HOUSING BOARD SHOP PREMISES (Rent increase on changes in tenancy)

Mr Ho See Beng asked the Minister for National Development whether there is a limit to the increase in rent of Housing and Development Board shophouses when tenants of such premises are involved in the change of ownership of business and names of tenants.

Mr Teh Cheang Wan: Mr Speaker, Sir, shopkeepers' requests for change of trades, inclusion or change of partners, are usually approved subject to increase in rentals to prevailing market rates for that area. However, total assignment of the premises will not be allowed. In this case, the registered tenants will have to terminate the tenancy and return the shops to the Housing Board.

Mr Ho See Beng: Sir, does the Minister not think that the increase in rentals to prevailing market rates or to neighbourhood rates obtainable could do an injustice to the tenants, because no two situations are absolutely identical, because one location may be better than the other?

Mr Teh Cheang Wan: Sir, I agree with the hon. Member that no two situations are identical. However, the assessment of rentals for shops is usually based on the prevailing rates in the surrounding area. If, for example, in a particular neighbourhood the tender for rentals for a provision shop is $800, then we look at it this way. If the particular shop premises that we are considering raising the rental is less favourably located, then the rental will be less than $800. But if that particular shop is better located, then the rental will be higher than $800.

I might add that the reason for the reassessment of the rental is this. The Housing Board policy on tendering out shops is to base the rental on the highest tender for that particular trade. It is not the highest tender for the shop. Let us say in the Neighbourhood centre we have a number of shops for rent. We usually try to provide the widest range of services possible so that the residents will have a barber shop to go to for a haircut, a bank to bank in their money, and perhaps a pet shop to purchase their birds. So for a shop to sell four digit lottery, the tenant like the Turf Club usually pays the highest rent. For a bird shop, the tenant pays a low rent because he cannot afford to pay a high rent. So if the HDB rents out a shop to the Turf Club, the Club pays a high rent. And if the HDB rents out a shop to a barber, the rent is low. That is the reason why we cannot allow a barber shop to change its trade to, say, a bank or a finance company because that would mean a great difference in the rental. If it wants t change its trade to a bank, then it will have to pay a higher rental. That is the reason why, when a shopowner requests a change of trade, an upward adjustment of the rental is involved.

Even though the Housing Board premises are not rent-controlled premises, we do not adjust the rental upwards if the market rental has been increased in that area. But if a shopkeeper wants to assign the shop to other people and thereby collect tea money, it will not be allowed by the Housing Board. That is the reason why we find that the shopkeeper usually takes in new partners first and, after a while, transfers the name of the shop to his new partners. This is, in fact, a roundabout way of trying to assign his shop. In such a case the Housing Board will say, "It is not allowed. If you want to assign the shop to your new partner which you have taken in, then you have to surrender your premises back to the Housing Board.because you will not be allowed to take the tea money."

Mr Ho See Beng: Sir, based on the Minister's own argument, would he agree that under the circumstances the HDB can overcharge or undercharge the tenant?

Mr Teh Cheang Wan: Mr Speaker, Sir, theoretically yes. But, in practice, as I explained earlier, it is not done usually.

Mr Ho See Beng: Then why is it necessary for the HDB to charge $500 as transfer fee for administrative work?

An hon. Member: Tea money!

Mr Teh Cheang Wan: Sir, this is administrative charges. I read in the newspapers today that fees up to $30,000 are being charged. Generally there is no complaint about this charge of $500.

Mr Ho See Beng: Is this transfer fee applicable to big and small businesses having their premises in Housing Board estates?

Mr Teh Cheang Wan: Yes.

Mr Ho See Beng: Sir, I would like to ask the Minister this. Recently, Singapore Finance was taken over by Hong Leong. Is he aware that there was a transfer fee?

Mr Teh Cheang Wan: Sir, when the tenancy is in the name of a company and there is no change of name, then there is no transfer of tenancy. For example, if Singapore Finance has a branch in Toa Payoh and the take-over company continues to use the name of Singapore Finance for that shop premises, then there is no transfer of tenancy at all. But if Hong Leong wants to change the name of that shop to "Hong Leong Finance Company", then of course the HDB will adjust the rental for that premises.