FAQs for Rental Agreements for Commercial Equipment

Rental agreements for commercial equipment

Important Note: The prescribed period for rental agreements for commercial equipment has been extended from 19 October 2020 to 31 January 2021. Parties are encouraged to use the extended prescribed period to reach a long term mutually acceptable solution to their contractual disputes that arose because of COVID-19. Renters may wish to consider taking up the Repayment Scheme under the Re-Align Framework when it comes into force. Please refer to this press release for more information.

General FAQs

1. What types of rental agreements are covered by the Act?

The Act covers rental agreements for:
- A plant, machinery or fixed asset in Singapore that is used for manufacturing, production, or other business purposes; or
- A commercial vehicle (excluding taxis and private-hire cars).
The Act also covers hire-purchase agreements for commercial equipment and commercial vehicles (including taxis and private-hire cars).
The table below sets out the types of commercial equipment and vehicles that are covered or not covered by the Act for (i) hire-purchase agreements; and (ii) lease or rental agreements:

Item	Hire-Purchase Agreement	Lease or Rental Agreement
Plant, machinery or fixed asset in Singapore used for manufacturing, production, or other business purposes	Covered under the Act	Covered under the Act
Commercial vehicle	Covered under the Act a. A goods vehicle (e.g. a truck used to transport goods); b. An excursion bus, private bus, private-hire bus, omnibus or school bus; c. A private hire car; d. A taxi; or e. An engineering plant (e.g. a tractor, road roller, excavator, forklift).	Covered under the Act a. A goods vehicle (e.g. a truck used to transport goods); b. An excursion bus, private bus, private-hire bus, omnibus or school bus; c. An engineering plant (e.g. a tractor, road roller, excavator, forklift). Not covered under the Act a. A private hire car; or b. A taxi.
Non-commercial vehicle	Not covered under the Act	Not covered under the Act
FAQs	Please refer to the FAQs on hire-purchase agreements for more information.	Please refer to the FAQs below for more information.

2. What is the difference between a rental agreement and a hire-purchase agreement?

Broadly speaking, in a hire-purchase agreement, ownership of the good passes to the hirer after the payment of all the instalments.
In a rental agreement, ownership of the good does not pass to the renter.
If you are unsure of the nature of your contract, you should seek legal advice.

3. Does this Act cover a car that I rented for my personal use?

The Act does not cover rental agreements for non-commercial vehicles. Please refer to FAQ (1) on the commercial vehicles which are covered.

4. What reliefs under the Act are applicable to me, the renter of the commercial equipment/vehicle?

If you are unable to pay rent which is due from 1 February 2020 to 31 January 2021 under the rental agreement due to COVID-19, you may serve a Notification for Relief on the rental company. See FAQ (5) for more details.
Upon service of the Notification for Relief, the rental company cannot take certain actions against you up to 31 January 2021, including:
- Repossess the commercial equipment or vehicle.
- Unilaterally impose new charges, increase charges or interest rates beyond what is provided for in the agreement (please refer to FAQ (15) and (16) below.)
- Start or continue court proceedings or insolvency proceedings.
- Terminate your contract on the basis that you are unable to make payments on time.
In addition, the late payment interest rate and charges that are chargeable on arrears that accrued between 1 February 2020 and 31 January 2021 will be capped at the amount equal to 5% per annum of simple interest on the arrears. In other words, you are not liable to pay any late payment interest or fees above that amount. This helps to reduce the growth of your debt when you are unable to pay due to the impact of COVID-19. See FAQs (17) – (28) for more details.

5. What must I do to enjoy the reliefs?

The reliefs under the Act do not take effect automatically.
If you qualify for the relief, you need to first serve a Notification for Relief on the rental company using the form at this link (SingPass) or this link (CorpPass).
Once the Notification for Relief has been served on the rental company, the rental company cannot take the above actions in FAQ (4).

