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SMEs urge more government intervention

Small and medium-sized enterprises (SMEs) are urging the Singapore government to introduce a fair tenancy legislation, said the Singapore Business Federation (SBF).

They believe that such a law would provide greater rental transparency and help SMEs cope with growing commercial and industrial rents.

"Economies such as Korea, Belgium and Australia have legislated tenancy acts to protect tenants and small retailers, while the UK has both legislation and a voluntary code which consists of checklist and model lease templates to help tenants in lease negotiation and renewal. Singapore may wish to explore similar legislation or a fair consideration lease framework," said Victor Tay, chief operating officer of SBF.

At the SBF forum yesterday, these views were expressed when the close to 180 corporate leaders from various industries were polled on the many business pressures they currently face.

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Around 73 percent of the participants indicated that they were affected by lease terms and rental rates negotiations. When asked for measures which they believe will best promote the development of SMEs as well as minimise rental pressures, about 37 percent pointed to fair tenancy legislation, while 35 percent opted for a fair consideration lease framework.

These sentiments mirror the growing clamour for greater government intervention.

Kurt Wee, president of the Association of Small and Medium Enterprises (ASME) told the media that for the past 10 years, he noticed a shift towards a "very aggressive" model, where rent is based on a percentage of the tenant's turnover.

"I've come across lease agreements where landlords take as high as 28 per cent of (their tenant's) turnover - that's better than a shareholder, without even investing in the business!"

However, Minister of State for Trade and Industry Teo Ser Luck, said last month that the government will only intervene if it finds evidence of abuse of market dominance by any landlord. He added that the government plans to publish more comprehensive shop rental data later this year to make rental pricing more transparent.

Wee believes that the government could do more.

He said effective rent reporting should be mandatory under the fair tenancy legislation. He would also like to see a published set of recommended practices approved by the Competition Commission of Singapore in addition to a panel which will preside over leasing disputes.

"At the end of the day, (legislation would be) good for institutional landlords, because they will end up having more sustainable rental rates (since businesses won't fold as often), "Wee iterates, "We should stop churning asset prices to a level where they're not manageable, where it becomes a bubble."


Image source: sbf.org.sg

Christopher Chitty, Senior Content Producer at PropertyGuru edited this story. To contact him about this and other stories, email christopher@propertyguru.com.sg

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