FAQ on the Code of Conduct for Leasing of Retail Premises in Singapore
What is the Code of Conduct for Leasing of Retail Premises (CoC) in Singapore?
It consists of a set of guidelines and leasing principles to enable tenants and landlords of qualifying leases for retail premises to engage in fair and balanced lease negotiations. You may download a copy of the current version of the CoC in force here.
From 1 February 2024, compliance with the CoC will be mandatory for lease agreements covered under the Lease Agreements for Retail Premises Act. A copy of the CoC which will be in force from 1 February 2024 onwards is available here.
What is the Fair Tenancy Industry Committee (FTIC)?
It is a committee comprising tenants, landlords and neutral parties whose role is to ensure that the CoC remains relevant to businesses and there is compliance by the industry. The committee will also make recommendations to update or amend the CoC to be aligned with industry requirements. Tenants and landlords may submit feedback and declarations of mutually agreed deviations permitted by the CoC to the FTIC.
What is covered under the CoC?
The CoC is divided into four sections and covers the following:
- Conduct and Spirit of Negotiations
- How negotiations should be carried out in good faith.
- 13 Leasing Principles covering:
- Key Tenancy Terms.
- Confidentiality & Data Transparency requirements.
- Dispute Resolution & Enforcement of CoC
- Framework that has been put in place to provide parties with additional avenues of recourse in the event of non-compliance with the Code of Conduct.
When will the CoC be applicable?
Tenants and landlords will be able to file for deviations from the CoC and provide feedback on the CoC to the FTIC for lease agreements that are entered into on or after the effective date of legislation which is 1 February 2024. Negotiation for new and renewal leases are to abide by the CoC from 1 February 2024.
Can request be made for existing lease agreement or those signed prior to 1 Feb 2024 which is the effective date of legislation to adopt the guidelines of the CoC?
The CoC is not meant to be applied retrospectively. Existing lease agreements do not have to be amended to comply to the code. Any decisions to amend existing leases to comply to the code will have to be based on negotiations and mutual agreement between tenants and landlords.
For existing lease agreement that has an option to renew/extend the tenure, does the renewed/extended lease have to be CoC compliant?
The CoC will apply to leases renewed on or after 1 Feb 2024 unless the existing lease has a clause that specifies that all the contractual terms within the existing lease shall remain the same if parties decide to exercise the option to renew the lease. In such cases, the CoC need not apply to the lease agreement.
Alternatively, new terms that are CoC compliant may be negotiated for the purpose of renewal or extension of the lease agreement, even if there is an option to renew the lease based on existing contractual terms.
Does the CoC apply to lease agreements between landlords and master tenants?
The CoC applies to all leases of retail premises, or extensions and renewals of such lease, with a tenure of one year or more. Under the Act, retail premises are those that are used primarily for the retail sale of goods or the supply of services. qualifying leases, as provided in the Lease Agreements for Retail Premises Act. Non-exhaustive examples of retail premises are provided for in the CoC. For lease agreements between landlords and master tenants, the CoC shall apply as long as the intended ultimate use of the premises fall within the definition of retail premises under the Act (notwithstanding that the master tenant will be sub-leasing the premises to sub-tenants).
The CoC will also apply to retail lease agreements between master tenants and their sub-tenants if the premises fall within the definition of Qualifying Lease of Retail Premises.
Not all lease agreement clauses are covered under the CoC, how can we request to add new terms?
The Fair Tenancy Industry Committee will monitor the feedback received on the CoC. The CoC will be updated periodically to cater to industry trends and requirements.
Feedback may be submitted to email@example.com
Will the CoC be revised and when will it be revised?
The CoC will be updated periodically to cater to industry trends and requirements. The FTIC will be monitoring feedback on the CoC before deciding when revision of the CoC is required.
How do I know if a lease agreement is CoC compliant?
The party whose lease agreement template is used for the agreement will have to provide a checklist that clearly indicates:
- whether there are deviations from the leasing terms covered under the CoC (and if so, if these are mutually agreed to); and
- whether there are terms that are not applicable to the lease agreement.
The checklist template is available in the CoC (pages 36 to 39, appendix 1 of part D).
Parties must also conduct their due diligence to review their lease agreements to ensure that they are CoC compliant. Lease agreements shall be binding if neither party dispute against it within 14 days of signing the lease agreement.
How can a Party dispute against a lease agreement within 14 days of signing the lease?
Disputes may be escalated to the appointed dispute resolution body, Singapore Mediation Centre, whereby both parties must attend mediation sessions and comply with the resolution of the Singapore Mediation Centre.
What are considered Qualifying Lease for Retail Premises?
