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[h=2]NEA doubles rent and puts her out of business, Vivian ‘expresses empathy’[/h]
June 19th, 2012 |
Author: Contributions
When Rosemary paid S$30,000 for a small cubicle at a hawker centre in Chinatown to set up her business, she thought she had bought over the stall. The original stall owner had wanted S$50,000 but agreed to lower it after negotiation.
It was only later that Rosemary found out, to her shock, that the money was only a transfer fee. She would still need to pay rental to the National Environment Agency (NEA) every month.
Rosemary, in her 40s, had wanted to transit from her full-time job into doing something else. So, in 2008, she looked around for a shop. She came across “Stalls for sale or rent” notices pasted on vacant cubicles for sundry businesses on Smith Street in Chinatown. She decided on one of these, and called up the agent who helped broker the deal.
“When I went to the NEA, I found out that I wasn’t actually buying a stall,” Rosemary tells publichouse.sg. “I was just buying the rights to transfer the licence from the previous owners to me! So, in effect, I paid S$30,000 for a licence transfer, which was not what my original intention was.”
The lease on the shop would be 3 years.
As she was new to these things, she decided that she would give it a go nonetheless, even though she would have to fork out S$345.00 every month as rental, on top of other costs such as utilities. Her monthly expenses therefore came to more than S$500.
She spent some S$2,000 on renovation for the shop, which she used to sell health supplements products.
Soon, she found that business wasn’t good as the area had poor human traffic. Her products too began to get affected as they could not withstand the weather over long periods. Rosemary says she incurred losses because of this. Still she tried to make the best of it and decided to promote her products more, including embarking on online advertisements. However, business remained bad.
It was last year, 2011, that word started getting around about the hike in rentals for the stalls in that area. Her neighbours asked her if she was affected by this. As Rosemary was only into the third year of her lease, she said she was unaware of any such hikes. Some of her neighbours, Rosemary says, had their rentals increased by as much as 70 per cent on renewal of the leases for their stalls.
“Now, all in, they have to pay about S$700 every month to operate their little shops, the cubicles,” she adds. Some of these stalls sell cheap clothes, which have very low profit margins, others – such as the seamstress who offer clothes alteration services at S$2 or S$3 per item – could hardly make ends meet. “How much do you expect her to make?” Rosemary asks. “Even to just cover rental, it was already very very tough.”
The rental hike plus poor business have forced several of her neighbours to close down their shops so far, she says.
In 2012, when Rosemary’s lease on her shop was up for renewal, she too faced the same predicament.
In April this year, a letter from the NEA informed her that the rental on her new 3-year lease would be S$600, before GST, according to the valuation by a private valuer engaged by the NEA. This is an almost 100 per cent increase from the S$345 she had been paying. In addition to the other costs she would need to service, her monthly expenses in running the shop would be more than S$700, a substantial amount for a business which is not doing particularly well.
Rosemary was upset by this as already she was struggling to keep her small business afloat. Worse, she found out later that the vacant stall besides hers was tendered out for only about S$500. She thus questions the disparity in rent and the methods the valuer used in ascertaining how much the stalls are worth.
“NEA has absolute right to charge the rental it wants to charge. I have no quarrel with that,” Rosemary says. “My quarrel is with the private valuer. How can you come to this valuation? Why was my neighbour’s stall, just to the left of mine, tendered at a lower price than what the valuer is charging me?”
But that was not all which upset her. In the NEA letter, she was given 10 days to decide whether she wants to extend her lease and continue her business. The letter was dated 16 March but the post-mark on the envelope says “21 March”. By the time she received the letter, it was less than a week from the deadline of the 26th.
The letter also said that if she did not reply to indicate her decision, it would be assumed that she wants to continue her business and the lease will automatically be renewed for another 3 years. The renewal fee was S$13 a year.
Frustrated by this, she wrote to the NEA to register her concerns and questioned the hike in her rental rates.
On 9 April, she informed the NEA that she would not be renewing her lease. “I have no other option but to give it up as the sales cannot cover the rental. I am deeply saddened but it is the only rational thing to do,” she said in her letter. She informed the NEA that she would not be renewing her licence either.
