codes and the Schedules. The requirements that qualifying retail leases must comply with will be set out under the Codes. It is significant that requirements are set out in the Codes that can be modified by the Committee with the Minister's consent. The modifications do not require approval of Parliament.

While there should be flexibility, transparency and certainty for businesses are also important. Can the Minister of State share how frequently the Code of Conduct will be modified? Can the Minister of State also elaborate on the criteria and considerations for modifying the Code of Conduct? Can the Minister of State confirm that appropriate public consultations will be carried out before any modifications are carried out to the Code of Conduct and Schedules? Understanding the timeline for potential revisions will help stakeholders anticipate adjustments and plan accordingly.

My third and final point is on the scope of premises that are covered. The First and Second Schedules can be amended to vary the scope of qualifying leases covered by the Act. In addition to this, section 32 allows the Minister to exempt any person or premises from the scope of the Act by order in the Gazette.

The general power to exempt by order in the Gazette is less likely to attract scrutiny than amending the Schedules. Can the Minister of State share under what circumstances might the Minister exercise its power to exempt specific persons or premises under section 32 instead of amending the Schedules? Sir, notwithstanding these clarifications, I stand in support of the Bill.

Mr Speaker: Mr Lim Biow Chuan.

4.33 pm

Mr Lim Biow Chuan (Mountbatten): Sir, I declare my interest in speaking on this topic as a practising lawyer and whose area of practice includes landlord and tenancy-related matters. I have acted for both landlords and tenants.

In principle, Sir, I agree on the need for fair and more balanced lease negotiations between landlord and tenants of retail premises. This is especially so when tenants have spent tens of thousands of dollars renovating their premises and establishing their businesses at the rented premises. Often, there is goodwill built up by tenants in respect of a particular location.

Sir, this Bill makes it mandatory for a landlord and tenant to comply with a set of Code of Conduct for the leasing of retail premises which are defined as "qualifying leases". The Code of Conduct was drawn up and issued on 26 March 2021 by the Fair Tenancy Pro Tem Committee. Sir, I have read through the Code of Conduct and, in particular, the leasing principles stated in the Code of Conduct.

First, I agree with this principle that a landlord should act reasonably and not have the power to predetermine the lease of premises unless there is a requirement for redevelopment works. And if the landlord does predetermine the lease due to redevelopment works, then it is only right that the landlord should make some offer of compensation to the tenant for the costs of renovations incurred.

However, Sir, I want to express some caution when Parliament is asked to legislate on matters which ought to be determined by market forces. This was a similar principle made by Minister Indranee Rajah in February 2018 when she responded to my colleague, the hon Mr Murali Pillai, during his Adjournment Motion. She said, "In general, free market principles should apply."

Sir, I am also concerned that the Code of Conduct is not a subsidiary legislation drawn up by the Attorney-General's Chambers (AGC) but by FTIC which has the right to propose modifications to the Code of Conduct. Although members of FTIC are appointed by the Minister, in the event that, one day, more members of this FTIC are pro-tenants, then there is a risk that the recommendations in the Code of Conduct may tilt too much towards protection of a tenant who is not the owner of the property.

Sir, allow me to set the context of landlord-tenancy relationship in perspective. Landlords are typically owners of properties and they had paid hundreds of thousands or millions of dollars to buy real estate. These property owners then part with possession of the premises to tenants who are given exclusive possession of the premises for the duration of the tenancy. And in many landlord-tenancy disputes, the greatest worry of the landlord is that they are unable to recover possession of the premises from a tenant in default of rental. By the time the landlord commences legal action to seek an order of possession, the arrears would have accumulated to a large amount.

Hence, the starting point for most tenancy agreements is that they seek to protect the landlord to enable the landlord to recover possession of the premises whenever there is a breach of tenancy agreement.

Many of us in this House may not remember the Control of Rent Act – except Mr Murali – which was legislated after World War II to protect tenants against unscrupulous landlords during the housing shortage in the post-war years. However, eventually, the Control of Rent Act was abolished and this was because it had outlived its purposes as there was no longer a housing shortage. Further, at that point of time, rental control tenants had demanded exorbitant compensation before agreeing to vacate the rent-controlled premises. And, Sir, I have acted for such tenants before the Tenants Compensation Board. I know how difficult it is when the tenant demands hundreds of thousands of dollars for the premises that he does not own and for which he has been paying a small meagre sum of rental for many years.

Thus, I call on the Government to review any request for amendments to the Code of Conduct with some caution so that a right balance of fairness can be considered from both the landlord and the tenant's point of view. During times when there is a shortage of retail space, usually landlords have a better bargaining position. And we have had a relatively strong economy for many years and property prices remain strong. However, during times when there is a glut of retail space, tenants can and will make demands for better tenancy terms from the landlord. Landlords would then cut rental. They will moderate their tenancy terms in order to rent out their premises. Otherwise, vacant premises are deemed to be a wasting resource to the landlord.

If there are many retail properties which are vacant, it may cause property prices to nosedive. Members of this House who have lived through the Asian Financial Crisis in 1997 will know that a negative property market may eventually result in a recession because property owners cannot pay for their loan instalments and many property owners face financial ruin.