Qualifying Lease for Retail Premises are premises that are held under a lease agreement with a tenure of at least a year and used primarily for the sale of goods by retail or for the supply of services unless they are used primarily for the purpose of conducting administrative work in connection with the supply of services.
Does the CoC apply to lease agreements with tenure that are less than a year?
No, it applies only to lease agreements of Qualifying Leases for Retail Premises with tenures that are at least a year.
Does the CoC apply to renewal of lease agreements?
Yes, it applies to all Qualifying Leases for Retail Premises entering into renewal lease agreements.
Does the CoC apply for novation of lease agreements?
The CoC is applicable when a new lease agreement is formed through novation. The novation will replace the original lease agreement with a new one. If the original lease agreement was signed before the commencement date of the Act, and novated on or after 1 Feb 2024, the original lease agreement would not be subject to the CoC, but the new lease agreement would (if the remaining period of the lease is or exceeds one year).
Does the CoC apply for short term extension or temporary renewal of lease agreements?
The CoC is applicable for lease agreements of Qualifying Leases for Retail Premises, regardless of whether it is for extension or renewal. The CoC will not apply to short term extension or temporary renewal of lease agreements for lease tenure of less than 1 year.
Does the CoC apply to agreements and licenses of atrium/popup/pushcart rental?
The CoC will apply if it is for leasing of Qualifying Leases for Retail Premises. This can include atrium, pop-up and pushcart rentals, provided the lease tenure is at least one year.
Is the CoC compulsory for all lease agreements?
The CoC is applicable to all Qualifying Lease of Retail Premises entering into new or renewal lease agreements. All tenants and landlords involved in leasing of Qualifying Retail Premises are to abide by the CoC from 1 February 2024.
What if one of the parties insist on making changes to existing lease agreements to make it CoC compliant?
Existing leases that were entered into before 1 Feb 2024 do not have to be CoC compliant. Any changes to existing leases will have to be based on negotiations and mutual agreement between landlords and tenants.
What should I do if my lease agreement entered into on or after 1 February 2024 which is the effective date of legislation for Qualifying Leases for Retail Premises is not CoC compliant?
You may file a complaint against the other party with the Fair Tenancy Industry Committee or approach Singapore Mediation Centre to resolve the dispute or disagreement within 14 days of signing the lease agreement.
Please note that the effective date of 1 Feb 2024 refers to the date of the lease agreement and any letter of offer executed/signed from 1 Feb 2024 onwards. However, for letter of offer that was already signed before 1 Feb 2024, the lease can follow the old specimen so that the negotiated and committed clauses are aligned. CoC will not be applicable for such cases.
What are mutually-agreed deviations?
To cater towards the needs of tenants and landlords under exceptional circumstances that are beneficial to both parties, the CoC allows for deviations that both parties must agree to. The tenants and landlords must notify the Fair Tenancy Industry Committee by making a declaration to the committee. The four clauses that allows mutually agreed deviation are:
- Sales Performance
- Security Deposit
- Rental Formula
How do I make a declaration for mutually agreed deviation?
What can be done if both parties are unable to come to an agreement on a clause that allows mutually agreed deviation?
If disagreement happens before the lease agreement is signed, feedback may be shared with the Fair Tenancy Industry Committee. If the disagreement is after the signing of the lease agreement, the case may be escalated to the Singapore Mediation Centre within 14 days of signing the lease agreement.
What legal recourse is available to a party if the other is non-compliant with a leasing principle?
Under the Act, an aggrieved party can elect to file a complaint of non-compliance with an authorised dispute resolution body, if the signed lease agreement (i) does not comply with the leasing principles set out in the Code, or (ii) if a leasing principle incorporated into the lease agreement has not been complied with. He must do so within 14 days after (i) signing the lease agreement (or settlement agreement, where relevant), or (ii) the date of the alleged non-compliance. The complaint will then be dealt with through mediation, and if unsuccessful, through adjudication.
If the mediation progresses to adjudication, what can the adjudicator determine?
The adjudicator can vary the lease agreement to correct the non-compliance or he may order compensation that is in accordance with what is prescribed in the Code.
What is the process for filing an application for mediation or adjudication with Singapore Mediation Centre (SMC)?
Please refer to SMC’s website for more details.
Is it mandatory for tenants to integrate their Point-of-Sales (POS) system with the landlords upon request?
This is subjected to negotiation between tenants and landlords. If the tenants and landlords agree to integrate their POS systems, the cost of integration is to be shared equally between both parties.
In the event when both parties agree to the integration, but tenant is an existing tenant with existing POS system which is not compatible with landlord’s, the cost to purchase a new POS system and the cost for integration are also to be shared equally between both parties.
