DTI Releases Memorandum: Guidelines on the Concessions on Residential Rents; Commercial Rents of MSMEs
DTI released a memorandum on April 04, 2020, regarding the guidelines on the concession on residential rents and commercial rents of MSMEs. This is in response to the provision of RA 11469, otherwise known as “Bayanihan to Heal as One Act”, wherein it mandates property owners/lessors to give 30-days grace period on rentals falling due within the period of ECQ (Read: Real Estate Industry in Naga During ECQ), without incurring interest, penalties, fees, and other charges.
After RA 11469 took effect, DTI is tasked to specifically craft and enforce measures to provide the above-mentioned directive. DTI’s Memorandum Circular No. 20-12 is the department’s response on the directive containing all guidelines, in this regard. The circular’s objective is to provide economic relief during ECQ to Filipinos with residential rents and businesses with commercial rents.
The released memorandum of DTI is applicable to all residential rents regardless of the amount paid for the use or occupancy of the residential units, regardless of the mode and terms of payment. Residential units specifically refer to bed spaces, rooms, dormitories, apartments, houses, buildings, and/or land on which another’s dwelling is located used principally for residential or dwelling purposes.
Similar to the residential rent, the commercial rent means any amount paid for the use or occupancy of the commercial space, regardless of the mode and terms of payment, of MSMEs. Commercial space refers to land, offices, buildings, centers, shops, facilities, and any other property used principally for commercial purposes. Furthermore, the activity within the space receives revenue or the main aim is to gain profit.
Concession on Residential Rents
The cumulative amount of residential rents during the ECQ is equally amortized in the next 6 months following the end of ECQ. The amortized amount is added to the rents due to those succeeding months. The start of amortization is the next rent due date after the minimum 30 calendar days grace period following the last due date of the rent which fell due within the ECQ.
Concession on Commercial Rents for MSMEs
This is applicable only to those MSMEs who have temporarily ceased operations within the ECQ. The cumulative amount of commercial rents of MSMEs during the ECQ is equally amortized in the next 6 months following the end of ECQ. The amortized amount is added to the rents due to those succeeding months. The start of amortization is the next rent due date after the minimum 30 calendar days grace period following the last due date of the rent which fell due within the ECQ.
Given the due date of the rent is every 20th of the month and the rent rate is P 20,000 per month. The Luzon-wide Enhanced Community Quarantine was implemented on March 16, 2020, and is expected to end on April 30, 2020.
Given the above dates, two (2) rent due dates fall within the ECQ (March 20 & April 20) resulting in a cumulative rent amount of P 40,000. Dividing the amount by six (6), the monthly rental amortization is P 6,666.67 per month.
Start of amortization:
After the ECQ has been lifted on April 30, the 30 calendar days grace period starts on April 20 (last due date of the rent which fell due within the ECQ) and ends on May 20 (30th Calendar Day). Since May 20 is still within the 30-days grace period, the amortization will be added on the rent starting on June 20, 2020, until November 20, 2020. Therefore, the total monthly rental plus the amortization starting June until November is P 26,666.67.
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Lessors are not obliged to refund residential and commercial rents paid by the lessees during the period of the quarantine. However, lessors still need to grant the minimum 30-days grace period from the next due date of the residential/commercial rents without incurring penalties, interest, fees, and charges. In addition, MSME lessors may extend greater generosity by either totally or partially waive the rents that are falling due during ECQ; or give a discounted amount of the rents after the ECQ; or renegotiate the lease term agreements; or use other recourse to mitigate the impact of ECQ to the MSMEs.
MSMEs shall request from their lessors for assistance by providing supporting documentation as proof of enterprise size (Financial Statements) and lease contract as proof of tenancy. On the other hand, the lessors shall consider the capability to repay the rent of MSMEs in negotiating assistance to be granted.
Lessors cannot enforce eviction due to failure in paying the residential or commercial rent within the 30-days period after lifting of the ECQ.
Any violation of the released memorandum of DTI may be brought before DTI either in person or electronically containing the following information:
- Complete name, residence address, and contact number of the lessor and the lessee;
- Complete address of the residential unit or the commercial unit concerned;
- Date when the rental payment became due;
- A narration of the relevant and material facts; and
- Submission of documentary evidence, if any.
Lessors who shall refuse to provide 30-days grace period to lessees shall be penalized with imprisonment of not less than two (2) months or a fine, not less than ten thousand pesos (Php 10,000), or both.