New Variant of ‘whichever is higher’ Surfaces in Singapore

Viruses are pesky organisms. We try ways and means to stop their evildoing yet somehow, they find new ways of showing up.

A new strain of the unfairavirus, referred to as B.4.444, or the suredie variant, started surfacing in Singapore.

The virus attacks leases of retail premises and attaches itself to the tenancy agreement in the form of a provision that stipulates:

Gross Rent = S$25psf + 1% GTO OR 20% GTO*, whichever is higher.

* GTO stands for Gross Turnover.

What makes ‘whichever is higher’ so deadly is that it allows landlords to systematically skim off the tenant’s rewards in times of good sales while absolving them of the risks and responsibility in times of poor sales.

Tenants who contracted the unfairavirus have to pay high base rents in lull months and significantly higher turnover rents in peak months. This resulted in many businesses in the food, retail and services sector having low or no retained earnings.

The virus compromises the immune system of the contracted tenants and leaves them highly vulnerable to adverse changes in the environment. Symptoms include gasping for cash within seconds of experiencing a sudden drop in sales.

For more than 9 months, the tenant representatives on the Fair Tenancy Protem Committee had fought hard to curb the spread of ‘whichever is higher’. This led to the enactment of the landmark Code of Conduct for Leasing of Retail Premises, stipulating that the rental formula must be based on a single rental computation throughout the lease term.

Business health officials now warn that the virus has morphed into B.4.444. The new strain looks like this:

Gross Rent = S$25psf + 10% GTO above S$50,000 GTO

While B.4.444 is no deadlier than ‘whichever is higher’, it has the ability to escape the scrutiny of the authorities as the current DisgraceTogether app may be unable to detect it as an unfairavirus variant.

With less than 10 days to the roll-out of the fair tenancy code of conduct on 1 June 2021, this recent development is a major setback to the business community in Singapore.

Tenants who are signing new leases or renewing existing leases are warned against letting their guard down. Entrepreneurs and business owners are reminded to wear their eyes at all times while they are out there trying to keep their business afloat during this pandemic.

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