What if tenants refuse to integrate their Point-of-Sales system with the landlords?
Landlords and tenants are strongly encouraged to negotiate in the spirit of forming a symbiotic and collaborative relationship, and seek to see how each party’s requirements can be addressed.
If the landlord and tenant are charged separate costs by their respective vendors for their POS integration, can each party bear their own POS integration fee instead of a 50:50 co-sharing basis?
Yes. If mutually agreed, both landlords and tenants may pay for the POS integration fee charged by their respective vendors (on the same basis as POS maintenance fees).
Is the cost to purchase a compatible POS system for new tenants also shared between landlords and tenants?
New tenants that are required to integrate their POS system with landlords should purchase a compatible POS system at the onset, and this will be part of tenants’ business setup cost. For new tenants, only the POS system integration cost will be shared equally between landlords and tenants.
Cost to Prepare the Lease Agreement
If tenants make requests for changes to lease agreements that is already CoC compliant, are they required to pay for the amendments?
Yes, tenants will have to bear the cost (either in the form of legal fee or admin fee, but not both) for both the landlord and tenant, if they make request to make changes to a lease agreement that is already CoC compliant.
Third Party Costs
Can Landlords convey to Tenants the actual third-party costs later in emails rather than during the signing of the tenancy agreement (TA)? Landlords may not be able to provide the cost at the point of signing of TA.
All third-party costs which are to be borne by tenants must be clearly communicated upfront to tenants. Where the actual cost quantum is not known upfront, landlords can communicate an estimated quantum or a range of the expected quantum, and follow-up subsequently with the actual cost quantum when determined.
Sales Audit Fees
Can landlords request for tenants to provide an audited sales report if there is no gross turnover rent (GTO) component in the rent structure?
No. Submission of audited sales report is only required for tenants that have rent structures that includes GTO (i.e. only applicable when rent structure is percentage GTO rent or base rent + percentage GTO rent).
How will tenants with integrated POS systems and accepted statutory sales declarations by landlords be informed upfront about the audit fees for landlord’s requested audited sales reports, given that the fees may vary depending on the audit period?
Landlords will provide tenants a panel of auditors to choose from and must inform tenants of the fees upfront when the audit is requested. These fees will be shared on a 50:50 basis. Landlords must also provide an estimated fee for the audit.
What is the En-bloc Contestability Scheme for electricity charges?
This is when the landlords have obtained consent of all the tenants to purchase electricity for the entire premises. The selection of the electricity retailer and negotiation for the rates is done on behalf of all the tenants.
The landlords will be the master-metered account holders and will provide electricity to the tenants who are the sub-metered account holders. For more information on the En-bloc Contestability Scheme please refer to the Open Electricity Market website.
Can tenants request to procure their own electricity directly from electricity retailers?
Tenants may procure their own electricity from their preferred electricity retailer if the premises they are leasing is not on the En-bloc Contestability Scheme, as long as the existing physical infrastructure of the building can support this.
If the premises is on the En-bloc Contestability Scheme, tenants are unable to procure their own electricity from retailers.
How do we ensure that landlords who are on the En-bloc Contestability Scheme charges the tenants the same rates that are paid to the retailers?
Landlords are required to abide by the guiding principles to all chargeable costs, including electricity charges:
- There must be transparency, for example an upfront disclosure of chargeable third-party costs to the tenants must be made.
- The fees must be legitimate and justifiable in order to cover real costs (e.g. labour costs in coordinating work).
- There must not be profiteering.
The landlords must be able to justify the rates charged to tenants in cases of disputes.
Is there a cap on the administrative fees payable to landlords for providing tenants with electricity under the En-bloc Contestability Scheme?
There is no cap on the administrative fees charged by landlords. However, the administrative fees must be legitimate and reasonable. The spirit of the CoC is that there should be no attempts to unfairly profit or take unfair advantage of the other party.
The administrative fee must also be communicated upfront and tenants may negotiate with the landlords for a reasonable administrative fee.
What constitutes "reasonable administrative costs"?
Reasonable administrative costs are legitimate and justifiable costs incurred by the landlord in the administration of the bulk electricity purchase agreement (e.g accounting for conversion of high tension to low tension supply, billing etc). Such administrative costs will need to be communicated upfront to tenants.
I am leasing the premises of a building that is not on En-bloc Contestability Scheme. However, my landlord (a master tenant) is unable to allow my choice of electrical retailer due to a term in their head lease where electrical purchase is via an appointed third-party contractor. The head lease is signed before 1 June 2021, is my landlord being CoC compliant?
