Jingyun Wang
All you need to know about the new Rent Reduction Policy
Part 2
How to Calculate the Amount?
The amount of monthly rents should be determined according to the lease contract, excluding management fees such as property management fee and car parking fee. In the case that the monthly rents is not a fixed amount under a lease contract, the amount of monthly rents could be negotiated by both parties. In the case that there already exists a rent free period or a reduction of rents under a lease contract, the amount of monthly rents to be waived could be calculated based on the actual paid rents or be negotiated by both parties.
The Ultimate Tenant can benefit from a waiver of three months’ rents. Under any of the following circumstances, the Ultimate Tenant can benefit from an extra three months’ rents in maximum:
- The Ultimate Tenant is located in the high or middle risk epidemic area in 2022;
- The Ultimate Tenant was locked down in the Premises, was required to cease its business or the Premises was expropriated by the government;
- The Ultimate Tenant goes into loss in 2022.
In the case that the lease term in 2022 is less than one year, the rents will be reduced on a pro rata basis.
Methods for Reduction or Waiver of Rents
SOEs can waive the rents directly, deduct the unpaid rents or reimburse the paid rents in order to allow the Ultimate Tenant to benefit from the Policy.
Conclusion
The qualified Ultimate Tenant should apply for the reduction/waiver of rents before the relevant authority by submission of supporting documents on time.
For companies that cannot take pleasure in the Policy, you can also check the lease contract whether there exists any agreement about the reduction/waiver of rents due to unforeseen events or cease of business.
If the premises cannot be used due to the Outbreak or epidemic control measures (such as: expropriation by government), the tenant can negotiate with lesser to reduced rents. In order to keep a long-term client or to benefit from an exemption of real estate tax, the lesser will consider about reduction/waiver of rents. You can also propose to extend the lease term, postpone rental payment or payment by installments as an alternative. It’s also very important to keep all the communication records. To avoid misunderstanding or regret, it is advisable to confirm by written or sign supplemental agreement when any agreement is reached for reduction/waiver of rents.
Our team at DaWo have extensive experience with helping clients in negotiation, please feel free to contact us if you have any questions.
