SEPT.

5, 2011

NR # 2517B

Solons seek probe of unregulated mall rental rates

Lawmakers have called for a congressional inquiry into the high rental rates in many malls that have resulted in the high prices of food and beverages that are being sold to the public. Reps. Magtanggol Gunigundo I (2nd District, Valenzuela City) and Jeci Lapus (3rd District, Tarlac) have filed House Resolution 1542 directing the Committee on Trade and Industry to investigate the matter after receiving complaints from mall tenants about the high rentals rates. Majority of the Filipinos go to the malls at least once or twice a month. At the end of the day, it is they who pay the high prices of food and beverages inside the malls which were passed to them by owners, food outlets and restaurants that are complaining about the high rentals, Gunigundo said. Gunigundo said there have been allegations regarding absurdly high mall rental rates that drive retail outlets to pass these on consumers by way of higher prices or through giving them lesser quantities of goods or services. Gunigundo said there is a need for a congressional inquiry to look into the possibility of whether or not the conditions governing business operations particularly unregulated mall rental rates and rent escalations should remain a matter negotiated between lessors and lessees. Operators of these food and retail outlets justify their actions at increasing price tags or reducing serving sizes due to increasing overhead expenses caused primarily by mall rental rates that increase regularly at 10% annually and that they are forced to accept the escalation clauses marbled in lease contracts to preserve their businesses, Gunigundo said. Gunigundo said the escalation clause is a provision in the lease agreement contract in which the lessor requires the lessee to pay a higher aggregate rent by adjusting the annual base rent by an agreed method during the term of the lease agreement. Escalations are a form of additional rent where lessees are required to pay additional rent to the lessor over and above base rent in order to reimburse the lessor for increases in operating expenses and real estate taxes beyond the level established in the base year calculation, Gunigundo said. Lapus, Vice Chairman of the House Committee on Accounts, said on top of the basic rent, lessees are also required to pay a percentage rate of 15% of his or her gross

sales. The percentage rate is paid whenever 15% of the lessees gross sales are higher than the discounted rent as contained in the lease agreement, Lapus said. Lapus said aside from the 10% annual escalation of rent and payment of percentage rent when applicable, lessees are also paying other charges such as maintenance, airconditioning, common use service areas (CUSA), telephones, electricity, water and tenant association dues. These unregulated annual escalations of rent, percentage rent and other charges significantly affect the lessees overhead expenses. A direct consequence of high expenses is that lessees must operate on higher mark-up or the amount added to the cost price to cover overhead and profit, Lapus said. (30) lvc