The Code of Conduct applies to Master leases for retail premises signed on or after 1 February 2024. The Head Lessor should review their Lease Agreement to comply to CoC at the earliest opportunity during a lease/rent review.
Can different administrative fee be charged to different tenant within the same building that is under the En-bloc Contestability Scheme?
The administrative fee charged should be the same for all tenants within the same building under the En-bloc Contestability Scheme, unless additional administration is required for the purpose of conversion between high and low tensile electricity. In such instances, all tenants that requires conversion between high and low tensile electricity should be charged the same administrative fee.
Advertising and Promotion Charge and Service Charge
How can landlords with leases of longer tenure manage their costs if there are increase in service and A&P charges but they cannot adjust the overall gross rent payable by tenant during the lease term?
For leases with longer tenure where escalating cost over time could be a concern, landlords and tenants may negotiate and provide for rental escalation over time in the lease agreement.
Would tenants be required to reinstate the premises to original condition if landlords pre-terminate the lease agreements for redevelopment works?
No. Tenants will not be required to do so, and also will not be required to make any payment in lieu of reinstatement.
In the event of redevelopment works, what are the conditions that landlords can pre-terminate the lease agreements?
Landlords are only entitled to pre-terminate the lease of any premises if the intention is to carry out substantial redevelopment, asset enhancement or reconfiguration works under the following conditions:
- If they intend to carry out substantial redevelopment works and requires
vacant possession of tenant’s premises. Not when it is for minor works.
- Give no less than 6 months’ prior written notice to tenant.
- Pay compensation sum based on the Agreed Declared Value of the Tenant’s Fit Out Capex Works.
- Inform tenant of proposed works when written permission from URA to carry out the redevelopment works is obtained prior to signing of the lease.
Under what conditions can tenants terminate their lease agreements early?
Tenants are allowed to pre-terminate under the conditions when:
- Business principal (i.e. the originator of the goods and/or services that the tenant has obtained the rights to sell the goods and/or provide the services which is being retailed at the premises) is insolvent; or loss of distributorship or franchise rights not due to non-performance or breach.
- Give no less than 6 months’ prior written notice to landlord and pay landlord a compensation sum equivalent to the security deposit amount.
- Tenant may request to assign the lease to a replacement tenant, subject to landlord’s approval.
Can landlord pre-terminate the lease as per Paragraph 4 of CoC if it is due to Government-initiated redevelopment works?
Paragraph 4 of the CoC clause applies to all pre-termination by landlords due to landlord’s redevelopment plans. For cases where it is purely and fully due to government redevelopment plans (e.g. land acquisition), landlords and tenants should work out a mutually agreeable compensation, taking into account (i) the compensation landlord is receiving from Government, and (ii) the principles on compensation in Paragraph 4 the CoC. In the event that the landlord is of the view that the compensation from the Government does not adequately cover compensation to be paid to the tenant(s), the landlord should work with the tenant(s) to bring the case up to relevant authorities to seek additional compensation.
If the landlord is agreeable with the estimated Tenant’s Fit Out Capex Works to be the Agreed Declared Value, is it still necessary for tenant to declare the actual value of the Tenant’s Capex Works to landlord in writing together with copies of all third-party invoices for verification and validation by landlord?
When the landlord accepts the estimated cost of Tenant’s Fit Out Capex Works as the Agreed Declared Value, the tenant need not be required to submit to the landlord the fit-out invoices for verification of actual expenses incurred. Compensation shall be based on the estimated cost as the Agreed Declared Value.
Can Sales Performance clause be included in standard lease agreements?
As a general rule, sales performance clauses (e.g. a clause which allows landlord to penalise the tenant in any manner, such as pre-termination of the lease, if the tenant does not fulfil a stipulated sales target) must not be included in the lease agreement.
On an exceptional basis, if both parties agree to include a sales performance clause in the lease agreement, such sales performance clause may be included in the lease agreement.
Material Adverse Change
Are clauses related to force majeure covered under the CoC?
While not mandatory, tenants and landlords are encouraged to re-negotiate the lease agreement in cases where the tenant is prevented, obstructed or hindered from performing its typical business activity at the leased premises due to events beyond tenant’s control.
For rent escalating rental structures and rental structures with GTO components, what should the maximum of 3 months for security deposit be based on?
For escalating rental structures, as long as the security deposit collected does not exceed three months gross rent of the highest rent amount of the lease term, it will be CoC compliant. Example: First year rent is $3,000, second year is $3,500 and third year is $4,000. As long as the security deposit collected does not exceed three months gross rent of $12,000, it is compliant.
