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Code of Conduct for Leasing of Retail Premises to take effect from 1 February 2024

11 December 2023. Published by Bonnie Wong, Of Counsel

Following from the passing of the Lease Agreements for Retail Premises Bill which mandates compliance with the Code of Conduct for Leasing of Retail Premises in Singapore ("Code") for qualifying leases of retail premises earlier this year, the Lease Agreements for Retail Premises Act ("Act') is expected to take effect from 1 February 2024. Under the new legislation, landlords and tenants of a "qualifying lease" must ensure that the lease agreement complies with the leasing principles in the Code then in force at the time the lease agreement is signed. 

For purpose of safeguarding the Code, the Fair Tenancy Industry Committee ("FTIC") representing both landlords and tenants as well as neutral parties was set up in May 2021 to be the custodian of the Code and to ensure that the Code is kept up to date with the latest market practices, monitor the performance of the Code and submit recommendations to the Government to enhance the regulatory framework.

The Code was first introduced on 26 March 2021 and serves as a set of mandatory guidelines to provide guidance to landlords and tenants of qualifying leases to enable a fair and balanced position in lease negotiations and a dispute resolution framework for such landlords and tenants. The third version of the Code is currently in draft form and the finalised version is expected to take effect on the same day as the day of commencement of the new Act on 1 February 2024. 

Under the third version of the Code, a "qualifying lease" refers to a lease for retail premises, or an extension or renewal of such lease signed on or after 1 February 2024 with a lease term of one year or more. Premises are considered as retail premises if they are used primarily for the sale of goods by retail or the supply of services. Examples of retail premises which falls within the scope of the Code includes restaurants and bars, shops, clinics, pet shops, tuition centres, commercial schools, gyms and cinemas. 

The Code provides for 11 leasing principles for key tenancy terms and other leasing principles in relation to confidentiality clauses and data transparency. One of the notable leasing principles relates to rent which provides that a rental formula must not have an "either/or, whichever is higher" formula or have a gross turnover rent ("GTO") component when GTO is more than a specified amount. Any rental formula not based on a single rental computation and departs from the leasing principle in the Code may be included in a lease agreement only on the exceptional basis if both parties agree to such a rental formula. Under the Code, any "catch-all" provision requiring tenant to pay unspecified and generic third-party costs is also not allowed. 

Where there is a permitted deviation from a particular leasing principle and if parties agree to such a deviation, the landlord must submit a declaration of the permitted deviation to the FTIC within the 14 days of the signing of the lease agreement (or such other period as may be prescribed by the Act) failing which such permitted deviation may be deemed void. The FTIC may also charge filling fees for the submission of the declaration of permitted deviation(s) from 1 February 2024, which is currently set at S$100 (subject to GST) per deviation. 

A copy of the Code can be downloaded at the following website of the FTIC.