Oct 09, 2014

    Guide to help SMEs beat rental woes in the works

    ONE of the country's leading business groups is drafting a framework to help small firms negotiate fairer tenancy agreements as a way to offset the crippling rent rises they face when renewing 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 transparent tenancy terms.

    It is intended to be a voluntary guide but the SBF wants landlords to be "pioneering adapters" of it, said Victor Tay, SBF chief operating officer, yesterday.

    The Jurong Town Council and Housing Board have already expressed interest.

    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 on commercial rents by the end of the year with the help of government agencies in a move to increase transparency.

    Many small and medium-sized enterprises (SMEs) have long complained about the impact of rising rents on their businesses.

    Low Cheong Kee, founder of local hardware chain Home-Fix, often deals with double-digit rent increases when he renews shop leases every three years.

    His experience with rising rents is one faced by many SMEs in the retail and food sectors. Rents can make up 30 per cent of a retailer's total costs, 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 Jimmy Fong, chief executive of Apple reseller 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.

    Teo Ser Luck, Minister of State for Trade and Industry, commended the SBF 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.