Specific FAQs

Types of agreements and vehicles which the Act applies to

6. I rented my vehicle for the purpose of my job as a private-hire driver or taxi driver. Does the Act apply to me?

No, the Act does not apply to rental agreements for private-hire cars or taxis.
However, the Government has worked closely with the industry and the associations to provide targeted relief to help drivers tide over this challenging period. We have set out more information on these relief measures below:
- Special Relief Fund (SRF). Eligible active drivers can receive relief of $300 per vehicle per month to defray business costs. Please click on this link for further information.
- Self-Employed Person Income Relief Scheme (SIRS). Drivers who are eligible for the SIRS can also receive $1,000 per month for nine months (or $9,000 in total). Please click on this link for further information.
- Courier/Delivery service. From now till end-September, taxi and private-hire car drivers may deliver food and groceries to supplement their income and cushion the decline in ridership. Please contact your operator for more information.
- Enhanced training support. To help drivers upskill, the SkillsFuture Singapore (SSG) has enhanced course fee support of up to 90% for selected courses. This applies until the end of 2020. Under the Self-Employed Persons (SEP) Training Support Scheme administered by the NTUC, drivers can also receive at least $10 per hour when they attend sector-specific training programmes. Please click on this link for further information.

7. Does the Act apply to me if I use the vehicle that I rented partly for commercial purposes and partly for personal use?

It depends on whether your vehicle is a commercial vehicle. Please refer to FAQ (1) above.
A personal vehicle used for travel to and from a place of work is not a commercial vehicle.

Eligibility and scope of the relief

I am a renter…

8. I am an individual who rented a commercial equipment/vehicle. Does the Act apply to me?

The Act applies to rental agreements for commercial equipment/vehicles. It applies regardless of whether the renter is an individual or a company.

9. I am a renter of commercial equipment/vehicle. I served a Notification for Relief before 20 June 2020. Is my Notification for Relief valid?

You should check your contract to see if it is a (i) rental agreement; or (ii) a hire-purchase agreement. Please refer to FAQ (2) for details on the difference between a rental agreement and a hire-purchase agreement.
If your contract is a rental agreement, and you served a Notification for Relief before 20 June 2020, your Notification for Relief is not valid as rental agreements for commercial equipment/vehicles were only introduced as contracts to be covered by the Act on 20 June 2020.
If you wish to obtain relief with respect to your rental agreement, you should serve a new Notification for Relief. Please refer to FAQ (4) for details.

10. I am a renter of commercial equipment/vehicle and I served a Notification for Relief on or after 20 June 2020. I have already paid the rent for February to May 2020 prior to serving the Notification for Relief. Must the rental company return the rent paid to me?

No, the Act does not provide such relief.
Please also note that the relief that the Act does not waive rent for commercial equipment/vehicles. Any unpaid rent continues to accrue during the relief period, and may be enforced after the relief period. Please refer to FAQ (14) for details.

11. My business suffered a drop of revenue due to COVID-19. Under the Act, must I still continue paying rent for the commercial equipment/vehicle?

The rent continues to be payable under the contract. However, the Act prevents the rental company from repossessing your rented commercial equipment or vehicle, or commencing or continuing legal action during the prescribed period (i.e. up to 31 January 2021). This gives the renter and the rental company time to negotiate a mutually acceptable way to deal with the arrears.
The relief applies only to renters who can demonstrate that they are unable to pay rent due to COVID-19. It does not allow renters who are able to pay, to avoid paying. Renters who have the ability to pay (even if they suffered a drop in revenue) must continue to pay rent.

12. I was unable to pay the rent for the commercial equipment/vehicle that fell due before 1 February 2020. Does the Act apply to arrears from before 1 February 2020?

No, the Act applies only to the inability to pay rent due to COVID-19 from 1 February 2020 to 31 January 2021. The rental company is entitled to enforce any contractual rights they have for unpaid rent due before 1 February 2020.

13. I am unable to pay rent for the commercial equipment/vehicle due to COVID-19. Should I issue a Notification for Relief or apply for an Assessor’s determination under the Act?

