Commercial and industrial tenants in Housing and Development Board (HDB) properties will no longer be allowed to assign their premises to another party.
The HDB announced this on Monday, in a move to weed out unhealthy speculation and rising assignment fees.
Assignment fee is the amount agreed upon between the proposed tenant and existing tenant for the transfer of the property.
The HDB has about 8,000 commercial and 10,700 industrial tenants.
Currently, they are allowed to assign their premises to another party, a move meant to facilitate the exit of marginal tenants and minimise disruption of services.
But the HDB says it has seen an upward trend in the average assignment fee and tendered rent in recent years.
This contributes to higher operating costs, which may be passed on to residents and consumers.
To ensure this does not happen, assignment will not be allowed for new tenancies, starting on 16 October.
Instead, tenants will need to return the premises to HDB for re-tender if they wish to wind up their businesses.
As for existing tenancies, a three-year window period will be given to help tenants make business adjustments.
That means they will be able to continue assigning their shops or industrial premises till 15 October 2016.
But their assignees can no longer further assign the premises as they are considered new tenants.
Praising the move, Chua Ser Kang, president of Joo Chiat Merchants Association, said: “It will bring tenants back to the original intent and prevent speculation. It’ll also lower rentals.”
But Chia Sai Im, chairman of People’s Park Traders’ Association, said: “If they (the tenants) feel they need to retire in the next three to five years, under the new rules, if they can’t assign the premises or can’t work anymore, they might have a problem.”
Some property analysts say a fall in rentals can be expected in the next one or two years.
Donald Han, managing director of Chesterton Singapore, said: “We might see existing rentals probably come down by as much as about 20 per cent. We’ve seen that happening after the government, through the NEA, coming in to restrict assignment of leases for some of the hawker stalls. Especially (for) the more popular hawker stalls, rental has come down by as much as 15, 20 per cent. So we expect the same impact for the HDB rental market for commercial properties.”
HDB also announced it will increase the supply of HDB shops, by building four new neighbourhood centres over the next five years. This is in tandem with the ramped up development of public housing.
The new neighbourhood centres will be located in Punggol, Sembawang and Hougang.
Source : Channel NewsAsia – 14 Oct 2013