A common question from business owners regarding the Covid-19 (Temporary Measures) Act (the “Covid Act”) is when the Landlord is required to pass the benefit of the reduction in property tax to Tenants. For many Tenants, receiving the benefit of the property tax immediately is key to the business surviving another month.
Under the Covid Act, the Landlord has to pass the benefit of the reduction in property tax to their Tenants fully and unconditionally. The manner of passing on the benefit can be by payment in lump sum, payment in instalments or reducing or offsetting current or future rent.
While the Covid Act stipulates that the benefit must be passed on within a prescribed time period, this prescribed time period has yet to be determined by Parliament. Subsidiary legislation determining the prescribed time period is expected to be passed some time this month. IRAS has, in the meantime, issued a Guidance Note on what prescribed time period should be.
1. Landlords will be required to pass on the rebate they receive at two milestones, namely the amount attributable to 1 January – 30 June 2020 by 31 July 2020 and the remaining amount by 31 December 2020. This is the minimum obligation expected of Landlords. In most cases, Landlords would at this juncture already be able to estimate the property tax rebate they would receive and are encouraged by IRAS to pass on the rebates earlier to support their Tenants during this difficult time.
2. If Landlords have already passed on the rebate to each of their Tenants in the form of monetary payment, rental reductions or an offset against current and future rental consistent with the requirements of the Covid Act, the amount of rebate passed on earlier will satisfy the obligation imposed under the Covid Act.
As this is just a Guidance Note, it is not binding and is subject to what is stated in the subsidiary legislation eventually passed.
In the meantime, Landlords and Tenants should kickstart the negotiations to find amicable solutions to tenancy issues. If parties are unable to come to a resolution, they may refer their disputes to the Valuation Review Panel constituted under the Covid Act.