In fact, observers of the retail market will also know that not all retail spaces are in equal demand. There are some shopping malls where there are still many empty retail spaces as compared to a major shopping mall where there is huge demand for retail space due to better management of the mall. Thus, Sir, I would urge that we should consider allowing free market principles to set tenancy terms as far as possible.

In respect of the Bill, I have a few queries for the Minister of State.

Paragraph 3 of the Code of Conduct provides for Advertising and Promotion (A&P) charge to be capped at the overall gross rent. This means that if a landlord wants to adjust what is commonly known as the A&P charge, he must do so within the total gross rent payable by the tenant.

But surely, A&P charges payable by a tenant must be a matter of negotiation between the landlord and tenant. As long as it can be proven by the landlord that the A&P charges are meant to promote the mall or the building, why does the Code of Conduct restrict the amount of A&P charge to be collected? The setting of this rule would cause a landlord to simply refuse to conduct any A&P activities for the building or the mall if he is unable to raise A&P charges without cutting back on the amount of rental that he receives. So, if the total amount of rent cannot be changed, then he will simply not do any A&P activities because why would he want to cut his own rental?

Paragraph 4 of the Code of Conduct also provides for the landlord to pay compensation if there is predetermination of the lease. As said earlier, I agree with this principle and I would add that we should make it mandatory for the landlord to send reminders to the tenant on the need to submit their declaration of value of capex works within three months of completion of the renovation works. This is to avoid a situation whereby the tenant may have forgotten to keep or to submit records of their capex and thus be unable to substantiate their claim in the event that the landlord does predetermine the tenancy.

Next, Sir, I want to speak about clause 2 of the Bill. Clause 2 of the Bill provides for the law to be applied to all qualifying leases. Sir, may I ask whether this will include even the smaller retail landlords like those in HDB shops or the owners of smaller shops at Lucky Plaza, City Plaza or Peninsula Plaza? How does the Government intend to assist the smaller landlords to ensure that they are aware of the need to comply with the Code of Conduct? For example, would they be aware of the need to provide a certificate from the registered surveyor or the cap on the amount of security deposit? I know many of these small landlords would have absolutely no clue where to find a registered surveyor because they have been renting out the place for so many years.

Next, Part 4 of the Bill requires the landlord or tenant to settle disputes with an authorised dispute resolution body and that authorised dispute resolution body must then maintain a panel of mediators and a panel of adjudicators. May I ask the Minister of State which is the authorised dispute resolution body?

Sir, I declare that I have served as a director in the Financial Industry Dispute Resolution Centre (FIDReC) for 12 years. And I know, for these past 12 years, it is not easy to establish a dispute resolution body which has a pool of experienced and respected adjudicators and mediators. So, would this body referred to in the Bill be able to find enough adjudicators who are sufficiently experienced in landlord-tenancy disputes?

Finally, clause 26 of the Bill requires parties to a settlement agreement to apply to record the settlement agreement as an order of Court. What if one party refuses to consent to the recoding of the settlement agreement? Who then will bear the legal costs of filing the application to record the settlement agreement?

Sir, I would be grateful if the Minister of State can assist to clarify my concerns. And save for those concerns, Sir, I support the Bill.

Mr Speaker: Mr Saktiandi Supaat.

4.43 pm

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Speaker, Sir, retail and commercial leases have long been a special class of tenancies that are protected by legislation in other countries, such as Australia, France and Belgium. Despite the rise of online shopping and transactions, the retail shops in our neighbourhoods and shopping malls are still an invaluable part of our lives in Singapore.

This Bill is significant, as mentioned by some of our hon Members who have delivered their speeches, as it seeks to regulate the negotiation of private leases between landlords and tenants. It represents an exception to Singapore's reluctance to interfere with the free market of private commercial transactions. It goes beyond the specific and temporary interventions that this House had passed during the height of the COVID-19 crisis.

One main aspect of the Bill is to elevate parts of the Code of Conduct for Leasing of Retail Premises into law. The Code was co-created by the retail industry landlord and tenant representatives through extensive discussions between June 2020 and March 2021.

That time period suggests that the Code was created in a context where COVID-19 had significantly affected retail businesses as footfall plunged during the pandemic. Are the principles in the Code suitable for permanent adoption going forward, especially as we leave the pandemic days behind us?

Clause 5 of the Bill, which introduces the Code into legislation, provides that the Code can only be modified with the Minister's approval. So, I would like to ask the Minister of State, would such a requirement introduce bureaucratic "red tape" that makes the Code less nimble and ready to adapt to changing market conditions? And how many times has the Code been amended or revised since it was initially issued?

Even though clause 5 introduces the Code of Conduct generally, it appears that the Bill only gives legislative bite to Part B of the Code, by requiring the landlord and the tenant of a "qualifying lease" to comply with the leasing principles set out in Part B. May I clarify with the Minister of State if the intention is for Parts A, C and D of the Code to have the force of law as well?

For example, Part A of the Code mandates landlords and tenants to "adopt a consensual approach to negotiate in good faith". With the passing of this Bill, is there now a legal duty to negotiate in good faith, even in the absence of an express contractual term? I understand that this is not the current state of the law.

