[On 4 April 2020, the Department of Trade and Industry (DTI) issued the “Guidelines of the Concessions on Residential Rents; Commercial Rents of MSMEs,” pursuant to the Bayanihan to Heal as One Act. See the summary of grace periods for rents or loans; updated quarantine classifications; and the supplemental guidelines per DTI Memorandum Circular No. 20-29.]
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MEMORANDUM CIRCULAR NO. 20-12
Series of 2020
SUBJECT : GUIDELINES OF THE CONCESSIONS ON RESIDENTIAL RENTS; COMMERCIAL RENTS OF MSMES
DATE : 04 April 2020
WHEREAS, Presidential Proclamation No. 922, Series of 2020 was issued declaring a State of Public Health Emergency throughout the Philippines in view of the Coronavirus Disease 2019 (COVID-19) and raised the Code Alert System for COVID-19 to Code Red Sublevel 2;
WHEREAS, Presidential Proclamation No. 929, Series of 2020 further declared a State of Calamity throughout the Philippines and imposed an Enhanced Community Quarantine throughout Luzon from 17 March 2020 to 12 April 2020, unless earlier lifted or extended by the President as circumstances may warrant;
WHEREAS, Republic Act (RA) No. 11469 declared the existence of a National Emergency and a national policy in connection with the COVID-19 situation.
WHEREAS, pursuant to Article VI Section 23(2) of the 1987 Constitution, RA 11469 authorized the President to exercise powers that are necessary and proper to carry out the declared national policy, and adopt temporary emergency measures to respond to the crisis brought about by the pandemic for three (3) months;
WHEREAS, Section 4(aa) of RA 11469, otherwise known as the “Bayanihan to Heal As One Act” mandates for a provision of “a minimum of thirty (30)-day grace period on residential rents falling due within the period of the enhanced community quarantine, without incurring interests, penalties, fees, and other charges.
WHEREAS, under RA 11469, refusal to provide thirty (30)-day grace periods provided under Section 4 thereof shall be punishable with imprisonment of two (2) months or a fine of not less than Ten thousand pesos (10,000.00) but not more than One million pesos (P1,000,000.00), or both, such imprisonment and fine, at the discretion of the court;
WHEREAS, Section 3 of the same law declares as policy during the COVID-19 pandemic the “provision of safety nets to all affected sectors” and “partner with the private sector and other stakeholders to deliver these measures and programs quickly and efficiently”.
WHEREAS, pursuant to RA 11469, the Office of the Executive Secretary under the Office of the President issued the Memorandum dated 28 March 2020 entitled “Implementation of Temporary Emergency Measures under Republic Act (RA) No. 11469, Otherwise Known as the Bayanihan to Heal as One Act” (“OP Memorandum“) ordering the whole of government to work together towards to provide temporary economic relief of Filipinos, among others;
WHEREAS, by virtue thereof, the OP Memorandum tasked the Department of Trade and Industry (DTI) to specifically craft and enforce measures to provide for a minimum of thirty (30)-day grace period on residential rents falling due within the period of the enhanced community quarantine, within incurring interests, penalties, fees, and other charges;
WHEREAS, Section 2 of RA 6977, as amended, otherwise known as the “Magna Carta for Micro, Small and Medium Enterprises (MSMEs), declares that “the policy of the State to promote, support, strengthen and encourage the grown and development of MSMEs” and “the State shall recognize the specific needs of the MSMEs and shall undertake to promote entrepreneurship, support entrepreneurs, encourage the establishment of MSMEs and ensure their continuing viability and growth”;
WHEREAS, Section 3 of the same law defines MSMEs as “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 falling under the following categories:
- micro : not more than P3,000,000
- small : P3,000,001 – P15,000,000
- medium : P15,000,001 – P100,000,000
WHEREAS, on 16 March 2020, the Office of the Executive Secretary issue a Memorandum on “Community Quarantine over the Entire Luzon and Further Guidelines for the Management of the Corona Virus Disease 2019 (COVID-19) Situation”, declaring an Enhanced Community Quarantine (ECQ) in Luzon and limiting operations to private establishments providing basic necessities;
WHEREAS, commercial establishments forced to cease operations covering the date of the ECQ will be under financial distress due to the lack of revenue while maintaining overhead commitments;
WHEREAS, the Inter-Agency Task Force for the Management of Emerging Infectious Diseases Resolution No. 18 Series of 2020 dated 01 April 2020, authorized the Department of Trade and Industry (DTI) to issue guidelines to implement a directive for “a thirty (30)-day grace period to commercial rents falling upon micro, small and medium enterprises (MSMEs) within the period of the ECQ, without incurring interest, penalties, fees, and other charges.:
WHEREFORE, the foregoing considered, this Memorandum Circular (MC) is hereby issued for the information, guidance and strict compliance of those concerned.
