Sudden change in rent policy requires businesses to pay sooner than expected

Employers and workers in essential businesses that closed shop during the lockdown are now suddenly required to pay their rent much sooner than everyone else, revised guidelines from the Department of Trade and Industry showed.

Moreover, this would also apply to non-essential businesses that were allowed by the government to open when the lockdown started being relaxed last month.

They have to pay their residential and commercial rent even if they opted to remain closed.

Trade Secretary Ramon Lopez signed the revised set of guidelines on Tuesday (June 2). A copy of the memorandum circular was released to reporters the same day.

The new rules are a sharp contrast from the support the DTI had tried to assure workers and businesses back in April, when they first released a set of guidelines deferring rental payments while on lockdown.

Back then, residents and businesses were told they would have a 30-day grace period after the quarantine before they have to start paying rent again.

Under the old circular issued last April 4, the total rent that businesses and residents would not pay during quarantine would be equally divided in the six months after the grace period ends.

But without the public knowing, the grace period had actually already started back in March in the case of essential industries and their workers, even if their employer decided it would be best not to open shop yet.

“This shall apply regardless of whether or not the lessee opts to go back to work or resume business operation,” read Memorandum Circular 20-29, which was released and signed on Tuesday.

It is not clear why the DTI revised its earlier guidelines.

Lopez, who earlier framed the deferment as a relief during the pandemic, did not respond to requests for comment as of late afternoon on Tuesday.

Not all essential businesses are huge businesses. There are small businesses too, like homegrown coffee shops that did not open shop even for deliveries because they could not afford the costs.

When asked for comment, Roberto Claudio, vice chair of the Philippine Retailers Association, said the new circular was “confusing and conflicting [with] the earlier guidelines on rentals issue during the lockdown.”

“The biggest confusion is why, all of a sudden, everyone is obligated by that memorandum to pay rental [fees] whether we were closed or not,” he said in a phone interview.

“I think that should apply only to those who opened and were operational and were getting revenues,” he said.

The impact of this sudden change would disproportionately harm micro and small businesses, he said, which like most other establishments, had no revenues for nearly three months now.

Claudio, chair and CEO of popular sports retail company Toby’s Sports, said medium and large companies might be in a better position to negotiate with their well-established landlords like popular malls.

Micro and small companies, however, usually rent commercial space from regular folk who also happen to be landlords, like an apartment owner, for example, he said.

“It’s going to create a lot of friction [between landlords and tenants],” he said, worried that this would cause a huge disruption and in some cases, even closure, especially of businesses that had no earnings during the lockdown.

Edited by TSB