By 16 April, she had moved out of her cubicle and repainted the walls in order to hand the shop back to the NEA. It was also around that time that she found out the empty stalls next to hers had been tendered out at $100 a month rental, Rosemary says. “[It] reinforces my earlier point that the rental hike is irrational. How could NEA, the landlord, impose a 6 times higher rental on existing tenants while new bidders get away with it for a song after the old tenants give up?”
Receiving no response from the NEA, she wrote to Minister Balakrishnan on 2 May, to tell him of her situation and that of her fellow shop owners.
More than half of the shops have remained closed for at least the last one to two years, she says. “Stallholders are barely making enough from hand to mouth. Hence, what is the justification for the almost doubling of rental as recommended by a ‘Private Valuer’?”
Rosemary also said that to re-tender for a stall in order to get a lower rent encompasses uncertainty for existing tenants. There is “the genuine fear of losing long-time customers, the uncertainty of the bidding process, and the inconvenience and costs of moving all the goods out of the stall and into temporary storage.”
The minister replied on the same day, expressing empathy and promised to look into the matter.
It was only on 1 June – one month after her email to them – that the NEA finally replied. “[We] apologise for our delay in clarifying your concerns over the rental of your ex-stall,” it said. It then explained how the tender exercise is carried out and the considerations which go into how rental rates are assessed. These include “various factors such as stall location, stall size and the prevailing market conditions.” It explained the revised tender policy where “potential stallholders will no longer need to submit tender bids that meet or exceed the reserve rent.”
It then encouraged Rosemary “to consider taking up a stall with [NEA] again under the revised tender policy.”
When Rosemary read the letter, she was flabbergasted as it did not address her concerns, particularly about how her rent is being doubled which has effectively put her out of business. Why would she want to tender for a stall again, especially when she already had one, until the rental hike killed her business? The NEA’s reply confirmed to her what the other tenants have told her earlier – that it was useless to seek an explanation from the authorities.
Rosemary is looking for answers because she feels that it is patently unfair for the stall owners there to be subjected to higher rent, like the seamstress who has 3 children to care for. Their businesses could be the only means by which they support their families.
Rosemary is thus raising several areas of concern:
1. Her main grouse is with the use of a “private valuer” by the NEA to ascertain the value of the stalls. This is then used to decide the rental rates which, as in her case, could be more than what is being tendered out upon her subsequent lease renewals.
2. When she signed on for the stall, she was not told that her rent could potentially be raised. She is concerned that new stall owners, like herself, are not made aware of this and could run into problems when their leases are up for renewal. In short, what happens after the initial lease period is up?
3. The short notice given to existing tenants to renew their leases. In her case, she was only given 10 days to decide but by the time she received the letter, it was less than that.
4. She questions why there is a need for transfer fees and suggests that this should be abolished. She also questions why the renewal fee is only S$13 while transfer fees are left to market forces which, in her example, commands S$30,000.
5. The uncertainties faced by stall owners after the initial lease period. These include rental rates being raised so much that it is not possible to continue the business, and the hassle of re-tendering for the stalls. Why make existing stall owners go through this hassle, as suggested by the NEA letter to her, when they should be allowed to continue their businesses on the existing rental rates, or at least not have to face 70 to 100 per cent rate hikes?
At her cubicle at Smith Street, some shops have closed and have been tendered out for just S$100, Rosemary says. However, she adds, the new owners of these stalls do not use these shops for business but as store rooms because human traffic there is low. These shops have their shutters down and this affect the other shops which are trying to survive. Potential customers would avoid these areas as only a few shops are opened. Rosemary therefore questions if such shops should be allowed to remain closed or be used as store rooms.
“This is people’s livelihood, you know?” Rosemary says. “These are people’s lives, the poorest of the poorest in our community and in our society. How do you treat them, after 3 years? Just when they’re about to get on their feet, you break them at the knees.”
.
Andrew Loh
* Andrew helms publichouse.sg as Editor-in-Chief. His writings have been reproduced in other publications, including the Australian Housing Journal in 2010. He was nominated by Yahoo! Singapore as one of Singapore’s most influential media persons in 2011.
.
