The Enhanced Community Quarantine (ECQ), currently in effect, restricts movement of people and the operations of certain businesses. This restriction, as a consequence, impairs the ability of many individuals and business owners to comply with rental obligations. Republic Act No. 11469 or the "Bayanihan to Heal As One Act" (RA 11469) and Department of Trade and Industry (DTI) Memorandum Circular No. 20-04 dated 15 March 2020 (DTI MC 20-04) contain provisions on rental payments. We anticipate that additional regulations will be issued in the coming weeks. As of 2 April 2020, the guidelines for rental payments during the effectivity of the ECQ are as follows:
RA 11469 authorized the President to provide a minimum 30-day grace period for the payment of residential rents falling due within the period of the ECQ without incurring interests, penalties, fees and other charges1. The relief that the President may grant is limited to suspending the payment of rent, not waiving the same.
In the Memorandum dated 28 March 2020 from the Office of the President, the President delegated to the DTI Secretary the authority to suspend payment of residential rents. At present, the DTI has yet to release its position in relation to the suspension of payment of residential rents.
2. Retail stores / establishments located inside malls in the National Capital Region (NCR)
Prior to the enactment of RA 11468, the DTI issued DTI Memorandum Circular No. 20-04. DTI MC 20-04 provides that mall operations in the NCR shall be limited to establishments offering basic necessities such as groceries, supermarkets, banks, pharmacies, health clinics, bookstores, hardware stores and food stalls.
For retail stores and establishments located inside malls in the NCR which are not allowed to operate during the general community quarantine, the DTI directed the lessors and owners of business spaces to waive the corresponding rentals fees and charges for 15 March 2020 to 14 April 2020.
3. Leisure and Entertainment Businesses in the NCR
Under DTI MC 20-04, certain businesses offering leisure and entertainment are not allowed to operate during the ECQ, namely:
- places of amusements that serve alcoholic beverages such as night clubs, bars, taverns, cocktail lounges, discotheques, beer parlors and pubs;
- arts, entertainment and recreation activities/places such as live performances, events or exhibits intended for public viewing, art galleries, concerts and opera or dance production, operation of concert and theatre halls and other arts; and
- gambling facilities such as casinos, bingo halls, and video gaming terminals and the provision of gambling services such as lotteries and off-track betting.
The DTI directed the lessors and owners of business spaces to waive the corresponding rentals fees and charges from 15 March 2020 to 14 April 2020.
4. All other businesses / establishments / offices that are closed and/or not allowed to operate during the ECQ
For all other businesses, establishments and offices that are not covered by DTI MC 20-04, even if they are closed and/or are not allowed to operate during the ECQ, payment of rental is not suspended and/or waived, as of this time under any of the ECQ guidelines, although there may be remedies under the relevant lease contracts or other applicable laws/regulations (see our related client alert here).
Certain local government units, including those of Las Pinas, Muntinlupa and Paranaque, have requested lessors of commercial establishments located in the respective cities to waive the corresponding fees of all lessees for at least one month. However, it appears that none of the issuances requires mandatory compliance from lessors.
Actions to Consider
Affected businesses and/or individuals should determine if they or their business qualify for waiver of rental payments whether under DTI MC 20-04 (e.g., for establishments located in malls, leisure establishments) or issuances that may be issued subsequently.
1.1 Consider any actions / statements already made by lessor granting specific and immediate relief (e.g., certain lessors / mall owners already made public announcements regarding the waiver of rental payments).
1.2 Seek confirmation from the lessor regarding the waiver of rental fees and charges for the relevant period.
- Review, identify and consider applicability of any contractual clauses or general legal provisions that allow for certain relief as a result of the pandemic or other government regulations or restrictions.
- Consider reaching out to lessor to request to negotiate a mutually agreeable course of action on rental payments during the period of ECQ.
1 Section 4 (aa).