Part D of the Code also requires a landlord to provide the tenant with a completed checklist indicating whether its draft lease agreement deviates or disapplies particular leasing principles under the Code. Will this become a legal requirement? While I understand that the Code has already been voluntarily adopted by major private sector landlords like CapitaLand, CDL, Frasers and Keppel Land, I am concerned about the compliance readiness and costs to other relatively smaller landlords of retail premises, such as, for example, Majlis Ugama Islam Singapura (MUIS) or clan associations.

Most significantly, there has been some concern over the Bill’s silence on the data transparency guidelines at Part C of the Code. The tenant group Singapore Tenants United for Fairness (SGTuff) made a public call for landlords to be required to provide data on the footfall and average rental per square foot in their retail premises. Such data provides tenants with a more even playing field when negotiating shopping mall leases with building landlords, especially if the lease contemplates a gross turnover rent structure.

On the application of leasing principles set out at Part B of the Code, the Bill provides that this would only apply to a "qualifying lease". Among other things, the lease would be one which is for at least one year, and any period for which the lease can be later extended or renewed is disregarded. May I ask the Minister of State: does this allow for landlords or tenants to escape compliance with the leasing principles by structuring their lease as multiple renewal periods of 11 months, for example?

Four out of the 11 leasing principles under the Code – relating to exclusivity terms, sales performance clauses, rental structure and security deposit – can be deviated from, provided that the landlord and the tenant mutually agree. However, the Code also provides that deviations for the first three principles are to be "on an exceptional basis". May I ask the Minister of State as well does this mean that something more is required on top of the mutual agreement of the landlord and the tenant?

Clause 6 of the Bill also provides that any permitted deviation from the leasing principles must be declared to FTIC or else it might be void. The Committee will maintain a register and record of permitted deviations under clause 7 of the Bill. May I ask the Minister of State what is the purpose of lodging these declarations with the FTIC? Is there room for the FTIC to interfere with these permitted deviations if they have been mutually agreed by the landlord and tenant in question?

I would also like to commend, Mr Speaker, the aim of a "low-cost and expedient" dispute resolution process for any non-compliance with leasing principles, through the introduction of mediation and adjudication processes at Part 4 of the Bill. I look forward to seeing the rules, procedures and other details that will be established under clause 10 by the authorised dispute resolution body, which I understand will be the Singapore Mediation Centre (SMC).

However, can the Minister of State clarify if there would be a stipulation equivalent to paragraph 3 of Part D of the Code of Conduct? It says there that a landlord or tenant may escalate any non-compliance in the lease agreement to SMC "within 14 days of the signing of the lease agreement". If yes, what is the consequence if the parties do not escalate the matter within 14 days of signing the lease agreement? A bit of a technicality, but I thought it is good to clear this. Are they barred from raising the issue from then on?

To keep the process "low-cost and expedient", will the mediation and adjudication be carried out without lawyers?

I also note that the prescribed mediation and adjudication process is only meant to cover a dispute over "non-compliance with a leasing principle in relation to their lease agreement". If there are concurrently other disputes arising out of the lease agreement, I presume these will have to be referred to the Courts or to arbitration, depending on what the lease agreement provides.

May I ask the Minister of State is this a circumstance where a Court would exercise its discretion under clause 13 of the Bill to stay parallel Court proceedings? Does this also mean that disputes over non-compliance with the leasing principles must always be subject to the mediation and adjudication process under the Bill, and cannot be decided by a Court or arbitral tribunal?

Mr Speaker, before I conclude, I would like to briefly touch on one area which is not presently dealt with by the Code of Conduct or the Bill. In most longer-term leases, including those that are renewable for further periods, there are usually terms providing for a rent review exercise to "refresh" the rent payable after a certain period of time. This recognises that rent amounts are susceptible to market changes and fluctuations over time.

Rent review is an area which is regulated in other jurisdictions. In France, the law provides for a legal mechanism where the rent will be revised every three years based on an index without recourse to the courts, following a request from the landlord or the tenant. In Belgium, a party may apply to court to obtain an adjustment of the rent where there are new circumstances affecting the normal rental value of the leased building. In various Australian states, the law prescribes certain restrictions on the rent review procedure and calculation methodology that may be agreed by the parties in the lease agreement.

This may be an area that FTIC or the Ministry may wish to look into going forward. Mr Speaker, Sir, notwithstanding the clarifications sought, I support the Bill.

Mr Speaker: Mr Don Wee.

4.51 pm

Mr Don Wee (Chua Chu Kang): Mr Speaker, Sir, I rise in support of the Lease Agreements for Retail Premises Bill. The proposed legislation will help to level the playing field for tenants and landlords. It will enhance fairness and transparency during the negotiation process and empower both parties to make informed decisions. This Bill supports entrepreneurship by providing businesses with guidance and certainty. We can expect beneficial change for the whole community, not just the retail sector.

Although some landlords had voluntarily adopted the Code of Conduct, mandating compliance with the Code will ensure that all retail sectors and tenants will be covered and will benefit from it. This will be especially helpful for small business owners with limited means and information resources in their negotiations with landlords.

