The Department of Trade and Industry (DTI) released the guidelines on the concessions on residential rents, and commercial rents of Micro, Small and Medium Enterprises (MSMEs) that have ceased operations due to the Enhanced Community Quarantine (ECQ). Memorandum Circular No. 20-12 aims to provide Filipinos and businesses, particularly MSMEs, economic relief during the Coronavirus Disease 2019 (COVID-19) public health emergency (see Amended Supplemental Guidelines under DTI Memorandum Circular No. 20-31).
Note: IATF Resolution No. 33 dated 6 May 2020, and the Revised Omnibus Guidelines (as approved in Resolution No. 37 dated 11 May 2020) contains three revisions:
- The grace period is available in ECQ, MECQ and GCQ areas;
- In addition to residential and MSME rental payments, “sectors not permitted to operate during the said period” are now entitled to the 30-day grace period; and
- The grace period is: (a) 30 days from the last due date; or (b) until such time that the community quarantine is lifted, whichever is longer.
The minimum grace period is thirty (30) calendar days following the last due date of the rent which fell due within the ECQ (added: updated quarantine classifications). This is in accordance with Republic Act No. 11469, also known as the Bayanihan to Heal as One Act, authorizing a 30-day grace period for both loans and rents. In the Implementing Directives earlier issued by the President, the Department of Finance (DOF) was tasked to implement the 30-day grace period for loans (see DOF Implementing Rules and Regulations), while the DTI was tasked to implement the 30-day grace period for rents. MC 20-12, issued by the DTI on 4 April 2020, covers two types of rental payments: (a) residential; and (b) commercial.
A. 30-day Grace Period for Residential Rent
“Residential rent” means any amount paid for the use or occupancy of a residential unit, regardless of the mode and terms of payment. “Residential unit” refers to bedspaces, rooms, dormitories, apartments, houses, buildings, and/or land on which another’s dwelling is located used principally for residential or dwelling purposes.
A grace period, for a minimum of 30 days, is granted on residential rents falling due within the period of the ECQ, without incurring interests, penalties, fees, and other charges. The cumulative amount of rents falling due within the ECQ shall be spread out or equally amortized in the six (6) months following the end of the ECQ, and shall be added to the rents due on those succeeding months, without interest, penalties, fees, and charges.
[See also: COVID-19 Lockdown: Fortuitous Event or Force Majeure Exemption from Obligations]
B. 30-day Grace Period for Commercial Rent
“Commercial rent” means any amount paid for the use or occupancy of any other property used principally for commercial purposes, which denote any activity for which profit as the main aim or revenue is received. RA 11469 explicitly mentions only residential rent, and to cover commercial rents for MSMEs, the DTI cited the law’s declared policy on the “provision of safety nets to all affected sectors” and Republic Act No. 6977, otherwise known as the “Magna Carta for Micro, Small and Medium Enterprises (MSMEs)”.
A grace period, for a minimum of 30 days, is granted on commercial rents falling due upon MSMEs that have temporarily ceased operations within the period of the ECQ, without incurring interests, penalties, fees, and other charges. The cumulative amount of rents due within the ECQ shall be spread out or equally amortized in the next six (6) months following the end of the ECQ, and shall be added to the rents due on those succeeding months, without interests, penalties, fees, and charges. In summary, a business enterprise is entitled to the 30-day grace period if ALL the following are present:
- (1) The lease contract must principally be for commercial purposes, which denote any activity for which profit as the main aim or revenue is received.
- (2) The rent must fall due within the period of the ECQ.
- (3) The lessee must have temporarily ceased operations because of the ECQ.
- (4) The business enterprise must be a MSME, which refers to any business activity or enterprise engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans by exclusive of the land on which the particular business entity’s office, plant and equipment are situated, must have value of not more than P100 Million. To be specific: (a) micro enterprise – not more than P3,000,000; (b) small enterprise – P3,000,001 to P15,000,000; and (c) medium enterprise – P15,000,001 to P100,000,000. [See also: Micro, Small and Medium Enterprises: What Businesses are Considered MSMEs]
- (5) The MSMEs must have signified to their respective lessors their request for assistance by providing supporting documents, such as, but not limited to, financial statements as proof of enterprise size, and/or lease contracts as proof of tenancy.
The commercial rent for MSMEs is not waived even if they are not doing business during the ECQ. The payment period is merely extended, spread out over six months. Nevertheless, the lessors of commercial rents for MSMEs may, purely on a voluntary basis, extend greater generosity by:
- a. Totally or partially wave the commercial rents that are falling due during the ECQ.
- b. Grant reprieve or discounted amount of commercial rents due after the ECQ.
- c. Open for renegotiation the Lease Term Agreements with the lessees.
- d. Use other recourse to mitigate the impact of the ECQ to the MSMEs.
Lessors shall consider the liquidity and capability to pay rent of MSMEs in negotiating assistance to be granted. MSMEs may present their financial statements, cash flow projections, among others, as supporting evidence.
