Lessors and lessees are stuck in a legal conundrum as to the interpretation of the previous circulars regarding residential and commercial rents during the imposition of community quarantines in the country.
On 04 April 2020, the Department of Trade and Industry (“DTI”) issued DTI Memorandum Circular No. 20-12 series of 2020 which provided for the Guidelines on the concessions on residential and commercial rents of MSMEs.
On 02 June 2020, DTI issued Memorandum Circular No. 20-29 series of 2020 providing for the Supplemental Guidelines on Residential Rents and Commercial Rents.
Below are the salient portions of the Circular which are vital as to concerns on residential and commercial rents during the imposition of community quarantines:
What are covered under DTI Memorandum Circular No. 20-29?
- Residential Rents: any amount paid for the use or occupancy of a building and/or land, houses, apartment/condominium/town house unit, dormitory, room or bed space primarily for residential or dwelling purposes, regardless of the mode and terms of payment.
- Commercial Rents: any amount paid for the use or occupancy of a building and/or land, store, or space for commercial purposes, regardless of the mode and terms of payment.
What rents are covered by the Circular?
- Due dates of residential and commercial rents falling within the period of the covered community quarantine which shall not be earlier than March 17, 2020 and not later than the lifting of the covered community quarantine
- For NCR:
- Enhanced Community Quarantine (“ECQ”): 17 March 2020;
- Modified Enhanced Community Quarantine (“MECQ”): 16 May 2020; and
- General Community Quarantine: (“GCQ”) 01 June 2020.
What does the term “community quarantine” include?
- ECQ, MECQ, and GCQ.
What are the rental concessions available under the said circular?
- Grace period of thirty (30) days; and
When is the commencement of the 30-day grace period to lessees?
- The granting of the 30-day grace period shall commence:
- From the lifting of the covered community quarantine, or
- From the date that the tenant is allowed to resume employment or business operation
- whichever comes first, without incurring interests, penalties, fees, and other charges.
- Amortization for six (6) months of cumulative rents which became due during the period of any of the covered community quarantine.
How will the cumulative rents be amortized?
- The lessee shall execute and sign a promissory note or letter, undertaking to pay the deferred rent/s.
- The payment of the amortized rents shall commence after the termination of the thirty (30)-day minimum grace period without penalties, fees, and other charges.
- However, if a residential lessee’s employer or a commercial lessee’s business has been permitted to operate pursuant to a presidential proclamation, IATF resolution, and/or relevant ordinances notwithstanding the imposed community quarantine, the commencement of the grace period shall be made from the date that such employment or business was allowed to resume.
- Kindly note that failure thereof shall make such deferred rents due and demandable immediately following the end of the minimum grace period of 30 days.
Who may avail of the rental concessions under the said circular?
- Residential lessees who:
- have lost their income during any of the community quarantines, or
- whose employer/s or business/es were not allowed to operate by law/regulations/ordinances relevant to any covered community quarantine.
- Commercial lessee whose business is among those not permitted to operate pursuant to laws, regulations, or ordinances relevant to any covered community quarantine.
What if rents falling due during the covered community quarantine were already paid by the lessee, is the lessor mandated to return the amount paid by the lessee?
- No, lessors are not obliged to refund residential and commercial rents paid by the lessees before or during the period of the community quarantine.
What are the reprieves that may be granted by lessors of commercial rents for MSMEs:
- Total or partial waiver of commercial rents falling due within the community quarantine imposed;
- Reprieve or discounts;
- Renegotiation of the lease term agreements; and
- Other recourses that may mitigate the impact of a covered community quarantine to the MSMEs
Can a lessee be evicted should he/she/it fail to pay the rental payment due?
- Yes, but only after the lapse of the period from March 17, 2020 to the end of the grace period granted by his/her/its lessor.
Should the lessor/lessee violate relevant laws, regulations, and/or ordinances, will he/she/it be liable?
- Yes, they may be held civilly, criminally, or administratively liable.
What can a lessor/lessee do should there be violations of DTI Memorandum Circular No. 20-29?
- Concerns and complaints may be brought before DTI personally or electronically. The following information is required:
- Complete Name/Residence/Email Address/ Contact Nos. of lessor and lessee;
- Complete address of the leased premises;
- Date when rental payment is due;
- Narration of relevant and material facts; and
- Supporting documents.
For further queries on this matter or other legal concerns, you may contact us from Mondays to Fridays, 9:00 AM to 6:00 PM, through our email: solutions@fbrtlawfirm.com.ph, and our website at https://fbrtlawfirm.com.ph/.
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