Section 1. Objective. – This Memorandum Circular aims to provide Filipinos and businesses particularly MSMEs, economic relief during the COVID-19 public health emergency.
Section 2. Scope. – The provisions hereof shall be granted to (1) residential rents, and (2) commercial rents of MSMEs, as defined by RA 6977, as amended, that have ceased operations due to the ECQ.
For purposes of this MC, “residential rent” shall mean any amount paid for the use or occupancy of a residential unit, regardless of the mode and terms of payment.
“Residential unit” shall refer to bedspaces, rooms, dormitories, apartments, houses, buildings, and/or land on which another’s dwelling is located used principally for residential or dwelling purposes.
On the other hand, “commercial rent” shall mean 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.
Section 3. Concession on Residential and Commercial Rent –
3.1. Concession on Residential Rents. – A minimum of thirty (30)-days grace period shall be granted on residential rents falling due within the period of the ECQ, without incurring interests, penalties, fees, and other charges.
Where cumulative amount of rents falling due within the ECQ, shall be 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.
3.2. Concession on Commercial Rents for MSMEs. – A minimum of thirty (30)-days grace period shall be 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.
Where cumulative amount of rents due within the ECQ, shall be 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.
3.3. Determination of the 30-day grace period. – The minimum thirty (30)-days grace period is determined to be the 30 calendar days following the last due date of the rent which fell due within the ECQ.
3.4. 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. Notwithstanding this provision, 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.
3.5. Other Concessions for MSMEs. – Notwithstanding the above, the lessors of commercial rents for MSMEs who wish to extend greater generosity may:
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.
Section 4. 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.
Section 5. Eligibility for Concessions. – MSMEs shall signify 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.
Section 6. Considerations for 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.
Section 7. Non-Enforcement of Evictions. – No eviction for failure to pay the residential or commercial rent due may be enforced within the thirty (30)-day period after the lifting of the Enhanced Community Quarantine.
Section 8. Complaints. – Any violation of this MC may be brought before the DTI either in person or electronically.
The complaint shall contain the following information –
- Complete name, residence address, and contact number of the lessor and the lessee;
- Complete address of the residential or commercial unit concerned;
- Date when the rental payment became due;
- Narration of the relevant and material facts; and
- Submission of documentary evidence, if any.
Section 9. Enforcement. – 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, who will be required to submit a written reply within five (5) working days from receipt of notice, containing the following –
- An explanation why or how the violation occurred or, if contested, the basis for disputing the violation;
- Corrective actions that have been taken and the results achieved;
- The date/s of when corrective action/s was/were fully achieved; and
- 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.
Section 10. Penal Clause. – As provided under Section 6(e) of RA 11469, lessors who shall refuse to provide 30-day grace period to lessees shall be penalized with imprisonment of not less than two (2) months or a fine of not less than ten thousand pesos (Php 10,000.00), or both, such imprisonment and fine, at the discretion of the court.
Section 11. Separability. – The provisions of this MC are declared to be separable and if any provisions or the application thereof is held invalid or unconstitutional, the validity of other provisions shall not be affected.
Section 12. Effectivity. – Given the presence of a public health emergency, this Memorandum Circular shall take effect immediately upon its publication and filing with the University of the Philippines Law Center.
Issued this 4th day of April 2020 in Makati City, Philippines.
Approved:
RAMON M. LOPEZ, Secretary
- Extension of Filing Periods and Suspension of Hearings for March 29 to April 4, 2021: SC Administrative Circular No. 14-2021 (Full Text) - March 28, 2021
- ECQ Bubble for NCR, Bulacan, Cavite, Laguna and Rizal: Resolution No. 106-A (Full Text) - March 27, 2021
- Guidelines on the Administration of COVID-19 Vaccines in the Workplaces (Labor Advisory No. 3) - March 12, 2021
Is there a memorandum, for cancelled booked events like birthdays, wedding, debut and social gathering within the ECQ period? That we already prepared and spent time and effort already.
Hi Precy. That’s a great question. Unfortunately, it’s not covered by the covid-related regulations. The general law governs, including provisions on “fortuitous events” or “acts of god” in the Civil Code. Perhaps we can have a separate post for that topic. Good luck.
Received a letter from our lessor already asking for payment for the month of May2020 at 50% discount following the 30day grace period and the 6mos spread even though ECQ was extended til May15. Lessor justified that je has loans to aettle. Can this appear to preempt the situation evem though our business has not resumed operations since the lockdown. Can we still negotiate the rent rate and the grace period since the 30day grace does not guarantee full recovery from the financial impact.
