INTER-OFFICE MEMORANDUM

____________________________________________________________________________
FOR :

FROM :

RE : LEGAL OPINION ON THE REQUEST OF __________. FOR 50% RENTAL

DISCOUNT FROM _____________

DATE :
____________________________________________________________________________

BACKGROUND:

______________ requested GOVERNMENT AGENCY for a fifty percent (50%) rental

discount covering the period _________, claiming business losses due to the Covid-19
pandemic.

ISSUE:

Whether GOVERNMENT AGENCY should grant ___________ 50% discount on rentals

falling due from _______________.

OPINION:

GOVERNMENT AGENCY is not obligated to grant a discount in rental payments even

for the period of the community quarantine. However, GOVERNMENT AGENCY may grant
______________ a grace period to pay rentals and amortization of rentals falling due within the
period of community quarantine.

JUSTIFICATION:

1. The Bayanihan to Recover as One Act (Bayanihan 2), 1 extending the effectivity of the
RA 11469 or the Bayanihan to Heal as One Act,2 only provides for a grace period
within which to pay rentals due as concession to lessees:

“Provide for a minimum of thirty (30)-day grace period on residential rents falling
due within the period of enhanced community quarantine, without incurring
interests, penalties, fees, and other charges.”

1 The Bayanihan 2 bill which extends the effectivity of RA 11469 was recently ratified by the Senate of the
Philippines on August 20, 2020 and transmitted to the Office of the President.

2 RA 11469 is only effective until June 24, 2020.

1
 Granting a 50% discount entails waiver of a portion of the rentals due. The above
provision mandates non-imposition of interest, penalties, fees or other charges on the
principal rental amount but does not provide or encourage any waiver of the principal rental
amount. While the law aims to provide a relief to lessees in the form of rental concessions, it
also does not deprive lessors of potential income. Further, the grace period provision under
RA 11469 covers only residential rents within the ECQ period. What is clear is that the law
only mandates the provision of a grace period for payment of rentals, not waiver of rentals or
grant of any discount.

2. DTI Memorandum Circular No. 20-31,3 clarifying earlier-issued DTI circulars on rental
concessions, provides that the 30-day grace period and amortization within 6 months
of cumulative rentals falling within the period of ECQ, MECQ and GCQ applies only
to:

(a) residential lessees;

(b) micro, small and medium enterprises or MSMEs; and
(c) other business sectors whose operation is not permitted during the period of
community quarantine.

If the lessee is not permitted to operate during the period of community quarantine,
the above circular only provides for a mandatory grace period and amortization of
cumulative rents, whether residential or commercial.

_____________ is still allowed to operate its business during the period of

community quarantine, however limited. While the DTI circular does not provide for a
specific provision on rental concessions for business sectors permitted to operate during the
period of community quarantine, the lessor may still extend the same concession as that
available to business sectors not permitted to operate within the same period. At most,
GOVERNMENT AGENCY may grant _________ a grace period and amortization of rental
payments, in adherence to the spirit and intent of the Bayanihan law.

3. __________ did not substantiate its claim of entitlement to a 50% discount on rentals
falling due from ______________.

__________ claims that it suffered losses in its general business units since the start
of the Covid-19 pandemic. However, it did not present any evidence to prove that it is
entitled to a 50% discount in rentals. There were no figures provided to prove that it had
suffered such losses to justify the amount of discount claimed. A 50% discount in rentals for
a 10-month period (almost 1-year rental) is very substantial such that _________ should be
able to justify entitlement to said discount. However, even if Prince Retail is able to support
its claim; still, the law and relevant circulars only mandates the provision of a grace period
and amortization of rental payments.

4. The Lease Agreement does not provide for any concession in rentals in case of force
majeure.

3 Amendment to the Supplemental Guidelines on the Concessions on Residential Rents and Commercial Rents
dated June 5, 2020

2
 The Lease Agreement provides that even “in periods of calamity, payments of the
rentals shall not be interrupted but shall continue to accrue even during any stoppage of the
business operations of either party for any reason whatsoever, including flood, typhoon,
power failure, labor disputes, riot, demonstration, civil commotion, or any disturbance
whatsoever.”4

The Lease Agreement is strict in that even the stoppage of business operations due
to force majeure does not bar the accrual of rentals, much less entitle the lessee to claim
any rental discount. However, the Lease Agreement should be read in conjunction with laws
and issuances enacted as emergency response to the Covid-19 pandemic. As such,
GOVERNMENT AGENCY may only grant Prince Retail, Inc. the grace period and option to
amortize rental payments before eventual expiration of the Lease Agreement.

RECOMMENDATION:

Given the foregoing, we recommend that instead of the requested 50% discount,
GOVERNMENT AGENCY consider granting ______________ a grace period to pay rentals
due and option to amortize payment of rentals falling due within the period of community
quarantine.

FOR YOUR CONSIDERATION.

4 Paragraph 17 of the Lease Agreement