With the lifting of the lockdown in Shanghai, many companies have been dealing with several COVID-19 related legal issues. One hot topic a client has approached us with was regarding exemptions on payment of office rent. We thought it may be helpful to share our findings with others seeking to return to business as usual after the prolonged lockdown.
In March, 2022, the Shanghai Government issued a Notice about the Policy Measures the Government is taking to help companies promote development and adapt to the COVID 19 lockdown. One of the most important policies announced in the Notice was the exemption from the obligation of payment of rent for 3 to 6 months where certain conditions are met. This policy seems encouraging to many enterprises, but you may have some questions regarding the application of the Policy, here are a few questions that are frequently asked by Clients:
Q1: Does this Policy apply to all State-Owned landlords?
A1: No. According to the Implementation Measures of the Notice, the exemption is only applicable to State-Owned premises under the supervision of Municipal Commission of State-owned Assets Management of Shanghai. If the State-Owned Premises belong to state-owned landlords of other provinces in China, businesses will need to confirm with relevant provinces for their policies.
Q2: Can all enterprises enjoy three to six months’ rent exemption?
A2: No. This policy only applies to Small and Micro sized enterprises and individual-run businesses. Companies must determine firstly if they are qualified applicants under the Policy. China has relevant laws and regulations to categorize the size of enterprises. The main criteria for the measurement is staff number and annual income of an enterprise.
Q3: Are privately-owned landlords bound by the exemption Policy?
A3: No. Privately-owned landlords are not bound by the Notice, although they are encouraged to refer to the Policy. However, this does not mean exemption and reduction of rent is not possible if your company leases under a private landlord. As they may still be under legal obligation to reduce or exempt rent if certain conditions are satisfied.
This however, requires the applicant to make a proactive and legally persuasive application and negotiation with the landlord, and requires the applicant to have a good understanding and interpretation of relevant laws and regulations. We would recommend these enterprises to seek professional advice for a better result.
If your company is having COVID-19 Lockdown related legal issues, feel free to drop us an email for professional advice and a legally and commercially wise tactic.