Hi James. Strictly speaking, the grace period is yet to run (because the ECQ has been extended). On the other hand, purely on a business standpoint, the 50% discount looks tempting. Note that the regulation, in fact, expressly provides that the lessee may still choose to pay. It’s understandable that lessors will look for creative ways to generate income during the ECQ period. The 50% discount is definitely a creative way to “encourage” tenants to make payments (even if entitled to the grace period). Good luck.
Hi, so the MC 20-04 released last March 15 stated that closed business establishments’ rent in NCR should be waived. But here in the MC 20-12, it states that it should be given a grace period only for atleast 30 days or amortized by atleast 6 months without interest. Which MC should we follow??
Hi Hayb. You raised a great point. It seems that MC 20-04 didn’t factor in RA 11469, while MC 20-12 already factored it in. This is probably the reason why MC 20-12 provides that: “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.”
There are important distinctions to consider. MC 20-04 applies only in the NCR, while MC 20-12 applies nationwide. MC 20-04 applies only to specific businesses enumerated in 2.1 (2.1.1, 2.1.2 and 2.1.3); while MC 20-04 applies to all residential and commercial rents.
My commercial space rent falls every first of the month–advance payment. The last time I paid was March 3. I close operation just in time with the Community Quarantine on March15. I am next due in April 1. How can I avail of the 30-day extension, when my next due [following the 30-day] would be in May 1. It seems that the reprieve is not in anyway helpful as the rent accumulates by May 1. Pls help interpret.
Hi Danny. It is spread out in the next 6 months. The benefit is still there. Please see the summary: https://pnl-law.com/blog/grace-period-for-rents-residential-and-msmes-during-the-enhanced-community-quarantine/
Good luck.
Hi!
Does this mean that the payment for May will be spread out in 6 months?
For example: Due date is April 17. So 30 day grace period – moved to May 17. And this payment for May will be spread out in 6 months? So for June 17 payment – full monthly amt plus the amortization?
And is this also applicable to condo and auto loans (in house financing)?
Thank you!
Hi Jen. For the first question, yes, it’s the full month plus the amortization. For the second question, those are loans, so please refer to the other set of Guidelines, here: https://pnl-law.com/blog/grace-period-for-loans-already-in-effect-implementing-rules-and-regulations-issued-by-dof/
Good luck.
1) If the Lessee have accumulated arrears of more than 3 months prior to the ECQ, shall those accumulated arrears be included in the 30 day grace period?
2) If the lessor is dependent on the lessee’s payment and has no other source of income, what are the lessor’s recourse?
Hi Francis. As noted in the other reply, this is a tough question because there’s no express provision for past overdue rents.Subject to interpretation. Perhaps you can make that inquiry with DTI to make it official. Nevertheless, by way of general information, here’s a theory: overdue rents are also considered “due” together with the rent for the period falling during the ECQ. In other words, all those rents (including overdue) fall “due” during the ECQ period, which means that the entire amount is covered by the 6-month staggered payment terms. Good luck.
Hello.
Its clear that the memorandums only apply to Rents, and under the Bayanihan as one Act (Sec 4aa), moratoriums only apply to a consumer’s loan payables to banks and other financial institutions incluing pawnshops.
I’d like to ask of you have any idea regarding my questions below:
1. On top of rents, condos have HOA monthly dues, does memo 20-12 imply inclusion of this type of payable
2. What about Equities or downpayments of buyers for real estate purchases as there is no memorandum coming from the DHSUD yet?
Thank you and keep safe.
Hi AJ, tough questions, you have.
1. Can go either way. Rent is payable to the owner of the unit, while dues are payable to the HOA, so should be treated separately. On the other hand, the Circular defines residential rent as < strong >any amount paid for the use or occupancy of a residential unit,” so it can be argued that dues form part of the amounts paid for the “use or occupancy” of the unit.
2. Those are not “rent”, but more of payment, so most likely not covered in this Circular. What’s more complicated is this — if the payment is through financing (banks or in-house), does the grace period for loans apply?
Good luck.
Hi sir
thanks for your reply.
Just to further clarify:
For example:
Rent: P 20,000.00
6 month amortization – P 3,333.33 per month
Old due date: April 17
New due date: May 17
Payment for May 17: P20,000 or P3,333.33 only?
Payment for June 17: P 20,000 + P3,333.33 = P 23,333.00
Thanks again!
I have a follow up question with Jen’s inquiry:
If in case there will be 2 residential rent dues that falls during ECQ, should it have a separate due date or can we add both rents due that falls within ECQ period, divide it to 6 months staggered payments and its due date will be the first due date after lifting the ECQ?
Example:
March 17 – ECQ period – New due date: April 17 which will be moved til May 1 – P20,000
April 17 – ECQ period – New due date: May 17 – P20,000
Total due after lifting the ECQ: 40,000 / 6 = P6,666 amortized due will ALL be added to May 17 due date?