If you have been affected by COVID-19, and are unable to perform your contractual obligations, we would encourage you to work together with your rental company to reach a mutually acceptable solution. A long-term solution will give all parties a better chance to recover from the impact of COVID-19.
For both parties, a settlement is preferable to being mired in costly and lengthy legal proceedings.
If you cannot reach an agreement yet and require protection from legal proceedings, you may serve a Notification for Relief on your rental company, who is then prohibited from taking any of the actions in FAQ (3). This will give you temporary protection up to 31 January 2021.
For the avoidance of doubt, rent continues to accrue in the interim. You are therefore encouraged to use the temporary relief period to work out a solution.
In the event of a dispute over whether there is an inability to pay rent, or whether that inability is materially caused by COVID-19, either party may make an application to the Assessor, who will seek to achieve an outcome that is just and equitable in the circumstances. Please refer to this link for further information on the application process and the relevant forms.

14. Do I have to pay the accrued unpaid rent (and other charges if any) for the commercial equipment/vehicle after the 6-month relief period?

Yes. The unpaid rent (and any other charges such as interest or fees for late payment, if provided for under the contract) continues to accrue during the relief period, and may be enforced after the relief period.
The Act seeks to temporarily prohibit the rental company from enforcing the contract during the relief period.
While this gives the renter some breathing space without the threat of repossession or litigation to sort out his finances, he may be subject to a higher outstanding amount at the end of the temporary relief period as the interest or fees for late payment continues to accrue under his contract with the rental company.
As such, renters are encouraged to engage their rental companies to negotiate a mutually acceptable solution.

15. Can a rental company charge the renter interest or other fees for late payment of rent for the commercial equipment/vehicle during the relief period, after the renter serves the Notification for Relief?

If the agreement provides that the rental company can charge interest or charges (be it for late payment or otherwise), interest or other charges would accrue and can be enforced by the rental company after the relief period.
However, the rental company may not unilaterally increase the charges payable by the renter. See FAQ (16) below. Further, the late payment interest and charges may be subject to a cap. See FAQs (17) – (28) below.

16. The rental company says that it is exercising its right to increase the interest payable under the rental agreement for the commercial equipment/vehicle. Can it do so?

If a renter has served a Notification for Relief on the rental company, under the Act, the rental company is not permitted to:
- Increase any charges or interest rate payable under the contract unless such increase
  
  (i) is specified in the contract;
  
  (ii) is calculated by reference to a formula (e.g. a reference rate) in the contract
  
  (iii) relates to expenses reasonably incurred by the rental company in the ordinary course of business; or
  
  (iv) is further agreed to by the renter.
- Impose new charges except with the further agreement of the renter.
The table below illustrates when an increase in interest rate or charges, or an imposition of new charges or interest, is or is not permitted.

Example	Permitted	Not Permitted
Contract provides that the rental company may charge “an additional x% p.a. or such other rate as it may in its discretion prescribe” on overdue payments.	Rental company can charge the additional x% p.a.	Rental company cannot increase the rate above the additional x% unless the renter further agrees to the increased rate.
Contract provides that the rental company may charge “$x a day for each day the payment is not satisfied in full, or any such other charge at its discretion”.	Rental company can charge $x a day for each day the payment is not satisfied in full.	Rental company cannot rely on this clause to increase the charges to more than $x a day, unless the renter further agrees to the increased charges.
Contract provides that rental company may “impose any charges at its discretion”.	Rental company can impose charges where it relates to expenses that it has reasonably incurred in the ordinary course of business, e.g. administrative charges (including increase) which are based on the rental company’s internal schedule of charges and are collected from other renters with similar rental agreements.	Rental company cannot rely on this clause to impose a charge that is not reasonably incurred in the ordinary course of business, unless the renter’s further consent is obtained.
Contract provides that the rental company “reserves the right to vary the conditions in the agreement without the hirer’s consent”.	-	Rental company cannot rely on this clause to increase or introduce any new interest or charges, unless the renter’s further consent is obtained.

In addition to the above, the late payment interest and charges may be subject to a cap. See FAQs (17) – (28) below.

17. What are the arrears that will be subject to the cap on late payment interest and charges?

The cap applies in respect of arrears that accrued between 1 February 2020 and 31 January 2021 due to COVID-19.

18. What happens to arrears that have accrued before 1 February, or after 31 January 2021 (e.g., arrears for the month of January 2020)?

The relief does not apply to such arrears. The contractual late payment interest and charges will apply.