Editor’s note: We have written to NEA. Once NEA replies, we will let readers know.
When Rosemary paid S$30,000 for a small cubicle at a hawker centre in Chinatown to set up her business, she thought she had bought over the stall. The original stall owner had wanted S$50,000 but agreed to lower it after negotiation.
It was only later that Rosemary found out, to her shock, that the money was only a transfer fee. She would still need to pay rental to the National Environment Agency (NEA) every month.
Rosemary, in her 40s, had wanted to transit from her full-time job into doing something else. So, in 2008, she looked around for a shop. She came across “Stalls for sale or rent” notices pasted on vacant cubicles for sundry businesses on Smith Street in Chinatown. She decided on one of these, and called up the agent who helped broker the deal.
“When I went to the NEA, I found out that I wasn’t actually buying a stall,” Rosemary tells publichouse.sg. “I was just buying the rights to transfer the licence from the previous owners to me! So, in effect, I paid S$30,000 for a licence transfer, which was not what my original intention was.”
The lease on the shop would be 3 years.
As she was new to these things, she decided that she would give it a go nonetheless, even though she would have to fork out S$345.00 every month as rental, on top of other costs such as utilities. Her monthly expenses therefore came to more than S$500.
She spent some S$2,000 on renovation for the shop, which she used to sell health supplements products.
Soon, she found that business wasn’t good as the area had poor human traffic. Her products too began to get affected as they could not withstand the weather over long periods. Rosemary says she incurred losses because of this. Still she tried to make the best of it and decided to promote her products more, including embarking on online advertisements. However, business remained bad.
It was last year, 2011, that word started getting around about the hike in rentals for the stalls in that area. Her neighbours asked her if she was affected by this. As Rosemary was only into the third year of her lease, she said she was unaware of any such hikes. Some of her neighbours, Rosemary says, had their rentals increased by as much as 70 per cent on renewal of the leases for their stalls.
“Now, all in, they have to pay about S$700 every month to operate their little shops, the cubicles,” she adds. Some of these stalls sell cheap clothes, which have very low profit margins, others – such as the seamstress who offer clothes alteration services at S$2 or S$3 per item – could hardly make ends meet. “How much do you expect her to make?” Rosemary asks. “Even to just cover rental, it was already very very tough.”
The rental hike plus poor business have forced several of her neighbours to close down their shops so far, she says.
In 2012, when Rosemary’s lease on her shop was up for renewal, she too faced the same predicament.
In April this year, a letter from the NEA informed her that the rental on her new 3-year lease would be S$600, before GST, according to the valuation by a private valuer engaged by the NEA. This is an almost 100 per cent increase from the S$345 she had been paying. In addition to the other costs she would need to service, her monthly expenses in running the shop would be more than S$700, a substantial amount for a business which is not doing particularly well.
Rosemary was upset by this as already she was struggling to keep her small business afloat. Worse, she found out later that the vacant stall besides hers was tendered out for only about S$500. She thus questions the disparity in rent and the methods the valuer used in ascertaining how much the stalls are worth.
“NEA has absolute right to charge the rental it wants to charge. I have no quarrel with that,” Rosemary says. “My quarrel is with the private valuer. How can you come to this valuation? Why was my neighbour’s stall, just to the left of mine, tendered at a lower price than what the valuer is charging me?”
But that was not all which upset her. In the NEA letter, she was given 10 days to decide whether she wants to extend her lease and continue her business. The letter was dated 16 March but the post-mark on the envelope says “21 March”. By the time she received the letter, it was less than a week from the deadline of the 26th.
The letter also said that if she did not reply to indicate her decision, it would be assumed that she wants to continue her business and the lease will automatically be renewed for another 3 years. The renewal fee was S$13 a year.
Frustrated by this, she wrote to the NEA to register her concerns and questioned the hike in her rental rates.
On 9 April, she informed the NEA that she would not be renewing her lease. “I have no other option but to give it up as the sales cannot cover the rental. I am deeply saddened but it is the only rational thing to do,” she said in her letter. She informed the NEA that she would not be renewing her licence either.