I would like to ask about sub-tenants, many of whom are sole proprietors, such as those commonly present in the heartland areas, like the ones Ms See Jinli Jean had mentioned just now. They form an important part of our communities, providing products and services catered to their customers’ specific needs in the housing estates. Will they also be able to benefit from this legislation and obtain access to the necessary information, which will be made available to the main tenants? We want to continue to support these local businesses, some of which are quite unique, preserving our cultural heritage in the products and services rendered. More balanced bargaining power will maintain fair rates and would allow these entrepreneurs to prosper as well as to continue to contribute to the lively nature of the heartland districts.

While the Bill is undeniably a huge step forward in advancing the rights of tenants, more can be done. One example is to go beyond sharing of sales data metrics by trade category before signing a lease. Monthly updated information on footfall and the average rental per square foot by mall, building or floor, should be public information, just like for residential properties as well. An open and transparent market will be beneficial to all stakeholders – landlords, tenants and consumers. Mr Speaker, Sir, in Mandarin.

(In Mandarin): The Bill and Code are important steps forward for the retail industry. They will help to ensure a level playing field for tenants and landlords to negotiate lease agreements in openness and good faith. They will also support entrepreneurship by providing businesses with guidance and certainty on the lease negotiation process and helping them make informed business decisions based on their commercial interests.

However, many small landlords and tenants have long-term leasing agreements. Based on their long-standing relationships, they may not regard lease negotiations in the same way as parties in commercial malls do. For example, many HDB shops pay a lump-sum rent that is not tied to a specific psf rate, since they do not use psf as a benchmark to negotiate their rent. Some coffee shop operators sublet food stalls by verbal agreement. Hence, small businesses may not be sufficiently aware of the legislation to help them in their lease negotiations.

What will the Ministry do to raise awareness of the Bill and Code and communicate their benefits more widely to the industry, especially among small businesses? Will the Government consider conducting townhalls and roadshows to reach out to these businesses? Will these events be conducted in dialects?

What can be done to reassure small businesses which may be worried about compliance costs and whether their leases conform with the law? For example, it can cost $1,000 to $3,000 to engage a lawyer to review and amend a lease agreement, which can be quite significant for some businesses.

How can small tenants seek help to resolve disputes over non-compliance with the Bill and Code? Apart from FTIC and the Singapore Mediation Centre (SMC), are there other communication channels which are convenient and accessible to small businesses?

Mr Speaker: Minister of State Low Yen Ling.

4.56 pm

Ms Low Yen Ling: Mr Speaker, Sir, I thank all the 10 hon Members who have spoken in support of the Bill and for their questions, comments and suggestions. Please allow me to address the points raised in the course of my speech. As before, for the sake of clarity, I will refer to the Fair Tenancy Industry Committee established under this Bill as FTIC, and the Fair Tenancy Industry Committee that was formed two years ago in May 2021 as "current Committee" in my speech.

Mr Speaker, Sir, before I turn to address the Members’ comments, please allow me to recap very quickly the context for the Bill that has been cited by many hon Members.

In June 2020, when we first embarked on the journey to strengthen the retail sector with tenant and landlord representatives from the Pro Tem Committee, to be honest, it was far from certain that any common ground could be found, let alone a full-fledged and robust Code of Conduct that we have before us today in the House for this debate. So, the Code was, in the words of a current Committee member, and I quote her, "a landmark for the industry" and it is "a miracle that we could even reach this stage". This unprecedented Bill is also a landmark for the Government, like what some Members have shared.

For the first time, we have tabled a Bill that mandates compliance with principles that are drawn from a Code that is developed by the industry, that is owned by the industry. It is because the industry and stakeholders recognised the need for this Code and the collective benefits that it can bring to the stakeholders of the retail sector that we are all here today for the final stage of this Bill.

As Ms Jessica Tan pointed out, the Code does not set out to, nor does it intend to, solve every problem that tenants and landlords face in their lease negotiations. However, it is a critical first step that brings the industry together at the same table and steers it towards a positive direction for a brighter future.

While the COVID-19 pandemic catalysed the beginnings of the Code, as Mr Murali Pillai and Mr Saktiandi Supaat said, the conduct and the spirit of negotiations, as well as the development of common leasing principles, will place businesses on a stronger foundation for the long run. And to ensure its continued relevance, the Code will be a living document under the current Committee and then the FTIC’s stewardship, and updated from time to time to meet the industry's needs.

Since the Code was first published in March 2021, it has been updated twice. We are seeing the third version – Mr Louis Ng asked the question – in less than three years, three versions.

Mr Murali Pillai, Mr Louis Chua, Mr Leong Mun Wai, Ms See Jinli Jean in her maiden speech, and many Members have given their firm support, and I am very glad that the Bill addresses their concern about the imbalance of bargaining power for small companies in the retail leases.

I fully agree with Mr Murali Pillai that the Bill promotes equality, fairness and freedom to contract between leasing parties.

I also agree with Mr Don Wee, who has just spoken, that the Bill and the Code provide small businesses with guidance and certainty, and thus support entrepreneurship in general, by helping businesses understand their tenancy rights and make informed leasing decisions – knowing their tenancy rights as well as both sides knowing their obligations.

Above all, we are clear that by no means is this Bill signalling a shift in the Government’s position on free-market principles, the importance of which Mr Lim Biow Chuan had stressed in his very passionate speech earlier. On the contrary, the very reason that we are tabling this Bill is to promote greater transparency and a more vibrant and competitive retail scene to benefit Singaporeans and all consumers.

