FAQs for Situation B - Inability of lessee or licensee to carry out or complete renovation or fitting out works during the rent-free period

Situation B – Where a lessee or licensee (i.e., a tenant) of non-residential property is unable to carry out or complete renovation or fitting out works during the rent-free period

A tenant of non-residential property may be granted a rent-free period to carry out renovation or fitting out works. Such a tenant may have lost the benefit of the rent-free period if its contractors were unable to carry out or complete the renovation or fitting out works under a separate construction contract due to the COVID-19 situation. The tenant may apply for relief under Part 8 in respect of the rent-free period that it was unable to utilise.

Click here for a summary of the relief in this situation.

Part 8 also applies to the situations below. Further details may be found in the FAQs that are linked below:

FAQs

For lessees or licensees

1. What is the criteria I must fulfil before I can make an application for relief under Part 8?

You (the applicant) must fulfil the criteria below:

You must be a party to a lease or licence of non-residential property (the “affected contract”) that:
- is entered into, or renewed, before 25 March 2020; or
- is entered into before 25 March 2020, and is renewed on or after 25 March 2020, either automatically or in exercise of a right of renewal in the lease or licence agreement.
The affected contract must be in force at any time between 1 February 2020 and 31 March 2021 (both dates inclusive)
The affected contract must include a term providing for a period (the “rent-free period”):
- for you (the lessee or licensee) to carry out renovation or fitting out works; and
- during which rent is not payable, or a reduced amount of rent is payable, by you.
You are unable to carry out or complete renovation or fitting out works during the rent-free period (the “inability”) because of a delay or breach in a separate construction or supply (or related) contract (the parties to this contract need not be the same parties as the affected contract) and you could not have avoided the inability by taking reasonable steps
The delay or breach occurred between 1 February and 31 March 2021 (both dates inclusive) due to COVID-19

In addition, relief under Part 8 of the Act is not available if court or arbitral proceedings have already been commenced in relation to the subject of your intended application.

2. What kind of determinations can a Part 8 Assessor make?

The Part 8 Determination may vary the rent-free period in the lease or licence. This includes lengthening or shortening the rent-free period, and/or shifting the period.

3. My rent-free period overlaps with the Rental Relief under Part 2A of the Act. How will this be taken into account?

The Assessor will only adjust the contractual term in the lease or licence, which provides for the rent-free period, if you are unable to carry out or complete renovation or fitting out works during the rent-free period because of a delay or breach in a separate construction or supply (or related) contract, and it is just and equitable to do so.
If the above applies, and your original rent-free period overlaps with the Rental Relief under Part 2A of the Act, the Assessor may take into account the overlap with the Rental Relief in his/her determination.
For example, the Assessor may determine that it is just and equitable for the rent-free period to commence on 1 August 2020 instead of 1 April 2020, to take into account the Rental Relief period.

4. How do I apply for relief under Part 8?

You will need to submit an application to the Registrar. Further details, and the applicable forms, can be found here.

5. What is the latest date I can apply for relief under Part 8?

Your application must be filed before 31 May 2021.

6. Can the other party commence proceedings against me while I apply for relief under Part 8?

A temporary moratorium will apply once you have served the application for relief under Part 8 (the “Application”) on the other party or parties to the affected contract.

The moratorium will end on the earliest of the following:

Your withdrawal of the Application
The Registrar’s rejection of the Application
The issuance of the Part 8 Determination

Under the moratorium, the other party or parties to the affected contract may not start court proceedings or arbitral proceedings against you in relation to the rent-free period.

Please see section 37A of the Act here for the full list of prohibited actions during the moratorium.

7. I was unable to carry out renovation or fitting out works during the rent-free period for reasons unrelated to COVID-19. Can I apply for relief under Part 8?

No. To qualify for relief under Part 8, your inability to carry out or complete renovation or fitting out works during the rent-free period must be due to a delay or breach in a separate construction or supply (or related) contract, and that delay or breach must be due to COVID-19. Relief under Part 8 is not available if your liability for additional rental expenses arises due to other reasons.
We encourage you to explore other dispute resolution mechanisms, such as negotiation and mediation. COVID-19 has had a significant impact on everyone. Parties should thus act reasonably and work together to reach a mutually acceptable solution.

For Landlords

8. My tenant has applied for relief under Part 8 and served the Application on me. What do I do next?

You will need to submit a Response to the Registrar, and serve it on the Applicant (i.e., your tenant). Further details can be found here.

9. I rely on my rental income to pay for my own expenses, such as mortgage payments. I cannot afford to shift the rent-free period. What do I do?

You should explain your situation to the Assessor in in your Response. The Assessor will seek to achieve an outcome that is just and equitable in the circumstances, and may take into account:

The impact that any adjustment may have on another contract that you may have with a third party (e.g., your mortgage)
Any loss suffered or benefit obtained by you in relation to the matter