ONE of the country’s leading business groups is drafting a framework to help local firms negotiate fairer tenancy agreements as a way to offset the crippling rent rises many face when they renew leases.
The framework being drawn up by the Singapore Business Federation (SBF) will spell out the general elements of a fair agreement, including a clear basis for rent reviews and more transparency of tenancy terms.
It is intended to be a voluntary guide but both commercial landlords and government agencies have been engaged to be “pioneering adapters” of it, said SBF chief operating officer Victor Tay yesterday.
The framework will also help tenants negotiate fairer gross turnover schemes.
These allow landlords to collect a percentage of a tenant’s gross turnover on top of a base rent and are used by many mall owners.
The SBF will also publish a database of commercial rents by the end of the year with the help of government agencies as a move to increase transparency.
Many small and medium-sized enterprises (SMEs) have long complained about the toll taken on their businesses by ever-rising rents.
Mr Low Cheong Kee, the founder of local hardware chain Home-Fix, is often confronted with double-digit rent increases when he renews shop leases every three years or so.
He is not alone: Rising rents are a huge drag for many SMEs in the retail and food sectors. Rents can comprise 30 per cent of total costs among many retailers, said the SBF.
Mr Low said he backs the SBF initiative because “tenants are in a way being held hostage” to rent increases when their lease is up and they have already “committed to renovation, or taken two to three years of tenancy to build up a relationship with customers”.
But Mr Jimmy Fong, chief executive of Apple reseller chain Epicentre, feels the framework lacks bite as it will not be mandatory.
“Landlords are big boys. You take it or leave it. And if most contracts are going to be the same, how can you work out a deal?” he added.
Mr Teo Ser Luck, Minister of State for Trade and Industry, commended the SBF’s initiative when he spoke to more than 300 participants at the annual SME Convention at Suntec convention centre yesterday.
“We want to make sure that… tenants aren’t always being cornered and landlords aren’t always having the upper hand,” he said.
Mr Teo later told the media that “the SBF is also not over-protective of the tenants, so it’s fair on both sides”.