On 4 April 2020, pursuant to Republic Act No. 11469, otherwise known as the "Bayanihan to Heal as One Act", the Department of Trade and Industry (DTI) issued Memorandum Circular No. 20-12, series of 2020, prescribing the guidelines on the concessions of residential and commercial rents as a result of the National Emergency.
This post is a briefer on the notable points in DTI MC No. 20-12.
1. What kind of rents are covered by the concession? The circular covers two (2) types of rents. These are: (a) Residential Rent for Residential Units; and (b) Commercial Rents of Micro, Small, and Medium Enterprises (MSMEs) that have ceased operations due to the Enhanced Community Quarantine (ECQ). Both types of rent should fall due within the period of the ECQ.
2. What are "MSMEs"? MSMEs are businesses whose total assets, inclusive of loans, but exclusive of the land on which the MSMEs' office, plant and equipment are situated does not exceed One Hundred Million Pesos (P100,000,000.00). The circular further specifies what value constitutes micro-businesses, small businesses, or medium enterprises. All of these, however, are covered under the circular.
3. What is a "Residential Unit"? Residential Units refers to bed spaces, rooms, dormitories, apartments, houses, buildings, and/or land on which a person's dwelling is located. To be considered a Residential Unit, the use of the property should be principally for residential or dwelling purposes. Note that the DTI's definition does not include condominiums (more on this later).
4. What are the rent concessions provided under the said DTI circular? MC 20-12 requires all lessors to give a minimum grace period of thirty (30) days for ALL qualified residential rents and commercial rents falling due within the ECQ period. This means that, in case of non-payment on the due date (within the ECQ period), lessors are not allowed to collect interests, penalties, fees and other charges.
5. Can a lessor grant a grace period of more than thirty (30) days? Yes. MC 20-12 only prescribes the minimum grace period that should be given to the qualified lesses. Should the lessor decide to be more sympathetic and grant a longer period, this is allowed. In fact, par. 3.5 of the said circular suggests other ways lessors can show or extend generosity, such as but not limited to: (a) the total or partial waiver of rent falling due within the ECQ period; (b) the grant of reprieves or discounts for commercial rents due after the ECQ; (c) the re-negotiation of lease agreements; and/or (d) such other measures which can help mitigate the impact of the ECQ on MSMEs.
6. How is the grace period computed? The 30-day grace period starts to run, not after the ECQ is lifted, but from the last due date of the rent which fell due within the ECQ. Lessees should take note of this as lessors may be allowed to charge interests, penalties, and other charges after this grace period.
7. Is the grace period automatic? Yes. However, DTI MC 20-12 also requires MSMEs to signify their intention to avail of this by providing supporting documents, among others.
8. What if the rent has already been paid, can I get a refund? No. Rents which have already been paid, but would have otherwise qualified for the grace period, cannot be refunded. Notwithstanding this, MC 20-12 requires the lessor to grant a min. grace period of 30 days on the next due date of the rent.
9. What is the meaning of "Grace Period"? Grace period simply means the extension of the deadline for the payment of the rent. DTI MC 20-12 does not require lessors to waive rental payments, although it is an option available to lessors. By extending the payment deadline (instead of waiving rent), the law also gives due consideration to lessors, who also rely on rental payments for their income.
10. What if the lessor refuses to grant the required grace period? Refusal by the lessor to give the required grace period is a criminal offense. Under Section 6(e) of RA 11469, lessors who refuse to provide the 30-day grace period to lesses shall be penalized with imprisonment of not less than two (2) months or a fine of not less than P10,000.00, or both imprisonment and fine, at the discretion of the court.
11. Can the lessor be evicted if he/she fails to pay rent within the grace period given? If the lessor fails to pay rent notwithstanding the grace period given, he or she may be evicted in accordance with law. However, enforcement of the eviction cannot be done until after 30 days from the lifting of the ECQ.
12. Since "condominium units" are not specified in DTI MC 20-12, does this mean that they are not entitled to the grace period? No. The absence of any reference to "condominium units" in the definition of Residential Unit does not mean that residential rent for the use of condominium units are exempted. The grace period also applies. In fact, RA 11469 does not make any distinction and explicitly provides that the grace period shall apply to all residential rents falling due within the ECQ period.