With the coronavirus (COVID-19) pandemic rapidly evolving, the Singapore government has moved swiftly to pass the COVID-19 (Temporary Measures) Act 2020 (Act) on 7 April 2020. This has a direct impact on hospitality businesses – both for guest room reservations, and MICE events and other functions.
The Act provides temporary statutory relief and protection for individuals and companies that have been adversely affected by the COVID-19 outbreak.
What it covers
The Act will cover:
- certain specified contracts (examples provided below) which were entered into or renewed on or before 24 March 2020 IF
- a party is unable to perform a contractual obligation that is to be performed on or after 1 February 2020 and such inability is to a material extent caused by a COVID-19 event (a subject inability); AND
- a notification for relief is sent by the affected party to the other party within the time limit to be specified in the regulations to the Act.
The contracts and obligations covered by the Act which are relevant to the hospitality industry are:
- short-term accommodation services / bookings for both international or domestic tourists
- lease or license of non-residential real estate (restaurants, bars, hotels, co-working spaces/offices)
- MICE contracts including for the provision of venue, accommodation, catering or other goods or services for attendees. This catches contracts for weddings, parties and other social gatherings, business meetings, conferences, seminars, exhibition, shows, sales and incentive events, sporting events etc.
- international carriage of passengers by sea or land
- entertainment, dining, catering
- tours and tourism-related goods or services for both international or domestic tourists
- promotion of tourism in Singapore or distribution for the purposes of trade or retail of products related to such tourism
What protection can be sought by affected party?
Despite anything to the contrary in law or a given contract, until after the expiry of the prescribed moratorium period (see below) or explicit withdrawal of notification for relief by the affected party, the counterparty CANNOT take legal action against the non-performing party on a qualifying contract, including:
- commencing or continuing an action in court or arbitration under the Arbitration Act against the non-performing party and/or its guarantors
- terminating a lease or licence of real estate where the subject inability is the non-payment of rent or other moneys
- re-entering or forfeiting under a lease or licence of real estate, or the exercise of any other right that has a similar outcome
- enforcing any security over real estate or movable property used for trade or business (e.g. equipment, machinery)
- making an application for winding up, judicial management, bankruptcy, appointment of a receiver or manager over any property, commencement or levying of execution or other legal process against any property of the non-performing party and/or its guarantors
- repossessing any goods under any chattels lease, hire-purchase agreement or retention of title agreement, where such goods are used for the purpose of a trade or business
At the same time, to protect the unaffected counterparty, the Act provides that any period of limitation prescribed by law or a given contract for taking action in relation to the subject inability is extended by a period beginning on the date of service of the notification for relief by the affected party and ending on the expiry of the prescribed moratorium (see below) or explicit withdrawal of notification for relief.
The Act does not affect other actions taken in relation to the subject inability, including an action pursuant to the Frustrated Contracts Act (Cap. 115) or a force majeure clause in the contract where applicable, so long as such other action does not conflict with the relief provided by the Act.
Specific relief for the hospitality industry
As mentioned above, the Act also specifies relief for the contracts specific to the hospitality industry.
For those, despite anything to the contrary in law or in a given contract:
- once the notice for relief is served by the affected party, the counterparty cannot forfeit any deposit (or part thereof) due to a subject inability, unless otherwise decided by the assessor as just and equitable. If the deposit was previously forfeited at any time between 1 February 2020 and the commencement of the Act, the counterparty shall restore the deposit or part of the deposit upon receipt of notice for relief of the affected party under the Act; and
- If the inability to perform the obligation in the contract on or after 1 February 2020 was to a material extent caused by a COVID-19 event, that is a defence to a claim for the payment of a cancellation fee under the contract in respect of the subject inability.
What does this mean for you?
- Hotels providing venues for MICE events, including weddings, parties and other gatherings, cannot retain the client’s deposit or charge a cancellation fee for postponing or cancelling the event as a result of COVID-19. Instead hotels may be required to refund deposits (after covering already incurred expenses for such event if any) or continue to hold the deposit if the event is postponed.
- Hotels cannot charge a cancellation fee for hotel bookings for guest stays from 1 February 2020 where those were cancelled as a result of COVID-19.
- Restaurants, bars, hotels, co-working spaces that operate as a tenant in leased premises (which must be approved or zoned for non-residential uses) – if any such business is unable to pay rent at any time after 1 February 2020 throughout the prescribed moratorium period due to the COVID-19 disruption, they are entitled to seek relief under the Act. Any enforcement action by landlords to enforce lease provisions for non-payment of rent, including to terminate a lease and evict the tenant, to take possession of the premises, exercise a right of forfeiture or exercise any other right with similar outcome, will be considered invalid under the Act.
How long will the moratorium last
The Act will provide temporary relief for 6 months, with a possibility of extension for a further 6 months.
At the end of the relief period, affected individuals and businesses are expected to fulfil their original contractual obligations.
What do you need to do in order to obtain relief
You must notify your counterparty that you are not able to perform your contractual obligations as a result of a COVID-19 event – being:
- the epidemic or pandemic itself, or
- the operation of or compliance with any law of Singapore or another country, or the order or direction of the Government or other public authority, that is made by reason of or in connection with COVID-19.
We expect this includes travel restrictions and bans and any other social distancing measures imposed by the Government to deal with the outbreak.
If there is a dispute
As one of the key factors for relief is that the inability to perform a contract must have been caused to a material extent by a COVID-19 event, there may be instances when disputes arise as to whether a particular contract or obligation is eligible for relief.
If there is a dispute, a counterparty can apply to the Registrar to appoint an assessor. When making a determination the assessor may, among other factors, take into account the ability and financial capacity of an affected party to perform the relevant obligation. The assessor may, among other things, require a party to take action or pay a sum of money to discharge any obligation under the contract. The assessor’s determination is binding on all the parties to the application and all parties claiming under or through them. There is no appeal from an assessor’s determination.
Update on control order
In connection with the Act, the Ministry of Health has issued a control order limiting the movement of people in Singapore in the hopes of reducing, delaying or otherwise controlling the incidence or transmission of Covid-19 in Singapore. The control order will remain in force from 7 April 2020 to 4 May 2020 (both dates inclusive) and during this period, the government may, if necessary, invoke its powers under the Requisition of Resources Act to requisition any land, property or services needed to contain Covid-19. These powers may include requisitioning buildings such as hotels and serviced apartments which are suitable for conversion into accommodation and care facilities in order to isolate individuals who are suspected or infected with Covid-19.
The speed of the government’s response indicates the government’s recognition of the impact of the virus on both individuals and businesses, including specifically those in the hospitality sector, and their continued commitment and support of those who have been adversely impacted.