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]
- Twin-Notice Rule and Procedural Requirements in Employment Termination Proceedings - June 3, 2020
- When Travel Pass is Needed for Interzonal Travel during Community Quarantine - June 1, 2020
- Can Companies Compel Employees to Work during the General Community Quarantine (GCQ) and Impose Disciplinary Sanctions - May 29, 2020
Hi. My sublease contract with my sub lessee expired in Apr 18. informed her of the expiry on apr 29. GCQ in our area started May 1 till now. Though there was a renewal clause, but since my pricipal lessor disallowed me to sublease further in my next contract, i did not renew my sublease contract with my subleasse. I advised her to vacate the premise May 11 but she refused. She said i could notdo that because of the bayanihan act. Did i violate it?
Hi Ben. Please check the article again and check the portion on the one-month “no eviction” period. Good luck.
Magandang araw po, tatanung ko lang po kung papaano po pala sa commercial space na computer gaming business, kasama po kaya kami sa mga i waive ang payment sa rent, maraming salamat po, stay safe po,
Hi Ronaldo. Salamat, stay safe din. Hindi waiver ang grace period. Extended lang at spread out ang payment terms. Good luck.
Hi! Just like to know if we can request for pre termination of our rent during the ECQ? All business been down and corporators agreed that we can no longer sustain at the moment the rent expense of our organization. We,re actually a starting NGO who depends solely on donations to fund our services. Is there any law on this that can help us out.
Hi Ms. Maga. This is primarily contractual in nature. Lease contracts usually have provisions on pre-termination and security deposit. The pre-termination clause may: (a) allow pre-termination for any reason, without any liability, provided there is notice; (b) allow pre-termination, but the security deposit is forfeited; or (c) does not allow pre-termination, and provides that the entire balance for the remaining lease period shall be due and demandable. We really don’t know how your lease contract looks like. Nevertheless, it is always best to discuss the matter with the lessor. They will understand, hopefully. You may also want to read this related post: https://pnl-law.com/blog/covid-19-lockdown-fortuitous-event-or-force-majeure-exemption-from-obligations/
We hope the lease discussion goes well. We also hope your NGO recovers. Good luck.
Sir I have a question a po, kung dalawa po kaming may work po kailan po ba namin bayaran agad nang bou yung upa sa bahay po? Samantalang kami nahinto din naman po kami sa pag ta trabaho simula nang ipatupad ang ECQ noong kailan lag kami nakapag trabaho ulit. Gusto kase pabayran nang bou agad2 yung upa sa bahay eiy.
Hi Marilou. Malinaw naman sa regulations na dapat staggered ang payment sa 6 months pagkatapos ng quarantine. Good luck.
pano naman po if the situation is we have no past due on our rent and meron pa nga kaming 1 month security deposit then starting last march 25 umalis kami ng said rental room dahil sa ECQ and lockdown and decided to just stay at our parents place and hindi namin na consume ang room for the months of April and May and the landlady said we should still pay for April and May even if di namin na consume and di na kami babalik. Ano po ba ang karapatan namin? kasi those months kasi of April and May even if we choose to get our things on our rented place it’s not possible kasi bawal ang movement from far away places only if you will buy food or medicine. and most definitely even though di namin siya na inform ahead of time na i susurrender na lang namin ang room namin we couldn’t tell her namn since we never thought na sobrang hahaba ang ECQ and ma uubos ang savings namin specially na no work no pay pa kami since april and may. Ano po ba ang karapatan namin? may karapatan bang i hold ng landlady ang gamit namin as collateral para magbayad kami or photocopy of valid id’s will just do? nagrarason kasi ang landlady na if we could have let her known na aalis na lang kami di sana bakante sana ang kwarto for a prospective renter na gusto mag rent. Pero questionable sa part namin kasi since April and May bawal ang movement at “mas uunahin pa ng mga tao ang maghanap ng marerentahan kahit halos lahat naka focus na maka survive ang family nila and to think na bawal ang movement kaya it’s close to impossible din na makakuha sila ng bagong renter na papalit dahil lang sa Pandemic issue” plus wala pa kami legal contract of agreement. please i really needed your counsel on this.
Hi Haiver. First off, we cannot give any legal advice. By way of general information, it is always best to negotiate the matter with the lessor. Worst-case scenario, the complaint/matter can always be referred to the DTI. Good luck.
Hi Atty.,
I would like to ask when will the grace period start? For example, we held all rental payments for April and May. We told our clients that we will arrange a deferred payment schedule for the months covered by the ECQ/MECQ which will start by July 2020 and the payment for June will be deposited as scheduled.
However, one of our clients is contesting the deposit of the payment for June. They said that according to the memo by DTI, they should be given 30 days (starting June 1) before we can deposit the payment for June. Meaning, we can only deposit their payment on July 1.
Can you help us in clarifying this situation? Thank you very much.
Hi JV. There are two reckoning points. First, 30 days from the due date, if the due date falls during the quarantine. Second, upon lifting of the quarantine. Choose whichever is the longer period. The 30 days is counted from the due date, not the lifting of the quarantine. Good luck.
