Guidelines for 30-Day Grace Period on Rents: DTI Memorandum Circular 20-12 (Full Text)

[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 – 

  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.

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 –

  1. An explanation why or how the violation occurred or, if contested, the basis for disputing the violation;
  2. Corrective actions that have been taken and the results achieved;
  3. The date/s of when corrective action/s was/were fully achieved; and
  4. 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

P&L Law

50 thoughts on “Guidelines for 30-Day Grace Period on Rents: DTI Memorandum Circular 20-12 (Full Text)

  1. AvatarMarian Hernando

    Hi, is the payment for insurance and monthly downpayment for pre-selling of condominium not exempted from the Bayanihan Act? The companies keep on depositing my issued checks monthly. And is requiring me to pay and fund the check immediately. Even with the ongoing ECQ. Thank you.

    Reply
    1. pnlpnl

      Hi Marian. The grace period only covers loans. It does not cover payments through installments. Good luck.

  2. AvatarGlenn Lagahit

    Hi, how about the payment of utilities for residential renters? And those renters who have income or work during ecq/gcq? And until how many months does the law allows non payment for rent, notwithstanding that the owners of which depends on rental income. Thanks you po.

    Reply
  3. AvatarJose Plaridel Ycay

    Hi! We are leasing a commercial space and subleasing it to food stalls/kiosks.
    We are following the mandate of Bayanihan to heal.act 30 day grace period 6months installment and we already emailed our tenants re rental moratorium and payment scheds. The thing is ,One tenant is demanding that the Force majeure clause in the lease contract be implemented instead. In the clause, it states that if any part or the whole premises is damaged by acts of God , such as fire storm ,earthquake or any unforeseen event renders the leased premises unfit for use and occupation(during the term of lease) by the lessee this contract may be terminated without compensation by lessor or lessee.
    The tenant wishes to terminate the contract and to refund the advance and deposits.

    Question: Am I right in my following the DTI mandate? The ecq didnt render the leased premises unfit but it just made us stop.operations so we cant enforce the Force Majeure right? Ergo tenant/lessee doesn’t have any right to demand refund of advance and deposits. Am I right by all accounts? Thank you so much?

    Reply
    1. pnlpnl

      Hi Jose. That’s a tough question. I agree with you that the clause, as it is worded, refers to a destruction of the property. Note that the DTI encouraged the parties to negotiate on the matter. Still, as we repeatedly emphasize, this is not legal advice. Good luck.

  4. Avatarjun

    hi. what does it mean 30days grace period for residential rent? my due date is every 5th of month. and i haven’t paid yet for the month of may. then should i pay it before or on june.3? or is it possible to settle the amount within 30days after community quarantine lifted? and is this memorandum apply to foreigner as well? thanks

    Reply
  5. AvatarMartz

    Hello sir! We have now transitioned from ECQ to MECQ, and eventually GCQ. Memorandum 20-12 states the period of ECQ, my question is: Are MECQ and GCQ covered by this memorandum? Thank you.

    Reply
  6. AvatarJoey

    Hi. Since the ECQ has been lifted in our place and replaced under GCQ. Is the 30 days grace period applicable? My due date in a residential rent is every 25th of the month, so if we’re on GCQ last May 16, when should the 30 day grace period commence? I have an outstanding rent balance for the month of Mar 25th, Apr 25th and May 25th accordingly. So it’s already 3 months now this May 25th. What date should I’ll be settling? Is it after June 15th or 25th? Thank you very much.

    Reply
  7. Avatarcath

    Hi good day! Thank you for this very informative article. I just want to consult my situation.I use to rent in a low-rise apartment near BGC and I reside in Cavite. So my last month for my rental contract is End of March. We advised the admin that we will no longer be extending our contract and they agreed to it,conversation was through viber chat. Then Pandemic happened and ECQ was implemented which resulted to us not able to move our things out from the unit til now because we were locked down in Cavite. Now to my surprise, when the owner sent the statement of account, they billed us the 2 months worth of rent that was the duration of lockdown. Is there any clause on the bayanihan law or any law that can help us dispute them billing us full rent fee even though we have clearly advised them that we were no longer extending the contract? And any provisions that would apply to my situation where the only reason why we are not able to move our things out from the apartment was because of ECQ? I really appreciate your response.thanks in advance and all the best

    Reply
    1. pnlpnl

      Hi Cath. This is a common issue; tricky issue. We’ll be posting a separate article on this. Drop by soon.

  8. AvatarSheina Ocampo

    Hi Sir,
    Hope your keeping safe & healthy.

    Our commercial office rental will end this June 16,2020(including renovation based on our contract). Our Lessor advice us thru email last May 30, 2020 to renovate & vacate the office until June14,2020. However, ECQ ended only this May31, 2020 while GCQ will be implemented this June 01, 2020. Two (2) weeks is imposible for us to meet the deadline. I need your legal advice Sir. Thanks & God bless.

    Reply
    1. pnlpnl

      Hi Sheina. We can’t give any legal advice. By way of general information, please re-read the guidelines, specifically the portion on the prohibition of eviction within 30 days from lifting of any quarantine. Good luck.

  9. AvatarShiela

    Hi!

    I am renting a place in Makati and our supposed contract ended last 15 APRIL but since I went back to province, I couldn’t move out of my place in Makati. I was informed by my lessor that should I use the 6 months to pay for my rent, my 2 months worth of deposit will be put on hold as well. I already asked if I could just use the 1 month in the deposit so I shouldn’t have to pay her but she declined. Can she really delay the return of my deposit?

    Reply

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