As highlighted by Mr Murali Pillai in his passionate speech, the Government's underlying philosophy has always been, and still is, in the words of then-Senior Minister of State Indranee Rajah in 2018, that "in general, free market principles should apply and the Government should only intervene when necessary."

The Bill supports this approach. It does not seek to intervene in market outcomes and it does not seek to inadvertently distort competition or distort market forces at work. Instead, it empowers the industry players in the retail sector to come together to identify, and to address, their key pain points by finding common ground.

The leasing principles under the Code are a result of very extensive deliberation between tenants and landlord representatives. They represent the fine balance that both sides have struck.

The trust and partnership that tenants and landlords have forged in developing the Code together provide a firm foundation for widespread adoption by the industry. By mandating compliance with the Code, the Bill will enable both the tenants and the landlords to pursue their business interests more effectively and enhance the competitiveness of our retail scene in Singapore.

Mr Speaker, Sir, please allow me to now respond to the Members' clarifications on the Code and then their clarifications on the Bill.

I thank all the 10 Members for their questions and their suggestions for the Code.

To formulate the Code, the Pro Tem Committee had spent months deliberating each of the leasing principles extensively. The Pro Tem Committee weighed the views of tenants, large and small, and landlords, large and small, and incorporated their feedback to come up with a set of common standards that apply to the industry. Careful consideration was also given to ensure that the Code is not unduly onerous on any party.

The FTIC will certainly continue to drive the review of the Code under the Bill.

Mr Edward Chia had suggested amending specific leasing principles to further increase transparency in lease negotiations. Mr Edward Chia raised a point about electricity costs in his speech. He was concerned that while the Bill prohibits profiteering from the sale of electricity, tenants are charged for additional miscellaneous costs, such as "meter reading fees".

Landlords on the En-bloc Contestability Scheme (ECS) will have to procure electricity contracts on behalf of all their tenants. Then, the landlords are to pass tenants the electricity costs, as charged, without any mark-up.

Depending on the contract between the electricity retailer and the landlord, the electricity costs may include various components charged by the electricity retailer, such as fees for meter leasing and meter readings.

Under the ECS, the contract between, say, the electricity retailer with a mall, they will only measure the amount of electricity that the mall uses, but they will have to provide the individual meter to measure the tenants' usage. So, these are imposed by the electricity retailer. This is so that sub-meters can be installed for tenants and their electricity consumption can be tracked.

There are also instances where the landlord is not on the ECS. Those are cases where tenants would be able to choose from an array of electricity retailers of their choice from the open electricity market.

It is thus not practical nor possible for the Code to comprehensively come up with different permutations to try to cover the different types of commercial arrangements for electricity. What we want here is to improve transparency and to promote fair practices to make it clear that the landlord cannot charge mark-ups on electricity costs.

As Ms Jessica Tan said in her speech, "We should not expect legislation to be the panacea for all issues."

What is really important, as cited by many of the speakers today, is that details on costs are communicated transparently during the lease negotiation so that the tenant can make an informed decision whether to lease the premises.

Mr Edward Chia also asked if the Government or FTIC could provide guidelines for parties renegotiating lease agreements due to material adverse change when a tenant cannot carry on its business because of events beyond its control.

Parties are encouraged to abide by the principles governing the conduct and the spirit of negotiations as set out in the Code and to negotiate leases in good faith while also considering the other party's legitimate interests. As circumstances would differ for each lease, it is thus not feasible to issue guidelines for what would be commercial arrangements between the two parties.

Mr Edward Chia and Mr Lim Biow Chuan raised some questions about advertising and promotion (A&P) and also service charges during the lease, which landlords are allowed to adjust, on the condition that their overall gross rent does not increase. Again, this is to improve transparency and promote fair business practices so that there is certainty and predictability for retail tenants.

This condition has been set to prevent landlords from arbitrarily raising the gross rent after the agreement has been signed and to provide certainty to tenants on the rent that is payable during the lease term.

I wish to also clarify that the Code does not restrict the amount of A&P charges that a landlord may collect. As Mr Lim Biow Chuan noted, the amount of A&P charges that is payable by the tenant is really a matter of negotiation between parties and continues to be so. Rather, the Code holds the position that A&P charges are considered as business costs incurred by landlords and should thus be subsumed in the overall gross rent, rather than be borne fully by tenants.

In addition, landlords are also encouraged to keep proper records and accounts of these charges to ensure accountability because when renewing the lease agreement, tenants and landlords may review and revise the charges based on prevailing market conditions.

Mr Speaker, Sir, Mr Saktiandi Supaat and Mr Louis Chua asked if data transparency guidelines under Part C of the Code will be mandated under the Bill. I am happy to confirm this: they will be mandated.

The current Committee has updated the draft Code to raise the bar on data transparency and confidentiality and elevated the status of data transparency and confidentiality guidelines to be leasing principles. This brings the total number of principles to 13, instead of 11, which the Bill mandates compliance with.

In cases of non-compliance, parties can pursue recourse in the form of mediation and adjudication. The draft Code will be finalised in the coming months and will take effect on the same day as the date of commencement of the Act in early February 2024.