Hi Eloiza. It’s always better if the landlord and lessee can discuss creative options (like what you discussed), keeping in mind the intent and spirit of the DTI Circular. Strictly speaking, however, it makes sense that different due dates must be considered/computed separately. Good luck.
Hi Jen, based on your computation, it’s P23,333 starting May 17. Good luck.
Hi! Our company (located in BGC) is under MSME category. We just paid the April rent yesterday, 15 April. For May rental, they initially gave us a payment deadline of April 21, but we requested to move it further and was given until May 13. I’d like to know if I can justify our request with this mandate? We can still ask to move it further until May 21, right?
Our company is still in operations thru work from home scheme, but we still want to request for grace period on our rental fees. Will the extension be in discretion of the landlord?
Hi Maria. Under the Guidelines, it doesn’t matter whether the lessee is operating or not operating. Good luck.
Oh okay. I thought this was just for businesses that temporarily ceased operations as indicated below.
A minimum of thirty (30)-days grace period shall be 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.
Hi Maria. We’re puzzled why there’s a payment done in April, when this is covered by the grace period under the Guidelines. Still, please note that the Guidelines also provide that in case was already made, “the lessor shall grant a minimum of 30-day grace period from the next due date of the residential/commercial rents.” Good luck.
Hi! Thanks for your reply. The April was originally due last March, and they wouldn’t want to give us further extension anymore. Thanks again for clarification!
Bakit po parang ang unfair naman? Since ECQ naman. No operation and No source of income. Tapos will pay pa din yung rent? Sila kumikita tapos kami nagbabayad ng rent.
Okay na sana yung DTI Memo Circ. 20-04, tapos pinalitan nyo ng 20-12. Para obligado na magbayad.
Fyi, di lang naman 1 month yung ECQ, na eextend sya. So until kapag na extend tong ECQ, magbabayad pa din kami. Wala na nga kami kinikita, at walang operation. Magbabayad pa kami ng renta. Sana may konsiderasyon din kayo sa sitwasyon namin.
Salamat.
1) Our company’s main source of income is the monthly payment of our tenants. If our tenants opt to avail of the 30 day grace period or the equally amortized payment over 6 months, then, our company is deprived of much needed income with the delay in rental payments. What is our recourse?
2) Likewise, our company is dependent on the monthly rental payments of our tenants to pay our monthly loan obligations with our bank. So DO we also get an automatic 30 days grace period or equally amortized payment in 6 mos from the bank? What Memorandum Circular does said situation states? WHILE WE ARE A SME, OUR BANK SAYS OUR LOAN IS CLASSIFIED UNDER COMMERCIAL. WHAT RELIEF OR SUPPORT DO WE GET FROM GOVERNMENT ?
3) Monthly payments of our tenants are thru PDCs issued in full for the duration of the lease contract. Said PDCs are given upon signing of the lease contract. Does this situation fall under Item 3.4 (No Refunds Already Paid) of MC 20-12? Since the PDCs are already turned over to us as payments and to be deposited on its due date, hence, we are not obligated to give a refund or in that case the 30 day grace period or the 6 mos monthly amortization. Please clarify.
4) Included in the monthly payment (PDCs) of the tenants is the monthly dues we call Cusapa (utilities, maintenance, INSURANCE and security). You previously mentioned that rental payments should be separate from the monthly dues. How do we separate the payments if both payments are already included in the PDCs turned over to us. How DO we get paid for the monthly dues if we cannot deposit the PDC that will fall due? Please clarify.
Does this also apply to already issued PDCs to the lessor. I have already submitted a complaint to the DTI email address as we are chsrged on our bank with insufficient funds charge when our lessor tried to deposit the check. Our lessor’s excuse is because the check is already in ‘PDC Warehousing’ which is meant to be deposited on the date on the check. The response we got from the Region IV-A office of DTI is that PDC Warehousing is not covered by the Memorandum. Kindly shed some light on this matter.
Hi. We have a separate discussion on this: https://pnl-law.com/blog/bouncing-checks-grace-periods-and-the-enhanced-community-quarantine/
Good luck.
Section 7. Non-Enforcement of Evictions. – No eviction for failure to pay the residential or commercial rent due may be enforced within the thirty (30)-day period after the lifting of the Enhanced Community Quarantine. – for this one sir if they have rent due on April 1 and May 1, then ecq is lifted on May 15. But they have another due on June 1 but they said that they cannot make the payment, does this mean the landlord cannot evict them until June 15?
Hi Felix. The no-eviction policy is a blanket policy, which means that it doesn’t matter how much or for what month the unpaid rent pertains to. It’s effectively a 30-day moratorium on evictions. Good luck.