Common Provisions
No Refund on Rents Already Paid. Lessors are not obligated to refund residential and commercial rents paid by the lessees during the period of the quarantine. In such case, the lessor shall grant a minimum of 30-day grace period from the next due date of the residential/commercial rents without incurring interest, penalties, fees, and charges. [See discussion on post-dated checks: Bouncing Checks, Grace Periods and the Enhanced Community Quarantine]
Recognition of Voluntary Waiver from Lessors. Existing waivers on rental payments due provided by lessors, such as those in recognition of the closure of their lessees’ businesses during the ECQ, shall continue to be honored.
Non-Enforcement of Evictions. No eviction for failure to pay the residential or commercial rent due may be enforced within the 30-day period after the lifting of the Enhanced Community Quarantine.
Investigation and Penalties. Lessors who shall refuse to provide 30-day grace period to lessees shall be penalized with imprisonment of not less than 2 months or a fine of not less than P10,000, or both.
The DTI, through the Fair Trade and Enforcement Bureau (FTEB) or DTI Regional Offices, motu propio or upon complaint, shall issue a Notice of Violation against a lessor. The process may be initiated by a complaint filed before the DTI, either in person or electronically. The complaint shall contain the following information: (1) Complete name, residence address, and contact number of the lessor and the lessee; (2) Complete address of the residential or commercial unit concerned; (3) Date when the rental payment became due; (4) Narration of the relevant and material facts; and (5) Submission of documentary evidence, if any.
If the DTI finds merit in the complaint, it shall issue the Notice of Violation to the lessor, who will be required to submit a written reply within five (5) working days from receipt of notice, containing the following: (a) An explanation why or how the violation occurred or, if contested, the basis for disputing the violation; (b) Corrective actions that have been taken and the results achieved; (c) The date/s of when corrective action/s was/were fully achieved; and (d) Corrective actions to be taken to prevent recurrence.
Upon determination of the violation, appropriate criminal charge/s shall be filed against the lessor with the Department of Justice (DOJ), without prejudice to the filing of other administrative cases. [Full text of Memorandum Circular No. 20-12]
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What if our contract of lease will expire on April 30, and our lessor oblige us to vacate after ECQ. We have no pending unpaid rentals and utility bills. What will we do?
Hi Eula. The issue on renewal of lease contract is generally governed by the contact/agreement between the lessor and lessee. Good luck
Good evening Atty. Last March 30, we started moving out from our apartment although our supposed last day of rent is May 1, 2020. Halos 25% nalang po ng gamit namin ang natira sa apartment. Naabutan Lang ng lockdown Kaya hindi na nahabol ung iba. I told the landlady that we will try to get a vehicle pass Para matransfer mga gamit namin from Dalaguete to Oslob. But the LGU of Oslob didn’t provide us vehicle pass if not for medical reason. Today, the landlady asked me if we pursued the moving day today. But I told her we can’t coz it is impossible to get a vehicle pass if not for medical reason. Are we still going to pay our monthly rent Atty? What if the ECQ keeps on extending? Are we still obliged to pay eventho we are not staying there anymore?
Hi Maria. There are general provisions regarding rent, day-to-day or month-to-month extension, as the case may be. However, it might be counterproductive to get into those details. You may want to discuss this with the lessor and agree on an interim arrangement. Think of hotels, which allow, for a limited duration, guests to leave their baggage after checkout. Good luck.
Hi! We were supposed to leave our condominium here in Manila last April 7 because it was when our 1-year lease contract expired and we didn’t have any intention of renewing. On the same day, we were scheduled to transfer to a new apartment in QC which was already paid for with PDCs 1st week of March. Unfortunately, the ECQ was implemented and we weren’t able to relocate. After May 15, assuming Metro Manila transitions from ECQ to GCQ, are we then allowed to transfer to our new apartment (lipat bahay)? TIA for your reply.
Hi Eugene. That kind of movement should be allowed during GCQ (like when it was first declared in NCR in March). Still, we wait for updates from the IATF and other government agencies. Good luck.
Hi! My question is now that the ecq is extended until may 15 (let’s assume that the ecq will be lifted after may 15), and the 30 day grace period will run after that date. Meaning the billing for March – May will spread out for the next 6 months starting june – november (monthly rental plus the pro-rated billing from march-may)? Thanks in advance!
Hi Riz. The guidelines provide that all rent amounts falling due during the ECQ shall be covered by the grace period. If the ECQ covers 2 months, then the rent falling due in those two months will be pro-rated. Good luck.
Hi Atty,
Our landlord is difficult to deal with despite expressing our request (to discount our rental payment).
Further to this, our pdc is usually on the 29th of every month. Surprisingly, he deposited the check during ecq period. Can you please advise on how we can go about this?
Thank you in advance.
Shar
Hi Sharie. Please see this separate post: https://pnl-law.com/blog/bouncing-checks-grace-periods-and-the-enhanced-community-quarantine/
Good luck.