I am currently collecting security deposit from a tenant that amounts to more than three months' gross rent. This is because my monthly rental amount is very low but I still need to safeguard against default risks and the cost of reinstatement. In this case, is there a need to file for deviation?
An exception will be made when the security deposit collected is $500 or less but exceeds the sum of three months’ gross rent. The need to file for deviation will be waived for such instances.
Floor Area Alterations
Is it compulsory to provide a surveyed area certificate for the premise on lease if the landlord and tenant mutually agree on the estimated floor area?
Landlord and tenant may mutually agree to forego the need to have a surveyed area certificate:
- for floor area of premises 300 square feet and below; or
- when both parties mutually agree to accept building plans from the relevant authorities as an alternative to a floor survey, provided that there are no revisions from the original plans.
Can the landlord pass on the responsibility of building maintenance or parts of building maintenance to the tenant/master tenant. (for example where tenant is a single user of the whole building or has exclusive use to parts of the building such as washroom, staircase, lift etc.).
Yes. If the responsibility of maintenance of the building / parts of building is mutually agreed to be undertaken by the tenant, such commercial terms can be negotiated and the areas of maintenance by the landlord and/or tenant are to be specifically stated in the lease agreement. CoC’s leasing principle on building maintenance will not apply if such an agreement in the lease is included. The landlord shall indicate “Not Applicable” in CoC checklist’s leasing principle on “Building Maintenance”.
Is the landlord still liable for building maintenance when it is not their responsibility (examples: responsibility is assigned to the master tenant, or the landlord is an owner of a single unit of a strata titled mall)?
The clause on building maintenance applies for cases where the landlord is responsible for the maintenance of the building and there is gross negligence or wilful default on the part of the landlord. For cases where the landlord is not responsible for the maintenance of the building, the clause would not apply.
Is rental formula of charging base rent and percentage of GTO when sales figures exceed a specified amount compliant with the CoC (example: S$X psf + Y% of GTO above S$Z pm)?
The CoC’s guiding principle of reciprocity when applied to rent formula, would mean the sharing of both upside gains and downside risks of tenant’s monthly sales, if the rent formula contains any turnover element. In the example given, the landlord benefits from increased sales from the tenant but does not share in the downside risks when sales drop. Therefore, it is not CoC compliant, and deviation will have to be filed if this is the mutually agreed rent formula.
In general, the following types of rent formulas are CoC compliant:
- Fixed rental with no GTO – e.g. $X psf, or $Y per month.
- Rental with GTO component that applies from the first dollar of GTO – e.g. Y% of GTO, or $X psf + Y% of GTO.
Any rent formula that requires tenants to pay a higher total rent on account of a higher GTO, but not a lower total rent when GTO is lower, is not CoC compliant as these are effectively “whichever is higher” rent formulas. Mutual agreement and declaration to FTIC would be required for non-CoC compliant rent formulas.
What are the types of data that landlords must furnish if they are collecting sales data from tenants for computation of rental?
Landlords who collect sales data from tenants to compute rental based on Gross Turnover must share sales data by trade category on a confidential basis before new lease is signed. For existing tenants, the data must also be shared on a bi-annual basis. For reasons of confidentiality, sales data will not be shared where the number of tenants for the relevant trade category is less than 3.
An example of the type of data to be shared can be seen in the table on page 33, para 1 of the CoC – trade category, no of units, total monthly sales turnover, etc.
Filing Declarations of Deviations
What avenues do tenants and landlords have to share their feedback on the Code after the Act has been passed? Will there be dedicated avenues for feedback and discussions in the industry and among stakeholders to ensure the relevance of the code?
The Code is a living document and will continue to be maintained and updated by the FTIC, based on feedback from stakeholders and changing industry needs. Feedback and enquiries can be submitted through the FTIC website. Alternatively, the FTIC can be contacted by email or phone. Landlord and tenant representatives may also reach out to the FTIC via their TACs or business advisors.
How much is the filling fee?
A Filing fee of $100 per deviation (excluding GST) will be imposed from 1 Feb 2024. Landlord will pay for the fees first when filing for the declaration on the FTIC website, and landlord and tenant must share the filing fees on 50:50 basis.
How easy is it to file a deviation?
The FTIC website has a link to the user-friendly online portal that landlords can use to submit their declarations of deviation. It utilizes SingPass-integrated login, and also includes streamlined forms for the landlord to enter tenancy details and reasons for deviation. A filing is done once the landlord has completed this step. After submission by a landlord is done, the declaration will automatically be routed to the tenant to review and acknowledge the landlord’s submission.
The FTIC website also has a guide to file a deviation, which states that both parties can authorize a 3rd party with NRIC/FIN to file or acknowledge the joint declaration.