DTI | DOF | grace period | COVID-19

Enhanced community quarantine

residential rent

commercial rent

loan

MSME

Micro, small and medium enterprises

Economic relief

Bayanihan to Heal as One Act

DTI and DOF impose 30-day grace period for payment of rents and loans

To provide economic relief during the COVID-19 crisis, DTI and DOF have imposed a mandatory 30-day grace period for payment of (a) residential rent; (b) commercial rent by MSMEs; and (c) loans.

Client Alert - 13 April 2020

Dear valued client,

To provide economic relief during the COVID-19 crisis, the Department of Trade and Industry ("DTI") has imposed a mandatory 30-day grace period for payment of residential rent and commercial rent of micro, small and medium enterprises ("MSME"). The Department of Finance ("DOF") has imposed a similar mandatory grace period for payment of loans.

Mandatory grace period for payment of residential and commercial rent

The DTI issued Memorandum Circular 20-12 which imposes a minimum 30-day grace period for the following payments:

  1. Residential rent falling due within the enhanced community quarantine ("ECQ"); and

  2. Commercial rents falling due upon MSMEs that temporarily ceased operations during the ECQ. An MSME is generally any business with assets whose total value is not more than Php 100,000,000.00.

The cumulative amount of rents falling due within the ECQ will be equally amortized in the 6 months following the end of the ECQ, and will be added to the rents due on such succeeding months, without interest, penalties, fees and other charges. The 30-day grace period consists of the 30 calendar days following the last due date of the rent that fell due within the ECQ. 

Further, no eviction for failure to pay residential or commercial rent due may be enforced within the 30 day period after the lifting of the ECQ.

Mandatory grace period for payment of loans falling due during the ECQ

The DOF has issued the implementing rules and regulations of Republic Act No. 11469 (otherwise known as the "Bayanihan to Heal as One Act"). The rules require lenders to grant a 30-day grace period for all loans with principal and/or interest falling due within the ECQ period. For example, if the loan payment is due on April 10, the lender must allow the borrower to pay the loan on or before May 10.

The rules cover all lenders, including but not limited to credit granting financial institutions under the BSP's supervision (i.e. banks, pawnshops), SEC, Cooperative Development Authority, GSIS, SSS and Pag-ibig Fund ("Covered Institutions").

The 30-day grace period is automatically extended if the ECQ period is extended. The borrower may pay the accrued interest for the 30-day grace period on staggered basis over the remaining life of the loan.  All Covered Institutions will not apply interest on interest, fees and charges during the 30-day grace period to future payments/amortizations of the borrowers.

Penalties for non-compliance

Lessors who refuse to give the 30-day mandatory grace period above-described may be punished with imprisonment of at least 2 months or a fine of at least Php 10,000.00, or both. Violations may be reported to the DTI for investigation.

Similarly, lenders who refuse to give the 30-day mandatory grace period above-described may be punished with imprisonment of 2 months or a fine of at least Php 10,000.00 but not more than Php 1,000,000.00, or both. Violations may be reported to the DOF for investigation.

How this affects you

Lessors and lenders who are affected by the above issuances should grant the mandatory grace period to their lessess and borrowers respectively in order to avoid the penalties therein, which include possible imprisonment. Lessors and lenders should also follow the general prohibiton on imposing interest, penalties, fees and other charges as a result of the grace period.

On the other hand, lessees and borrowers can take advantage of the mandatory grace period to give themselves economic respite from the ECQ and better manage their business finances.

Regards,

The Legal Tree team
Mobile: +63 908 633 5638
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