On the afternoon of February 19, Lian Dongqing, deputy director of Tianjin Finance Bureau, and Liu Zhi, deputy director of the State-owned Assets Supervision and Administration Commission (SASAC) of Tianjin People’s Government, introduced the policy of rent concessions granted to small and medium-sized enterprises (SMEs) in Tianjin at the press conference on the prevention and control of the novel coronavirus pneumonia (NCP).
“Article 7 of ‘21 Measures for Benefiting SMEs’ provides that ‘rent concessions shall be given to SMEs. For SMEs that rent state-owned commercial property for their operation and public-builtsupporting food markets, the rent for the first three months shall be exempted and for the second three months halved. For SMEs that rent business premises from non state-owned landlords, the landlords shall be encouraged to reduce the rent, and the specific matters shall be settled by both parties through negotiation,” Lian said.

To ensure timely and smooth implementation of this policy, Tianjin Finance Bureau, after soliciting opinions from all parties, issued the Detailed Rules of Municipal Administrative Entities and Public Institutions for the Implementation of the Policy of Rent Concessions for SMEs on February 13, which give detailed interpretation of the policy of rent concessions implemented by municipal administrative entities and public institutions and their enterprises.

       1.Define the scope of the policy. The lessors are administrative entities and public institutions or their enterprises, and the lessees are SMEs and public-built supporting food markets. Administrative entities and public institutions at the district level shall follow suit.

2.Clarify the starting and ending time of the policy. From the date of the issuance of No.1 [2020] of the General Office of Tianjin Municipal People’s Government, the policy shall be implemented within 6 months. The rent for the first three months shall be exempted and for the second three months halved. The specific implementation time can be agreed by both parties on the basis of the original lease contract within the time limit stipulated by the policy (i.e. micro adjustments are possible).

3.Define the basis for qualification confirmation. SMEs shall be confirmed according to the Regulations on the Classification of Small and Medium-sized Enterprises, issued by the Ministry of Industry and Information Technology, the National Bureau of Statistics, the National Development and Reform Commission and the Ministry of Finance in 2011, while public-built supporting food markets shall be confirmed according to the approval documents of people's governments in all districts and their functional departments and sub-district offices (administrations).

4.Simplify the approval procedures. Items related to rent concessions shall be approved and recorded by relevant authorities and rental units, without the need to report to the Tianjin Finance Bureau.

5.Clarify the way of rent concessions. If the rent has been paid, it shall be deducted from the subsequent unpaid rent after both parties reach an agreement through negotiation, or returned directly according to the lessee's request. If the rent hasn’t been paid, the lessor shall directly reduce or exempt the rent for corresponding months according to the lease contract.

6.Ensure implementation of the policy.

“After the promulgation of the ‘21 Measures for Benefiting SMEs’, Tianjin SASAC made specific and detailed measures immediately,” Liu said. On February 8, enterprises managed by Tianjin SASAC and entrusted by the city to the SASAC and state-owned assets supervision and administration departments of all districts issued the Notice of Tianjin SASAC on the Implementation of Several Measures to further interpret and clarify relevant policies and ensure the implementation of preferential policies for enterprises.

The Notice points out: state-owned commercial property for operation means that property right holders shall be state-owned and wholly state-owned enterprises managed by Tianjin SASAC and entrusted by the city to the SASAC, or affiliated to state-owned legal person enterprises and wholly state-owned enterprises in Tianjin. As for enterprises beyond the above scope, it is suggested that Article 7 be implemented : for SMEs that rent business premises from non state-owned landlords, the landlords shall be encouraged to reduce the rent, and the specific matters shall be settled by both parties through negotiation. And SMEs shall be classified according to the Notice on Issuing the Regulations on the Classification of Small and Medium-sized Enterprises. To ensure that SMEs enjoy preferential policies as soon as possible, enterprises managed by Tianjin SASAC and entrusted by the city to the SASAC are required to implement decision-making procedures by themselves according to relevant regulations on state-owned assets supervision after confirming that the lessee is eligible to enjoy those policies. All this aims at reducing the decision-making steps, shortening the handling cycle and speeding up the handling process.