By 16 April, she had moved out of her cubicle and repainted the walls in order to hand the shop back to the NEA. It was also around that time that she found out the empty stalls next to hers had been tendered out at $100 a month rental, Rosemary says. “[It] reinforces my earlier point that the rental hike is irrational. How could NEA, the landlord, impose a 6 times higher rental on existing tenants while new bidders get away with it for a song after the old tenants give up?”
Receiving no response from the NEA, she wrote to Minister Balakrishnan on 2 May, to tell him of her situation and that of her fellow shop owners.
More than half of the shops have remained closed for at least the last one to two years, she says. “Stallholders are barely making enough from hand to mouth. Hence, what is the justification for the almost doubling of rental as recommended by a ‘Private Valuer’?”
Rosemary also said that to re-tender for a stall in order to get a lower rent encompasses uncertainty for existing tenants. There is “the genuine fear of losing long-time customers, the uncertainty of the bidding process, and the inconvenience and costs of moving all the goods out of the stall and into temporary storage.”
The minister replied on the same day, expressing empathy and promised to look into the matter.
It was only on 1 June – one month after her email to them – that the NEA finally replied. “[We] apologise for our delay in clarifying your concerns over the rental of your ex-stall,” it said. It then explained how the tender exercise is carried out and the considerations which go into how rental rates are assessed. These include “various factors such as stall location, stall size and the prevailing market conditions.” It explained the revised tender policy where “potential stallholders will no longer need to submit tender bids that meet or exceed the reserve rent.”
It then encouraged Rosemary “to consider taking up a stall with [NEA] again under the revised tender policy.”
When Rosemary read the letter, she was flabbergasted as it did not address her concerns, particularly about how her rent is being doubled which has effectively put her out of business. Why would she want to tender for a stall again, especially when she already had one, until the rental hike killed her business? The NEA’s reply confirmed to her what the other tenants have told her earlier – that it was useless to seek an explanation from the authorities.
Rosemary is looking for answers because she feels that it is patently unfair for the stall owners there to be subjected to higher rent, like the seamstress who has 3 children to care for. Their businesses could be the only means by which they support their families.
Rosemary is thus raising several areas of concern:
1. Her main grouse is with the use of a “private valuer” by the NEA to ascertain the value of the stalls. This is then used to decide the rental rates which, as in her case, could be more than what is being tendered out upon her subsequent lease renewals.
2. When she signed on for the stall, she was not told that her rent could potentially be raised. She is concerned that new stall owners, like herself, are not made aware of this and could run into problems when their leases are up for renewal. In short, what happens after the initial lease period is up?
3. The short notice given to existing tenants to renew their leases. In her case, she was only given 10 days to decide but by the time she received the letter, it was less than that.
4. She questions why there is a need for transfer fees and suggests that this should be abolished. She also questions why the renewal fee is only S$13 while transfer fees are left to market forces which, in her example, commands S$30,000.
5. The uncertainties faced by stall owners after the initial lease period. These include rental rates being raised so much that it is not possible to continue the business, and the hassle of re-tendering for the stalls. Why make existing stall owners go through this hassle, as suggested by the NEA letter to her, when they should be allowed to continue their businesses on the existing rental rates, or at least not have to face 70 to 100 per cent rate hikes?
At her cubicle at Smith Street, some shops have closed and have been tendered out for just S$100, Rosemary says. However, she adds, the new owners of these stalls do not use these shops for business but as store rooms because human traffic there is low. These shops have their shutters down and this affect the other shops which are trying to survive. Potential customers would avoid these areas as only a few shops are opened. Rosemary therefore questions if such shops should be allowed to remain closed or be used as store rooms.
“This is people’s livelihood, you know?” Rosemary says. “These are people’s lives, the poorest of the poorest in our community and in our society. How do you treat them, after 3 years? Just when they’re about to get on their feet, you break them at the knees.”
.
Andrew Loh
* Andrew helms publichouse.sg as Editor-in-Chief. His writings have been reproduced in other publications, including the Australian Housing Journal in 2010. He was nominated by Yahoo! Singapore as one of Singapore’s most influential media persons in 2011.
.
Editor’s note: We have written to NEA. Once NEA replies, we will let readers know.
