Expanded Grace Period for Rents in Residential and Commercial Units: DTI Amended Guidelines

The Department of Trade and Industry (DTI) issued the Supplemental Guidelines on the Concessions on Residential Rents and Commercial Rents (Memorandum Circular No. 20-29) and the Amendment to Supplemental Guidelines on the Concessions on Residential Rents and Commercial Rents (Memorandum Circular No. 20-31). Here is a summary/discussion of the amended supplemental guidelines:

Supplemental Guidelines for 30-day Grace Period for Residential and Commercial Rents

AREAS COVERED; COMMUNITY QUARANTINE CLASSIFICATION

The supplemental guidelines on the 30-day grace period for rents cover areas under Enhanced Community Quarantine (ECQ), Modified Enhanced Community Quarantine (MECQ), and General Community Quarantine (GCQ). Areas under Modified General Community Quarantine (MGCQ) are not covered.

The 30-day grace period covers rents falling due within the ECQ, MECQ and GCQ periods. [Incidentally, the 30-day grace period for loans was not extended by the appropriate government agency.]

WHEN THE 30-DAY GRACE PERIOD STARTS TO RUN; BENEFICIARIES

The 30-day grace period applies to: (a) residential lessees; and (b) micro, small and medium enterprises or MSMEs; and (c) other business sectors whose operation is not permitted during the period of community quarantine. The supplemental guidelines explicitly provide that the grant of a minimum 30-day grace period shall start to run from any of the following events, whichever comes later:

  • (1) from the last due date; or
  • (2) from the lifting of the ECQ, MECQ and GCQ. 

This irons out the provisions in MC 20-29, which created quite a confusion. MC 20-31 removed the provision in MC 20-29 that the “grace period may be availed of by residential lessees who have lost their income during any of the community quarantine, or whose employer/s or business/es were not allowed to operate by laws/ regulations/ ordinances relevant to any covered community quarantine.” This provision gives the impression that residential lessees who still receive salaries are excluded from the benefit of the 30-day grace period. MC 20-31 also removed the provision to the effect that the 30-day grace period shall be counted from the date that such employment or business was allowed to resume, regardless of whether or not the lessee opts to go back to work or resume operation.

The next possible source of confusion is Section 3.3 of the Amended Supplemental Guidelines, which reads: “For commercial rents falling due upon MSMEs and sectors not permitted to operate during the ECQ, MECQ, and GCQ, the minimum thirty (30)-day grace period shall be from the last due date or from the lifting of the ECQ, MECQ, and GCQ, whichever is longer, without incurring interests, penalties, fees and other charges;” [Emphasis supplied] This might be interpreted to mean that MSMEs and other sectors which are allowed to operate during the ECQ, MECQ and GCQ period are NOT entitled to the 30-day grace period. The Amended Supplemental Guidelines should have clarified that the phrase “not permitted to operate” refers to other “sectors”. MSMEs, even if allowed to operate, are entitled to the 30-day grace period.

PAYMENT OF RENT AFTER 30-DAY GRACE PERIOD

Cumulative amount of rents falling due within any of the covered community quarantine, shall be equally amortized in the six (6) months following the end of the 30-day minimum grace period, without interest, penalties, fees, and charges, which amount shall be added to the monthly rent.

REQUIREMENT TO AVAIL OF 6-MONTH CONCESSION

MC 20-31 removed the requirement that in order to avail of the 6-month concession, the lessee shall provide the lessor a signed Promissory Note or letter, undertaking to pay the deferred rent/s in accordance herewith, and failure thereof shall make such deferred rents due and demandable immediately following the end of the minimum grace period of thirty (30) days.

P&L Law

13 thoughts on “Expanded Grace Period for Rents in Residential and Commercial Units: DTI Amended Guidelines

  1. AvatarRic Mallare

    If a residential lessee’s contract expires 30 days after the ECQ is the lessor allowed to enforce and terminate the lease contract?