Mr Don Wee and Mr Louis Chua asked if the data transparency principle in the Code can be further strengthened, such as by providing tenants with more information beyond sales data by trade category.

Allow me to share that the Pro Tem Committee had considered all these matters in deliberating on the data transparency requirement. The Pro Tem Committee ultimately landed on the position in the Code that Members see today to promote greater transparency and enable both tenants and landlords to make informed lease decisions while balancing both parties' interests.

The addition of two leasing principles, confidentiality and data transparency, really demonstrates how the Code is a living document which will continue to evolve to meet the industry's needs.

While I am not able to address all the questions that were raised by Members, especially those that are outside the purview of the Code and the Bill, I will certainly convey your feedback to the current Committee for their consideration, including Mr Lim Biow Chuan's suggestion for reminders to be sent for the declaration of the value of capex works.

Mr Louis Ng asked about the frequency of reviewing the Code and its guiding criteria. Mr Saktiandi Supaat then enquired about rent review and if requiring the Minister's approval to amend the Code could make it less nimble.

I agree with both Mr Louis Ng and Mr Saktiandi Supaat that we will have to balance between providing flexibility and transparency and giving businesses certainty. The current Committee considered the industry's feedback when it reviewed the Code and will continue to do so. Under the Bill, MTI will also work with FTIC and ensure there is sufficient lead time for businesses to familiarise themselves with the latest updates on the Code and how the updated principles in the Code will be implemented before it comes into force.

Mr Speaker, Sir, I will now turn to address Members' clarifications on the Bill.

Mr Louis Ng asked about the scope of the Bill and how might the Minister exercise the power to exempt specific persons or premises from the Bill.

I want to assure him that the Government intends for the Bill to apply to all retail premises with a lease tenure of one year or more. Powers to vary the Schedules and to exempt specific entities are not uncommon in other Acts and I would like to assure the Member that MTI will exercise such powers under the Bill judiciously and only consider doing that in exceptional circumstances.

As Mr Saktiandi Supaat observed, some parties may seek to escape compliance with the Bill by deliberately structuring their lease in multiple renewal periods of 11 months – that is actually quite painful. He was citing that as an example that some tenants or landlords may game it that way.

I wish to assure him that the intent is to cover the vast majority of retail leases and exempt those on short-term leases. I want to assure him that if any party suspects that their lease terms are being deliberately shortened to circumvent compliance with the Code and the Bill, they can report to the FTIC such practices for going against the spirit of the Code.

Mr Lim Biow Chuan asked about the composition of the FTIC and cited there might be a risk of the balance of representation tilting towards either side. He noted the importance of this matter as the FTIC is responsible for maintaining and proposing changes to the Code.

I would like to assure him and the House that the Pro Tem Committee and current Committee have done an admirable job in balancing the needs of the tenants, large and small, and landlords, large and small, in developing the Code so far and we will continue to work closely with the FTIC to ensure that this momentum continues after the passing of the Bill.

Mr Speaker, Sir, as I have said at the beginning of my speech, the legislative approach we have taken for this Bill is really a first for the Government.

We have chosen to do so as, one, we recognise the potential downsides of overregulating in the lease negotiation space, where market forces and commercial considerations should prevail. Two, we do so because we recognise the benefits of having an industry-led body respond very nimbly and represent the industry aptly to changing needs in the fast-moving retail scene.

To ensure accountability in the process and fair consideration of interests on both sides, the Bill requires FTIC members appointed by the Minister for Trade and Industry to represent the interests of both tenants and landlords and also requires the FTIC to seek the Minister's approval before amending the Code.

Mr Edward Chia and Mr Saktiandi Supaat asked about the recourse available if landlords do not file declarations of permitted deviation after signing the lease agreement within the period to be prescribed in the Regulations. While the Bill only requires landlords to file any such declarations with the FTIC, tenants are encouraged to acknowledge these filings.

In cases where permitted deviations on exclusivity, sales performance and security deposit fail to be filed – to answer Members' questions – the deviation in the lease agreement would be void and the default position, as stated in the Code, would then apply. So, they have to file it within that period, failing which, deviations on those three areas would be void and the default position in the Code would then apply.

For the fourth scenario, for the fourth leasing principle where deviation is allowed, where it concerns the rental formula, if the permitted deviation related to the rental formula fails to be filed, the lease will continue on the same rental formula. This is because it is not possible to prescribe a default rental formula in the Code or to void the rental formula term in that particular lease agreement as it is an essential element of the contract.

On a related note, Mr Louis Ng asked about the consequences of non-compliance with leasing principles without a permitted deviation. I would like to clarify that that is not permitted. The reason why we are coming to Parliament today to pass this Bill to support this industry-led Code is to mandate compliance with the 13 leasing principles. Out of the 13 leasing principles, there are four leasing principles where, if both parties mutually agree, they can file a declaration of permitted deviation.

I would like to clarify that this is not permitted, because we need mandatory compliance. And in such cases, if he is aware of any, the tenant can decline the lease agreement and, in fact, report the matter to FTIC.

To answer Mr Saktiandi Supaat's question on the purpose of requiring parties to file declarations of permitted deviation with the FTIC, this is a good question. These requirements enable the FTIC to monitor industry trends in relation to the four leasing principles of exclusivity, sales performance, security deposit and rental formula, and then, to assess if there is a need to update the Code.

