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Watchdog studying retail lease market amid complaints

Watchdog studying retail lease market amid complaints

Source: Straits Times
Article Date: 13 May 2020
Author: Tiffany Fumiko Tay

Some mall tenants say they are bearing a huge part of the financial burden during slowdown.

The Competition and Consumer Commission of Singapore (CCCS) is looking into the private retail lease market, amid a chorus of complaints by mall tenants of an imbalance of bargaining power with landlords and unfair clauses in tenancy agreements.

Tenants had previously said that this imbalance, among other things, has seen them shouldering a large part of the financial burden amid the slowdown caused by the Covid-19 pandemic.

The CCCS has disseminated a survey soliciting feedback from tenants on market competitiveness and lease terms as part of its market study.

The aim is to better understand the market structure and identify any anti-competitive practices, according to a circular to various trade associations seen by The Straits Times.

Feedback from firms will also give government agencies a more holistic view of the private retail lease market and identify any issues that need to be addressed, the circular said, adding that survey responses will be kept confidential.

The competition watchdog said in response to queries by ST that there have been recent reports suggesting tenants in private retail malls may have been subjected to uneven bargaining power in their tenancy agreements.

"As such, the study aims to better understand the market for the leasing of private retail space in Singapore, including how the market features impact competition in Singapore," a spokesman said.

The study comes amid complaints that some mall landlords have been dragging their feet on rental relief for tenants during the two-month circuit breaker, when most shops have been forced to close.

The Covid-19 outbreak has also sparked a push for fair tenancy legislation, as retailers say the current struggle has brought the growing power imbalance to the fore.

SG Tenants United For Fairness (SGTUFF), an informal grouping of more than 700 tenants of private landlords formed in February, said it has been working with trade associations on recommendations for fair tenancy legislation and will have more to share on the issue soon.

The CCCS' survey is a welcome government effort that follows prolonged industry engagement on unfair tenancy terms that have become the norm, a spokesman for the group said.

Such clauses commonly found in tenancy agreements include restrictions on opening another outlet within 1km of a mall, allowing landlords to terminate leases early or relocate stores with no right to compensation and requiring tenants to provide monthly sales information to landlords.

Landlords often do not reciprocate with information on the mall's performance, SGTUFF said.

"So when it comes to negotiation for lease renewal, landlords always have a very clear upper hand in knowing exactly how to price up the rental charges based on their in-depth knowledge of the tenant's sales performance whereas tenants have almost zero leverage."

Property expert Christine Li, Cushman & Wakefield's head of research for Singapore and South-east Asia, said landlords should be mindful that it may not be easy to find replacement tenants in these uncertain times.

"As the Covid-19 pandemic is likely to be long-drawn, landlords may not wish to alienate or lose important anchor tenants or other key tenants, who may have long-term leases and who may not be easily replaced."

The outbreak should also serve as a wake-up call to retailers that had up to now refused to adopt a robust online strategy, she added.

She said: "It is imperative for landlords and tenants to work closely together in partnership for survival."

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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