19. What is the cap on late payment interest or charges?

The cap is the amount equal to 5% per annum of simple interest on the arrears.

20. How does the cap on late payment interest rate and charges work?

Once the Notification for Relief is served, all late payment interest and charges that are chargeable on arrears that accrued between 1 February and 31 January 2021 will be capped at an amount equal to 5% per annum of simple interest.
Please click here for illustrations on how the cap on late payment interest and charges work.

21. What happens if the rental company insists that I pay interest or charges that exceed the cap?

You will not be liable to pay any late payment interest or charges that exceed the cap.

22. Am I still liable to pay the rental company ordinary interest (if any)?

The cap only applies to late payment interest and charges. The usual interest and charges (if any) that the rental company charges in the absence of any late payments is not capped.

23. Can parties agree to a late payment interest rate that is below the cap?

Yes. We encourage parties to work together to reach a mutually acceptable solution. A long-term solution will give all parties a better chance to recover from the impact of COVID-19.

24. I entered into a compromise or settlement with the rental company before I served a Notification for Relief. Does this relief apply to me?

No, the relief will not apply if you have entered into a compromise or settlement before serving the Notification for Relief on the rental company.

25. I have paid the rental company late payment interest and charges above the cap. Can I serve a Notification for Relief on the rental company and get a refund?

You cannot claim a refund of any late payment interest or charges that you have already paid.

26. Can the rental company terminate my rental agreement because I am unable to pay on time?

After you serve a Notification for Relief in accordance with the Act, your rental company may not terminate your contract on the basis that you are unable to make payments on time. Any such termination will be invalid under the Act.

27. I served my rental company with a Notification for Relief before the cap on late payment interest and charges was brought into force on 31 July 2020. Does the cap apply to me? Do I need to serve the rental company with another Notification for Relief?

Yes, the cap on late payment interest and charges can apply to you, even if you served the Notification for Relief before the cap was brought into force on 31 July 2020. You do not need to serve the rental company with another Notification for Relief.

28. I applied for and received an Assessor’s Determination before the cap on late payment interest and charges was brought into force on 31 July 2020. Does the cap apply to me?

If your determination provides that section 5 of the Act applies in respect of your inability to make payment under the contract, the cap on late payment interest and charges will apply to those payments that you were unable to make.

29. What can I do if the rental company threatens to repossess my commercial equipment/vehicle after I have served a Notification for Relief?

It is unlawful and an offence for your rental company to repossess your commercial equipment or vehicle, or start court or insolvency proceedings against you after you serve a Notification for Relief in accordance with the Act.
We encourage you to reach out to your rental company to confirm that he had received your Notification for Relief, and to commence negotiations to reach a mutually acceptable solution.
If no agreement is reached, and the rental company does not agree that you are entitled to relief under the Act (and wishes to proceed with repossession of your commercial equipment/vehicle, or commencement of court or insolvency proceedings), either party may make an application to the Assessor, who will determine whether the relief is applicable. Please click on this link for further information on the application process and relevant forms.

30. My rental company repossessed my commercial equipment/vehicle before I served the Notification for Relief. Does the Act apply to me?

The Act does not apply to a repossession that occurred before the Notification for Relief was served.
If you believe that the rental company breached the terms of your rental agreement, please seek legal advice.

31. I served the Notification for Relief on my rental company, but did not get any response or acknowledgement. What do I do next?

You may wish to reach out to your rental company to ensure that it received the Notification for Relief, and commence negotiations.
We encourage rental companies and renters to be reasonable and to work out a mutually acceptable solution to the contractual issues that have been created by COVID-19.

I am a rental company…

32. My company is a rental company. A customer served us a Notification for Relief in relation to a rental agreement for a vehicle used as a private-hire car/ taxi, which does not fall within the Act. What do we do next?

Even though the Notification for Relief was served in error, this indicates that your customer has difficulties meeting his contractual obligations to you under the vehicle rental agreement. We encourage you to engage with your customer to work out a mutually acceptable solution to deal with these contractual issues that have been caused by COVID-19.
You can also dispute the Notification for Relief, by making an application to the Assessor by following the steps in this link. The Assessor will determine whether relief under the Act applies.