Planned to be passed on 7 April 2020, the Bill is designed to give temporary relief arising from the unprecedented disruption to commerce and daily life by the COVID-19 pandemic.

The Bill will give a party who is unable to perform obligations on or after 1 February 2020 under certain specified contracts, where the inability is materially caused by COVID-19, and has given a “Notification for Relief” to the counterparty and its guarantors, temporary relief from performing those obligations for a prescribed period. The period has yet to be prescribed by the Minister for Law, but it will not exceed 6 months.

Among the specified contracts are a lease or licence of non-residential immovable property.

If a tenant gives a “Notification for Relief” to the landlord, there is a moratorium on taking action arising from the failure to perform the obligations. These include:

1. Starting or continuing court or arbitration proceedings against the tenant and its guarantor;
2. Levying distress against property of the tenant; and
3. Exercising a right of re-entry or forfeiture under the lease or licence of immovable property.

The moratorium will end at the end of the prescribed period.

If there is a dispute as to the eligibility for relief, any party – most likely the landlord who receives a notification for relief – may submit it to an assessor for determination, whose decision is final.
The Bill does not affect action being taken under the Frustrated Contracts Act or based on a force majeure clause.

Rights to claim termination of a tenancy on the grounds of frustration do not need to be expressly spelt out in the contract because it is a common law doctrine. However, the threshold to meet is quite high and examples of possible circumstances constituting frustration include:

1. Impossibility of performance (e.g. due to destruction of the property);
2. Frustration of purpose (e.g. intended use of property not allowed); and
3. Performance becomes illegal.

It is ultimately a fact-specific inquiry and relevant factors considered would be the terms of the lease, the parties’ knowledge and expectations.

Unlike the doctrine of frustration, a force majeure clause provides a contractual exit right which typically provides for a right for one party or both to terminate a contract on grounds that something has occurred that has rendered performance of the obligations under the contract impossible. Whether a party is excused from performing an obligation on account of force majeure will depend on the terms of the lease.

Another aspect of the Bill is to compel owners of properties who receive any remission in property tax in response to COVID-19 to pass it on to the tenant. This methods have yet to be prescribed but the draft Bill stipulates that it may be by way of cash payment (lump sum or instalment) or by way of an off-set against the rent payable by the tenant.

The remission must be passed on to the tenant unconditionally. Any conditions imposed by the landlord will be void and a failure to pass the benefit is a criminal offence. Landlords must keep records to prove that the benefit was passed on, for 3 years.

The effect of these measures is simply to alleviate the cash flow crunch tenants may encounter; it does not waive the need to pay rental (except such amount that may be received from the property tax remission). The landlord’s other rights such as requiring the tenant to observe covenants, the compliance of which is not materially affected by COVID-19, and taking action to enforce them is not affected.

On the flip side, landlords may face a cash flow crunch themselves if the bulk of their tenants avail themselves to the moratorium. Landlords who may have obligations to tenants, e.g. commitment to advertising & promotion, but are not able to do so because of COVID-19 may also seek relief under the Bill.

After the prescribed period is over, parties will be free to assert their respective full legal rights. However, the question is whether the toll taken on the parties in the meantime will adversely impact their ability to meet the postponed obligations, even though a slew of measures have been rolled out by to support businesses and jobs by assisting businesses with cash flow, costs and credit.

These are extraordinary times, and it may be better in the long run for both landlords and tenants to work together to see through this period. For example, by coming to a mutually acceptable arrangement on their respective obligations instead of rushing for relief under the Bill that pushes the problem down the road.

Dentons Rodyk thanks and acknowledges Associate Katherine Ho for her contributions to this article.