Deferment - Keyword to Note on the Temporary Measures Bill and Special Financial Relief Programme
Updated: May 12, 2020
Temporary Measures Bill
On 7th April 2020, the Temporary Measures Bill was passed in Parliament and this Bill seeks to offer temporary relief to business and also individuals, hence the name of the Bill. For the Covid-19 affected parties who cannot who are unable to fulfill the obligations in their contracts, that is entered before the 25th March 2020, This Temporary Relief Bill will be like. a lifeline for them. If the affected parties will temporarily be relieved from legal actions for up to 6 months and this Bill applies to obligations that needs to be performed after 1st February 2020. Do note that this bill is meant for businesses and commercial/industrial properties. It does not apply to residential leases.
The important word in this whole Bill is the word ‘Deferment’. As the word implies, the obligations are only deferred and not WAIVED. This means that the obligations will still need to be fulfilled at a later stage. For example, if a tenant did not pay his/her rent for 6 months, this amount of unpaid rental is not waived and the tenant will still need to pay up this amount after period of 6 months. Tenant can discuss with the landlord though on the repayment terms for this amount of money. So, what this Bill serves to do is to relieve the affected parties from the worries of legal actions taken against them and they can focus on bettering or organising their business to handle the effects of this Covid-19 pandemic.
In the event if there cannot be a common consensus between the parties involved, then a panel of Assessors will be appointed to handle the dispute and conflict. These assessors are professionals from the accountancy, legal, financial and other industries. The assessors’ decisions will be deemed final and no appeals will be considered. Neither party can engage the service of a lawyer to assist them in this case as well.
So, the thing to note is really that this is a temporary relief and meant for people who are really strapped in a situation where they have no ability to fulfill their contracts. If the ability to fulfill the contracts, such as paying up of rent, is there, then it might be better to just fulfill it as postponing payments to a later stage may also just mean a higher payment commitment later on and interests may also be charged.
Special Financial Relief Programme (Mortgages)
The financial industry together with Monetary Association of Singapore (MAS) has also came up with a relief measure and that is to help individuals affected by Covid-19. This measure is to help borrowers who are currently facing difficulties in the repayment of their residential mortgage loans, allowing them to defer or lower their monthly repayments up to 31st December 2020. The borrowers can choose to defer the principal portion of the monthly instalment and paying only the interests or they can choose to defer the full monthly instalment.
Once again, the important word to note is ‘Defer’. This again means that all outstanding amount that has been deferred will ultimately need to be paid up to the financial institutions. We will need to bear in mind that taking this step will mean that we will be paying more interests in total at the end of the day. MAS also encourages borrowers to discuss with their banks or finance companies on the available options and how will the repayment schedule be like and what are the interest costs.
With what is being shared, so is it really worth it to defer your payments under the Temporary Relief Bill or Special Financial Relief Programme (Mortgages)? Businesses generally need liquidity of cash flow and this are really good measures put in place to help those businesses and individuals who are facing cash flow problems. These measures will definitely relieve much load and stress off the shoulders and they can concentrate on getting their business back on track. But if there is no reason to do so, then of course it is really not advisable to defer any repayments as we will be paying more at the end of the day. So do weigh your pros and cons and also discuss with your banks or the other party who has gone into a contract with you that you cannot fulfill, on the repayment terms of the deferred amount before you make up your mind.
If you still have any more questions regarding the Temporary Relief Bill or the Special Financial Relief Programme (Mortgages), please feel free to contact SG Property Advisers for a non-obligatory online session.
** More information can also be found on https://www.mlaw.gov.sg/covid19-relief/faq and https://www.mas.gov.sg/-/media/MAS/resource/covid-19/FAQs-on-Repayment-Deferment-Resi-Property-Loans-for-Individuals.PDF