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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Dear Sir,
As part of our requirements in renting a commercial space here in Pateros, Metro Manila, we were required to issue 12 pcs. post dated checks for monthly rentals ( January 2020 to December 2020) . But the sudden lockdown of Metro Manila prevented us to fund the checks of April and May 2020.
We have contacted them on the last week of March to tell them not to deposit the said checks until quarantine is lifted which they’ve agreed on via FB. But to our surprise we were informed just today that the checks have been already deposited on June 8, 2020 (Monday) and as expected they were bounced due to our unfunded account.
What will we do? Are we going to face penalties? How about the Bayanihan Act which stated that we are not obliged to pay rentals yet during lockdown?
I hope you can help us with this issue.
Hi Allan. That’s unfortunate to hear. Please see this post: https://pnl-law.com/blog/bouncing-checks-grace-periods-and-the-enhanced-community-quarantine/
Good luck.
This is for salon renting in my mothers building space.Their due date is supposed to be on March 20. But the province undergoes ECQ on March 16. How should they pay for its due? How about for due on Apr 20, May 20? And the for June 20..by the way June 1-june 15 our province was on MGCQ
Hi Atty.Fred/PNL, Maraming Salamat po for providing us your opinion on our concerns. Malaking tulong po ito.
1. Since the Bayanihan Law expired on June 25, 2020 are the DTI Guidelines covering Residential & Commercial Rent also expired?
2. If Yes, only the Rents Due from the ECQ March 16,2020 until GCQ June 25,2020 will be covered?
3. If Not, will the DTI Renat guidelines still be valid if and when we change to Modified-GCQ (in NCR)?
Thank you.
How about the payment for Association Dues especially in Condominiums which uses the funds to pay services such as security, housekeeping, and maintenance. Is this covered by the expanded 30 days period? We are already in GCQ and I’m wondering if it’s legal to cutoff water supply (as per policy of HOA) for those who have not paid or settled their Association dues.
Hi, we are a commercial lessor (community mall). Not related to overdue payments but can we evict a lessee who does not follow a covid preventive measures such as not wearing a mask and still allowing dine it to full capacity? Please advise
Good day,
May tenant po kame na 3months na hindi nag babayad ng rent. then the tenant was given prior notice that we will renovate the unit and the unit will be used by my nephew. the tenant is not planning on leaving and spreading rumors that is is being forced out of the unit. any advice and remedy on the situation. Thank you
what about for commercial rentals wherein early termination of contract is not permitted, what can we do about this? we are a start up company and very much affected with this pandemic.
just wanna ask i have a computer shop business.. my contract is 4yrs. i wrote a letter to the admin requesting to allow me to stay and wait for the government to allow me to operate. however, they declined my request and said they need to rent out the unit. thus, resulted in me not finishing the contract.. i still have a 100k security deposit.. can i still get it? they said i couldnt anymore..
Good day.
Ask ko lang po my contact sa condo ended last June 3,2020. As per contract, after 3 months makukuha na po ang security deposit. However, until today February 19,2021 wala pa din po and after so many follow ups and phone calls lagi reason ng condo admin wala pa daw ang cheque from their finance. Masyado na matagal and hassle na pag follow up sa kanila, good tenant naman po ako and no utang. I have also asked for the breakdown ng security deposit ko baka kasi wala na I balik saken pero to no avail din. Can I send them demand letter na po ba? Report them sa baranggay?
Thank you.