    Reply
    1. pnlpnl

      Hi Ric. The guidelines cover the non-enforcement of eviction “for failure to pay the residential or commercial rent due.” The issue on expiration of the lease contract is subject to the negotiations of the lessor and lessee. The provision on non-enforcement of eviction under the Supplemental Guidelines was not removed: https://pnl-law.com/blog/supplemental-guidelines-on-the-concessions-on-residential-rents-and-commercial-rents-dti-memorandum-circular-no-20-29-full-text/

      Good luck.

  2. AvatarJohn

    All of which assumes individuals have the money to pay rent. Hard when lockdown means you can’t work.

    Assuming a standard rental contract of one months deposit and postdated checks if there is no force majeue clause and the lease was not registered with the Registry of Property can Article 1648 Chapter 2 Section 1 of the Civil Code of the Philippines be used to terminate the contract? If so can this be challenged in any way by the landlord?

    Reply
    1. pnlpnl

      Hi John. Agree on the first part (on the other hand, most likely the DTI had to balance the guidelines with the rights of the lessors — many of them rely on the rentals for day-to-day expenses). On the second part, kindly expound (anyway, the provision is material with respect to third parties, but not between the lessor and lessee).

  3. AvatarEunice

    Hi,

    If the tenant is unpaid before ECQ, totally no payment since November 2019 does this also fall under Bayanihan act wherein the lessor is not allowed to evict the tenant?

    Reply
  4. Avatarelly

    HI
    if the tenant is preterminating the lease contract by end of June, will the 6-month amortisation still apply? she owes 2-months rental.

    the DTI memorandum doesn’t state anything about preterm and the clause that says” the amortise amount will be added to the current rental payments” doesn’t apply anymore since there’s no succeeding rental payments to add on to.

    How can we allow PDCs until November when they are preterminating by this month? There’s a big chance the checks may bounce.

    can we safely assume the DTI ruling doesn’t apply to this case and revert back to the lease contract instead as “breach of contract?”

    appreciate your reply.

    Reply
  5. AvatarTiffany Gonzales

    Good afternoon. In case of a commercial tenant pre-terminating a contract, are we bound also to extend the 30 day grace period and 6 months amortization of the cumulative amount of rents falling due within covered community quarantine upon termination?

    Thank you very much.

    Reply
    1. AvatarAnne villa

      Hi!
      If the contract expired and we have given the tenant 6 months to look for new place, because we need to use the house. Am I breaking any Law if the province is under MGCQ? Thanks

  6. AvatarJoseph David

    Hi, Good Evening.

    I have a BPI cheque dated June 1, 2020 meant for payment of rent (residential) that went NSF and I was charged the P2200 service fee for NSF.

    Could I still recover the P2200 service charge?

    Thank you.

    Reply
  7. AvatarRene

    Hi,
    Does MC 20-31 cover the payment of HOA association dues/fees for condominiums? We have residential unit owners who do not want to pay association dues since 2012 or prior to COVID. They’re using the MC 20-31 or Bayanihan Act as a reason not to pay their past dues and current dues. Also, these unit owners have jobs right now. Any inputs?

    Reply
  8. AvatarKirby

    Hi! In this time of pandemic, our annual commercial lease contract will expire in Oct and we have informed our lessor ahead that we will renew the contract. We have requested for the same rate (no increase in rate) since we have had always paid on time. However, the lessor said that he will increase the rate (by 20%). Is this illegal, especially this pandemic that DTI issued memo 20-31? We are a small size company (MSME). And is the 20% a legal rate for rent increase? We are turning only one year with this lessor.

    Actually, we also requested from this lessor to follow the DTI’s memo of 30-day grace period from the end of the GCQ/MECQ/ECQ, but he insisted us to still pay every month since March. So we were forced to pay ahead every month until now. Any legal remedy/action we can take against this lessor?

    Thank you so much for your assistance.

    Reply

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