FORCED to suspend services for yet another month, co-working operators are facing more pressure to provide their members with rental relief.

But many of these operators are themselves caught in years-long leases and still liable to pay rent to office landlords, exacerbating their financial woes amid Covid-19.

The Business Times understands from co-working members that major operators including JustCo and WeWork continued to charge membership fees in April, even though most members were not able to use the space once circuit breaker measures were in effect.

Only The Working Capitol is known to have waived fees for April, while JustCo has announced rebates for members for May. With the extended circuit breaker, The Working Capitol plans to roll out additional relief measures for members in May, while a smaller operator, Spectrum, is still reviewing whether to do so.

But it is not clear if other operators now plan to continue charging members fees in May. WeWork declined to comment, while IWG would only say that it will assist customers with financial difficulties where it can. O2Work and The Work Project did not respond by press time.

The uncertainty has frustrated co-working members. Some told BT that they do not intend to fulfil payments for May, since they are unable to use the space for the entire month.

One WeWork member said the firm did not offer any discounts or deferred payment options despite the concerns she raised. If she stops paying the fees, the member risks losing a deposit of over S$14,000, worth two months' fees.

"This is bad for small businesses and startups in Singapore, which WeWork claims it is trying to support… On enquiries, they have a very placeholder response, it's very cold," said the member, adding that she has insufficient cash flow to pay May's fees.

Another WeWork member which decided to terminate its membership in April said: "Part of the reason why we decided to set up at WeWork in the first place was because of its tech-focused member network, community spirit and industry events."

According to email seen by BT, WeWork told a member that it is not offering a pause in membership fees because its premises are still "operational".

Yet, it is not clear if co-working spaces are allowed to operate under current restrictions. When asked about this, an Enterprise Singapore spokesperson said that all co-working spaces "must be closed unless they have received an exemption". She did not respond on whether any have been granted exemptions.

Members of other co-working spaces are similarly upset. Public relations agency owner Oo Gin Lee told BT that the co-working space he works at, O2, could do more to offer support.

"They said that they are talking to their landlord UOL, but the government has already said that the landlords must pass on the rebates to co-working firms, so how is that even an issue?... Through no fault of our own, we can't use the space now. So why should we continue paying fees?" he questioned.

Office landlords Frasers Property, City Developments, CapitaLand and APM Property Management, which manages Suntec City, all told BT that they are committed to passing on property tax rebates to their co-working tenants.

The Work Project, which has five co-working spaces in the Central Business District, said that it aims to pass on property tax rebates from its landlord to its members, once received.

Spectrum, which has about 50 member organisations at its Duo Towers space, told BT it too will be doing the same.

Can members in non-essential services refuse to pay fees to co-working firms because of the circuit breaker measures? Jennifer Chia, head of corporate real estate at law firm TSMP, said members may be able to do so if the circuit breaker measures amount to a "legal frustration of contract", meaning the contract is impossible to perform. But the law "has no pat answers" amid this pandemic, she added.

The relationship between co-working operators and end-users is not a typical landlord and tenant one. Rather, the end-users are usually considered members because co-working firms offer a suite of services, somewhat similar to gym memberships, she explained.

"It would be a more nuanced question in the case of members in non-essential services as the operators would arguably not be able to make the space available to its members who are by law required to work from home," Ms Chia said.

Another lawyer who is close to the co-working industry told BT that disgruntled members may have a compelling case if they take the matter to the court.

"My view is that if the contract says that members have to pay, then they have to pay the fees as a contractual obligation. But if the members take it to court, the court is likely to rule in their favour, because if the place is closed, then members can't do anything, it's not their fault," he said.

It is not clear if members may be able to demand deferments. The recent COVID-19 (Temporary Measures) Act allows an occupant to delay licence payment for the affected months, provided it gives a notification of relief to the operator, said Koh Chia Ling, managing director of OC Queen Street. "Still, payment must be made later. On receipt of the notification, the operator cannot terminate the contractual licence for non-payment," he said.

Co-working operators are now in a tricky position, as they remain on the hook for rental payments.

A JustCo spokesperson, for instance, told BT that "all JustCo membership obligations will remain committed, just as JustCo is required to its own rental obligations as well."

How co-working operators handle this delicate situation now could impact their customer retention down the road, market watchers told BT. Disgruntled members may not renew contracts, while potential ones may be deterred by a seeming lack of empathy from operators.

"The pandemic is a global stress test of the co-working industry and it will weed out many of the subpar operators who underinvested in their communities," said Jonathan O'Byrne, founder of Collective Works, whose co-working business was bought by a CapitaLand joint venture.

Customer retention is especially critical given the challenging business prospects after the pandemic.

Demand for co-working may drop after the crisis because of existing members downsizing, said Calvin Yeo, head of office advisory at Knight Frank Singapore. "Some members may even cease their business ventures and not renew entirely. Renewed or new memberships may be for shorter terms, so as to mitigate the cost exposure in the event of a resurgence of Covid-19," he noted.