The policy of rent concessions involves 37 enterprises managed by Tianjin SASAC and 6 enterprises entrusted by the city to the SASAC. According to incomplete statistics, the area of real estate rented out by those enterprises each year exceeds 10 million square meters and the annual rental income is about 2 billion yuan or more. After preliminary estimation, the amount of rent concessions this time is over 500 million yuan. For example, TEDA Investment Holding Co., Ltd, Tianjin Bohai Chemical Industry Group Co., Ltd, Tianjin Textile Group (Holding) Co., Ltd, Tianjin Bohai Light Industry Investment Group Co., Ltd and Tianjin Zhonghuan Electronic Information Group Co., Ltd have reduced rent by about 320 million yuan, benefiting nearly 1,000 SMEs. Detailed statistics on other enterprises are in progress.

Q: If the lessee rents the property not owned by state-owned enterprises and wholly state-owned enterprises in Tianjin, can he enjoy the policy?

A: For enterprises who rent properties owned by state-owned enterprises and wholly state-owned enterprises in Tianjin, we require them to implement the policy unconditionally and resolutely. For enterprises who rent other properties beyond the scope specified in the lease contract, it is suggested to implement Article 7: for SMEs that rent business premises from non state-owned landlords, the landlords shall be encouraged to reduce the rent for the tenants, and the specific matters shall be settled by both parties through negotiation. This is because other property rights are mostly held by share-holding enterprises with a high degree of marketization, which need to adhere to the market-based operation and perform the decision-making procedures according to laws and regulations.

Q: According to the lease contract, if the remaining lease period is less than 6 months but the lease is still to be renewed or transferred to others, how should the policy be implemented?

A: The lease to be renewed or transferred to others shall be defined according to relevant regulations of the leasing enterprises when the contract expires. In principle, the policy of "three-month exemption and three-month halving" will be implemented only once for the same leased property.

Q: If the lessor collects rent from the lessee for more than one year at a time, what should they do?

A: It is suggested that the rent shall be deducted from the subsequent unpaid rent after both parties reach an agreement through negotiation. If the amount of the subsequent rent is insufficient to deduct or the lessee requests for the rent return, the lessor shall directly return it.

Due to the epidemic, state-owned enterprises are also facing the pressure of production and operation. It is the critical moment for those enterprises to highlight the sense of responsibility and fulfill their social responsibilities. State-owned enterprises expressed that they would “overcome all kinds of difficulties and make every effort to reduce the rent for eligible SMEs and ease the burden on them.” Considering the impact on the production and operation indexes of leasing enterprises due to the policy of "three-month exemption and three-month halving", Tianjin SASAC will make overall consideration when assessing the enterprises at the end of the year, and may appropriately reduce the performance indexes or regard the amount of rent reduction as their income and profit.

Q: Can individual businesses and micro-enterprises enjoy the policy of "three-month exemption and three-month halving"?

A: According to Tianjin Development and Reform Commission, this policy is only applicable to SMEs. For individual businesses, we suggest that both parties should negotiate and encourage the lessor to give appropriate support. The Notice on Issuing the Regulations on the Classification of Small and Medium-sized Enterprises points out that SMEs include medium-sized, small and micro-enterprises, so micro-enterprises are eligible to enjoy the policy.

Q: What procedures should the lessor and lessee perform when implementing the policy of rent concessions?

A: For eligible rental properties, we have three steps to perform the procedures. First, both parties shall communicate with each other in advance. The lessee shall submit a written application for rent relief to the lessor, and the lessor shall specify the handling documents provided by the lessee. Second, the lessor shall examine and determine whether the lessee meets the standards of the Notice on Issuing the Regulations on the Classification of Small and Medium-sized Enterprises. Third, according to the regulations on the management of real estate and land of state-owned enterprises, after the leasing enterprise performs the internal decision-making procedures, both parties shall finally perform the specific procedures.