So, as I said, this is a first step, it is a living document, we will continue to engage the industry to collect feedback but it has to be done in a way that all parties come to a consensus at the same table.

We keep talking about "large landlord" and "small tenants". Actually, landlords can also be small. I will come to that point later. Tenants can also be big. So, there are many, many permutations here and it is important for us to represent the interests of all possible scenarios.

I would like to clarify that while deviations represent a departure from the norms that are agreed to at the industry level, the Code does provide parties with the flexibility to negotiate the terms that are best suited to business requirements and commercial considerations. I hear from some Members that the reason why there are permitted deviations in the four areas, is it because the landlord wins?

Interestingly, the tenants are the ones who may advocate for that flexibility. Because if not, they will think that, in certain situations, it may be overly restrictive.

I want to address the query by Mr Leong Mun Wai. For example, I understand in our engagements with the stakeholders – and as I said, there are large and small landlords, and large and small tenants – I will quote to Members two very interesting examples, which did not come to my mind before my engagement with them.

Certain tenants may want to deviate and opt for a "whichever is higher" rental formula, which is currently not permitted in the Code, except by mutual agreement. I will give Members one example – a shop selling bak kwa. They shared that they may have most of their sales around the Lunar New Year period. Of course, you may say, actually we eat bak kwa throughout the whole year. But I think we will agree, we see the long queues one-and-a-half months before Lunar New Year.

They may actually enjoy a huge spike in their income during that period, rather than a steady income stream year-round, compared to other F&Bs, like say, a bubble tea shop. This is just one example. So, the bak kwa shop tenant may prefer a "whichever is higher" rental formula, which then will allow them to negotiate with the landlord to pay a lower baseline rent for most of the months, except for the few months leading up to Lunar New Year.

Another example is a winterwear shop. I think we do see that in some shopping malls, where the sales during the year-end holiday or sales to those people who go to Australia during the June holidays can be a bit higher than other months.

So, I just want us to think of other possible scenarios. Basically, this is not just the landlord, also the tenant representatives who told us that they hope for a little bit of flexibility so that it does not encumber them, when they go into a lease negotiation for the retail premises.

As lease agreements are private contracts between willing parties, tenants and landlords should do their due diligence before signing a lease agreement, which is binding once signed. Parties to the lease agreements are also responsible for ensuring compliance with the Code. Tenants and landlords, after signing, it is their responsibility to also ensure that there is compliance, failing which, they can then proceed to alert FTIC and then, if need be, there is a dispute resolution body, which I will touch on later.

If the FTIC receives complaints that a party regularly engages in practices or behaviours that are against the spirit or the requirements of the Code, it may seek further information from the parties and publicly highlight egregious or non-cooperative and non-compliant behaviour.

Mr Murali Pillai, Mr Lim Biow Chuan and Mr Saktiandi Supaat asked about the qualifications of the mediators and adjudicators. Because out of the three speakers, two are legally trained, I want to assure them that the panel of mediators and adjudicators appointed by the authorised dispute resolution body, which will be the Singapore Mediation Centre, SMC for short, will be fully qualified to deal with matters of non-compliance with the Code.

The mediators will comprise both legally trained and non-legally trained individuals who must pass SMC's training programme with a distinction grade. And all adjudicators have to be legally trained individuals. This is to ensure that they are able to address any legal implications in relation to non-compliance with the Code when rendering their decisions. While parties are free to hire their own legal representatives, it is not a requirement. Here, we are trying to make sure that, in the situation of dispute, we are trying to offer a low-cost, expedient avenue.

Mr Murali Pillai, in his speech, also asked about the adjudicator's power to address matters of non-compliance with leasing principles and whether the adjudicator can order both a variation of the lease as well as compensation to rectify the same matter of non-compliance.

This part is going to be quite technical, so please bear with me. I would like to clarify that the adjudicator can only make a determination to require either a variation of the lease, so that it complies with the leasing principle in question, because that would only come about as you go through the lease negotiations and as you sign. So, this will only kick in during that period – at the front part of your lease agreement. The adjudicator can either determine a variation of the lease or order a compensation, if the leasing principle in question provides for compensation to be made.

Let me repeat – the adjudicator can only order compensation if the leasing principle in question provides for compensation to be made. Currently, if you look at the Code – which is available at the URL www.ftic.org.sg, 39 pages long – compensation explicitly applies to three leasing principles in the Code relating to early termination of contracts. In other cases of non-compliance where the leasing principle does not provide for recourse of compensation, the aggrieved party may wish to seek damages through independent civil redress, like what the Member cited.

Mr Murali Pillai and Mr Saktiandi Supaat asked if the dispute resolution process under this Bill supersedes Court proceedings. I want to assure them that it does not. While we encourage parties to use the mediation and adjudication services that are set out in the Bill for Code-related complaints, this dispute resolution framework is provided, in addition to any other redress that the parties would have outside of the Bill.

As I have said, we would want to do this because we want to provide the aggrieved party a low-cost and expedient avenue.

It is not intended to override any other such redress. The Court would have the discretion, whether to hear or determine the matter or to grant a stay of proceedings, after considering all relevant circumstances.

