On March 25, President Rodrigo Duterte signed into law the Bayanihan to Heal as One Act or RA 11469. Part of it is for landlords to “provide a minimum of 30-day grace period on residential rents falling due within the period of the Enhanced Community Quarantine (ECQ), without incurring interests, penalties, fees and other charges.”
This means that residential tenants struggling to pay their rent while under ECQ may not be required to settle their dues, as a means to ease the burden of those affected by the Luzon lockdown, especially by wage earners. This provision was recommended by Senator Grace Poe during the Senate’s special session last March 23.
SIMPLIFYING MEMORANDUM CIRCULAR NO. 20-12
The Department of Trade and Industry (DTI) released a set of guidelines on the concessions of residential rents and commercial rents for Micro, Small and Medium Enterprises (MSMEs). The memorandum aims to provide Filipinos and businesses some relief during the ECQ.
Residential rent. This pertains to the amount paid for the occupancy of a residential unit. This includes bedspaces, rooms, dormitories, apartments, houses, buildings, and/or land that is primarily used for residential purposes. The minimum grace period is 30 calendar days following the last due date of the rent which falls within the ECQ. The cumulative amount of rents shall be spread out or equally amortized in the six months following the end of the ECQ and shall be added to the rent dues on these succeeding months — without penalties, interest, fees, and charges.
Commercial rent. This pertains to the rent paid for the occupancy of any other property that is used for commercial purposes such as for profit or revenue. The 30-day grace period is granted on commercial rents falling due upon MSMEs that have temporarily stopped operations within the period of the ECQ, without incurring interests, penalties, fees, and other charges. Similar to residential rent, the cumulative amount of commercial rents due within the ECQ shall be spread out or equally amortized in the next six months following the end of the quarantine and shall be added to the rents due on those succeeding months without interests, penalties, fees, and charges.
A business enterprise is entitled to the 30-day grace period if all of the following are present:
- The lease contract must be for commercial purposes
- The rent must fall due within the period of the ECQ
- The lessee must have temporarily ceased operations because of the ECQ
- The business enterprise must be a MSME — to be specific: micro enterprise: not more than P3,000,000; small enterprise: P3,000,001 to P15,000,000; and medium enterprise: P15,000,001 to P100,000,000.
- The MSMEs must show their respective lessors their request for assistance by providing supporting documents, such as financial statements as proof of enterprise size, and/or lease contracts as proof of tenancy
The commercial rent for MSMEs is not waived even if they are not doing business during the ECQ. Nevertheless, the lessors of commercial rents for MSMEs may, purely on a voluntary basis, extend greater generosity by:
- Totally or partially wave the commercial rents that are falling due during the ECQ
- Grant reprieve or discounted amount of commercial rents due after the ECQ
- Open for renegotiation the Lease Term Agreements with the lessees
- Use other recourse to mitigate the impact of the ECQ to the MSMEs
The lessors should consider the liquidity and capability to pay rent of MSMEs in negotiating assistance to be granted. MSMEs may present their financial statements, cash flow projections, among others, as supporting evidence.
COMMON PROVISIONS IN THE MEMORANDUM
- No refund on rents already paid. Lessors are not obligated to refund residential and commercial rents paid by the lessees during the period of the quarantine. In such case, the lessor shall grant a minimum of 30-day grace period from the next due dateof the residential or commercial rents without incurring interest, penalties, fees, and charges.
- Recognition of voluntary waiver from lessors. Existing waivers on rental payments due provided by lessors, such as the closure of their lessees’ businesses during the ECQ, will still be honored.
- Non-enforcement of evictions. Eviction for failure to pay the residential or commercial rent due will not be enforced within the 30-day period after the lifting of the ECQ.
- Investigation and penalties. Lessors who refuse to provide 30-day grace period to lessees will be penalized with imprisonment of not less than two months or a fine of not less than P10,000, or both.
The DTI, through the Fair Trade and Enforcement Bureau (FTEB) or DTI Regional Offices, upon complaint, will issue a notice of violation against a lessor. The process may be initiated by a complaint filed before the DTI, either in person or electronically. The complaint should contain the following information: complete name, residence address, and contact number of the lessor and the lessee; complete address of the residential or commercial unit concerned; date when the rental payment became due; narration of the relevant and material facts; and submission of documentary evidence, if any.
If the DTI finds merit in the complaint, it will issue a notice of violation to the lessor, who will be required to submit a written reply within five working days from receipt of notice. The reply should contain the following: an explanation why or how the violation occurred or, if contested, the basis for disputing the violation; corrective actions that have been taken and the results achieved; the date/s of when corrective action/s was or were fully achieved; and corrective actions to be taken to prevent recurrence.
Upon determination of the violation, appropriate criminal charge/s will be filed against the lessor with the Department of Justice (DOJ), without prejudice to the filing of other administrative cases.