Hello Atty,
I am a college student and my roommate ended her contract with our landlady around April 2020, meaning she would stop paying rent beyond May which is the expiry date of our contract. I myself planned on renewing my contract for midyear (June-July) thinking I still needed a place for when I process my documents if ever school ensued. She was told by my landlady that her belongings were to be stored away and boxed up if she were unable to retrieve them within the first week of June. Her reason was that new tenants were about to move into her bedspace around June. I was unaware of the landlady already offering up my roommate’s bedspace because she had not notified me at all; this was worrying as my belongings are exposed in the room. The landlady’s claim of incoming new tenants made us skeptic since quarantine has made travel very difficult and for school to resume was very vague. We are residents of Manila and our dormitory is in Baguio, imagine how difficult it would be to process documents just to claim our belongings in order to meet her grace period. I then also reaffirmed that I would be ending my contract instead of renewing. I confronted her how putting our stuff away seemed like an act of eviction for no longer paying for our bedspace for the month of June and I refused for her to store away my things. She reasoned that she would have to make the bedspace available for other tenants, and said the grace period was for leaving the belongings untouched was until June 5-7th as tenants would move in shortly after that. We could then claim it whenever as long as it was stored away. It should be noted that my roommate had paid her rent full. For my case, I asked to pay in person when I retrieve my things. But still, we weren’t occupying our bedspaces to accumulate utility bills so financially we aren’t staining her. She’s a well-known landlady who owns dormitories around the city. She was open to payment adjustments but she continues to barrage her lessees with deadline reminders in our group chat in messenger, even going as far as offering alternatives as to how we could send our payment (Mhuilleier, BDO online, etc.). As far as I know, IATF implemented guidelines wherein payments should could be made after the quarantine was lifted. She is extremely insensitive on that part neglecting how her lessees’ families should be prioritizing their own bills at home and their physical and mental well-being at that worrying over the rent and our belongings.
After a few days of my confrontation with her (which ended in her offering to talk to her lawyer’s secretary), my landlady notified that everyone of her lessees we will continue on our end of contract as of May 2020, which was initially its date of expiry. She also announced that she will not be renewing any contracts as school operations will not seem to continue as of now. She has given us the whole of June as a grace period for claiming our belongings and if we fail to do so by the end of the month, they will be “inventoried and set aside for safekeeping’. If this is now the case for everyone, I question why she still has to store away our belongings when they are safe in place. This also proved my skepticism as her rejecting contract renewals meaning the aforementioned tenants had vanished into thin air.
I am inquiring to see if my situation has valid concerns of my landlady violating IATF guidelines and if her actions are valid enough to submit a complaint to DTI. Thank you so much for your time and hoping for your response!
Hi Chelsea. This is a common issue; tricky issue. We’ll be posting a separate article on this. Drop by soon.
Hi, we have a tenant who was supposed to leave during the ECQ. They expressed their desire to vacate after the Contract expiration on April 30, 2020. However, they were not able to move out since it expired on April 30, 2020 during which Metro Manila was still under GCQ. Can they legally be charged rent from May 1 until they actually vacate the premises?
Hi Kaila. This is a common issue; tricky issue. We’ll be posting a separate article on this. Drop by soon.
Hello Atty. I was reading each comment to see if my question has been raised already. I found this (see below excerpt) similar to my situation and wanted to know if there has been updated post about this inquiry. In my case, my contract ended in Apr 30 but was not able to move out after that due to quarantine, so the lessor charged me monthly rental by not returning my security deposit.
Excerpt from previous comment:
Kaila Astorga
May 30, 2020 at 3:19 pm
Hi, we have a tenant who was supposed to leave during the ECQ. They expressed their desire to vacate after the Contract expiration on April 30, 2020. However, they were not able to move out since it expired on April 30, 2020 during which Metro Manila was still under GCQ. Can they legally be charged rent from May 1 until they actually vacate the premises?
Reply ?
pnl
June 1, 2020 at 11:49 am
Hi Kaila. This is a common issue; tricky issue. We’ll be posting a separate article on this. Drop by soon.
Hi atty,
we have lessee didnt pay rental yet since april 1 is her due date,2nd month is may is 2nd due date,it will be 3rd month on june 1,which GCq started.
are we still going to give 30days grace period atty if renter doesnt pay 3months already tomorrow.
We try to negotiate to pay this june 1 as her 3rd due date.we add the two months rental divide 6months.
but she said she cant pay.she can only pay the half rental from the basic rent.
Am i allowed to pre terminate the contract?give here notice to vacate the premises within 15days if shes not able to pay the rent?
please give me advise atty.as a am paying also many bills.
Hi nyvone. We can’t give any legal advice. Nevertheless, based on the guidelines, there is a no-eviction policy within 30 days from lifting of the community quarantine. This means that while either party can terminate the lease based on the grounds provided in the contract, no eviction can be done for 30 days from lifting of quarantine. Good luck.
Is lipat bahay from Taguig to Valenzuela allowed during GCQ ?
Thank you