Hi atty, I am a lessor and our province ended its ECQ last April 30, hence we are now in GCQ. Only 1 rental fee fell inside the ECQ and the supposedly due date was April 5.
As per the memo “cummulative amount of rents..”. Is the memo still applicable even though there was only 1 unpaid rent? Can we also already ask our tenants to pay for their monthly fee considering the 30 day grace period for the month of April? Can we also ask them to pay for their May’s rent? Our tenants are mostly working from home and the fee is only around 3k per month.
I have already raised these questions to DTI however the answers I get seem to be just computer-generated ones.
Hoping for your answers atty. Thank you so much.
Hi Monica. Perhaps it would suffice to say that the grace period now covers both GCQ and ECQ. Please see the update in the post. Good luck.
Hi Atty. for a commercial unit, the rental payment is due every 28th of the month. My tenant provided me a notice to leave and terminate contract effective March 27. He was not able to move out because of ECQ. He moved out on April 27. He did not pay March 28th rent due to DTI’s 30-day grace period. Since he left on April 27, can I use his security deposit to cover the unpaid rent from March 28-April 27? or do I have to refund him his security deposit and bill him for the one month unpaid rent after ECQ/GCQ? Please advise. Thanks. Cynthia
Hi Cynthia. You have to check the lease contract. In general, a lease contract usually says the security deposit cannot be used to cover rent. Some lease contracts also provide that the security deposit covers any unpaid amount at the end of the lease contract, which may include any unpaid rent. Good luck.
Good morning Atty. The rent payment of my tenant for commercial unit is due every 1st of the month. The lease agreement will expire November 2024. The lessee provided me a letter that she wants to terminate contract on June 15 due to no business during this Covid19 pandemic. She has not paid her May 1 lease yet due to DTI’s grace period of 30days.
1. If I accept the termination, can I charge her for all the lease payment due thru November 2024? Is Covid19 part of fortuitous event and any damages in the unit?
2. If it considered a fortuitous event, on June 15, when she leaves, can I still use her security deposit for unpaid rent from May 1 to June 15 plus other damages in the unit?
Please let me know. Thanks.
Ben Ong
Hi Ben. You have to check the provisions of your lease contract. In our experience, lease contracts may or may not have a pre-termination clause (if pre-termination is not allowed, it usually states that the security deposit is forfeited). There should also be a provision on security deposit (the provision varies, but it usually covers all amounts due upon termination of the lease). Good luck.
Hi, Atty,
Halimbawa ay nagrerent po ako sa isang dormitory. Ang contract ay from January 5 to May 5, 2020. Meron po akong binayaran na 1 month deposit at 1 month advance. Since 1 month advance rent payment ang scheme,so bale nagbayad po ako nyan last nung March 5 (covering the period of March 5 to April 5).
Ngayon, nagdeclare ng ECQ nung March 17, e umuwi po muna ako temporarily sa aming bahay para di abutan ng lockdown (yung mga gamit ko ay iniwan ko muna to sa dorm at nasa akin parin po ang susi sa dorm na tinitirhan ko po niyan).
Eto po ang aking katanungan:
1. Marerefund ko pa ba yung advance rent payment ko na di naconsume from March 17-April 5 due to ECQ dahil umuwi na po ako sa amin nun ng March 17?
2. Yun po bang April 5 to May 5, babayaran ko pa po ba? considering na di po ako nag stay sa dorm.
3. Yung deposit ko po ba ay masosoli pa ba sa akin?
4. Just in case e yung lessor po ay magdemand ng payment para April 5- May 5, pwede po ba magamit na i-cover na pambayad yung 1 month deposit na ibinayad ko po?
5. Since ang ECQ po ay na extend ng until May 15, need ko pa po bang bayaran ang rent ko from May 5 onwards?
6. Kung babayaran ko po ng after ECQ, 6 months ko po ba ito babayaran via installment? considering e May 5 po ang expiration ng contract ko po?
Please enlighten me po Atty. Thank you po.
Hi Cris. Hindi rent condonation ang grace period. Kumbaga, naka-postpone lang ang pagbabayad ng rent. Mas mainam siguro na basahin mo rin ito: https://pnl-law.com/blog/covid-19-lockdown-fortuitous-event-or-force-majeure-exemption-from-obligations/
Good luck.
Hi! ECQ will be lifted on May 15 and GCQ will start on May 16.
I would like to ask if not allowed to open establishments, bars or beer houses etc, are still obliged to pay after 30 day grace period.
Thank you
Hi Nana. Perhaps you missed reading the Note in the second paragraph of the article. Good luck.
Hi! Thanks! Sorry I just want to be sure…
Does it mean that eg. last due date was May 4, 2020 30 days grace period will be given falling on June 3, 2020 unless it is not allowed to operate during GCQ then the 30 days grace period will start once it is allowed to operate?
Thank you.
Hi Nana. Whichever is longer: (a) 30 days from last due date; or (b) end of quarantine. The 30 days is counted from the due date, not the end of the quarantine.
i see thank you so much!!