Mr Murali Pillai's last question concerns the scope to appeal the decisions of the adjudicator. As I have shared, the dispute resolution framework under the Bill is intended to be a low-cost and expedient alternative to other forms of redress available to the parties. It does not supplant the Court's jurisdiction. Parties can only seek mediation or adjudication in relation to non-compliance with the leasing principles which have been clearly set out in the Code. Thus, most cases before the adjudicator should be able to be determined in a relatively straightforward manner.

Sir, before I conclude, please allow me to say a few words in Mandarin.

(In Mandarin): Mr Speaker, the Code of Conduct for Leasing of Retail Premises in Singapore, launched in March 2021, was spearheaded by the industry to promote fairer and more balanced lease negotiations between tenants and landlords. The Code addresses structural issues in the industry and enables both parties to forge long-term symbiotic partnerships.

This Bill will mandate that all tenants and landlords comply with the Code. We hope that the Bill will also support entrepreneurship, by helping businesses understand their tenancy rights and make informed leasing decisions. This will set a strong foundation for a more vibrant and competitive retail scene in Singapore, which will benefit all consumers.

CapitaLand, a major landlord of commercial properties, shared that since adopting the Code, they have strengthened their relationship with their tenants and it has enabled them to work together to enhance the vibrancy of their malls and bring more exciting experiences to consumers.

Mr Don Wee and Mr Louis Chua asked how we can raise awareness of the Bill and Code among SMEs and address concerns over compliance costs. Mr Saktiandi Supaat and Mr Lim Biow Chuan also expressed concerns on compliance readiness for smaller landlords. I understand Members’ concerns and would like to assure them that we have refined the Code over a period of two years and we have tried to ensure right from the beginning that it is easy to understand and follow.

The Government will work with FTIC, the Federation of Merchants’ Associations Singapore (FMAS) and Heartland Enterprise Centre Singapore (HECS) to conduct roadshows and seminars in the heartlands, especially from now to February next year. I would like to assure Mr Don Wee that these seminars will not only be conducted in English, but also in Mandarin. He also asked whether they will be conducted in dialects. I will discuss this with FMAS.

So, we will work closely with FTIC, FMAS and HECS to conduct a series of roadshows and seminars to educate heartland shops about the details of the Bill and Code. Businesses can also approach HECS’ business advisors for one-on-one advice.

FMAS is also developing a lease agreement template tailored for heartland shopowners and will launch it by this year-end. We are grateful to the TACs, including FMAS and the Restaurant Association of Singapore, for their ground-up efforts to introduce sector-specific lease agreement templates, checklists and other resources, which will bring more convenience to businesses.

FTIC will continue to update the Code based on industry feedback. For example, during our engagements in partnership with FMAS and HECS in the past two years, many heartland retailers gave feedback that the requirement to provide a surveyed floor plan certified by a registered surveyor for new leases would increase their leasing costs.

After considering the feedback, the current Committee decided that tenants and landlords can submit certified floor or building plans from relevant authorities by mutual agreement. This shows that the Committee listens closely to the feedback from both tenants and landlords, large and small. The alternative option is more convenient and less costly. The updated Code is expected to take effect on the same day as the commencement of the Act in early February next year.

(In English): Mr Speaker, Sir, I believe I have addressed the key issues that were raised by Members. And as we can see from the last two-and-a-half hours of debate, the passionate speeches of the 10 Members, we have heard many different voices in the Chamber today.

On one hand, while some Members think that the Code can go further to address imbalances in lease negotiations, others worry that it may go too far. And some see the Bill as an exemplary example of our collaborative approach – "uniquely Singapore" – to problem-solving, while some caution that not all issues require the Government to step in and not all issues require the Government's intervention.

So, as you can hear from the 10 speeches from the Members, the diversity of views held amongst the 10 speakers – I was reflecting. It truly reflects the extensive and spirited discussions that have taken place these two years in the industry, between the large and small landlords and the large and small tenants.

Mr Speaker, Sir, the Code embodies the common ground that is found by tenants and landlords to bridge these differences, and it has been welcomed as a ground-breaking achievement for the industry – developed and owned by the industry.

I am very heartened that all 10 Members affirmed the importance of the Code and the need for the Bill to ensure widespread adoption.

To conclude, I would like to reiterate that the Code is a living document and will continue to evolve to meet the needs of the industry. This will allow new and current players to navigate the market more adroitly and adapt to disruptions with greater resilience. I am confident that by ensuring fair and balanced lease negotiations, the Bill will strengthen the foundations of the retail market. The FTIC will also be a positive driving force in finetuning the Code and bringing stakeholders together to push the industry to greater heights.

I would like to thank all the 10 Members for their support for the Bill. And I trust that with the support of the House today and the retail industry for this Bill and the Code, we will place the retail sector on solid ground for future growth and greater potential. Sir, I beg to move.

5.32 pm

Mr Speaker: Are there any clarifications for Minister of State Low? I do not see any.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Ms Low Yen Ling].

Bill considered in Committee; reported without amendment; read a Third time and passed.

Mr Speaker: Before I call the Deputy Leader, next Wednesday, we celebrate our country's 58th birthday. So, let me wish everyone a happy National Day in advance. [Applause.] Deputy Leader.