All about Rentals

Things to lookout for in a Tenancy Agreement

The scope of a tenancy agreement can be pretty comprehensive. From rights and obligations of each party, rent, lease term, payment arrangement, maintenance and repairs, option to renew, inventory and condition report. Parties are free to negotiate the terms and conditions that will govern their contractual relationship when entering into a tenancy agreement. Please ensure that you fully understand the nature and implications of the contractual terms you will be agreeing to before signing the tenancy agreement, or seek professional advice.

Here is an overview of the terms and conditions generally found in a tenancy agreement which would be useful to take note as you as you prepare to rent and negotiate.

Generate your own Tenancy Agreement template here.

The 3 main section of the Agreements:

1. The Schedule

2. The Operative Part

3. Annexures: Annexure A - a helpful guide for items to look out for at the end of the tenancy. Annexure B - Inventory List, and Annexure C - Condition Report, are suggested reports to be prepared pursuant to the relevant clauses in the Operative Part.

Items in each section:

1. The Schedule contains clauses relating to the main aspects of a tenancy for parties to negotiate, such as but not limited to rent, lease term, payment arrangement, etc. Where necessary, additional clauses can be incorporated into the tenancy agreement through relevant clause in the Schedule;:

• Agreement date

• Address of the premise/s

• Type of Property

• Name and details of parties; landlord, tenant, occupier/s

• Period of tenancy

• Rent

• Payment terms and details

• Fees payable

• Repairs

• Furnished, partially furnished, unfurnished

• Diplomatic clause

• Option to renew

• Condition of the premise/s

• Items to be done and provided by the landlord

• Special conditions if any

• Problem free period

2. The Operative Part contains generally applicable clauses that govern, amongst others, the day-to-day rights and obligations of parties;

• Premises and term: premise/s, period, rental amount

• Payment of rent and utilities, security deposit, telecommunications

• Immigration status of tenant and occupiers, compliance with Immigration Authority, indemnity, unauthorised occupiers.

• Maintenance of premises: fixtures and fittings, maintenance and repair, minor repair, maintenance of air-conditioners, cleaning and upkeep of premises, access to premises, no recovery for self-help remedy.

• Tenant’s obligations: no removal of items, no structural alteration or addition, hanging of pictures and paintings, no assignment or subletting without consent, no unauthorised storage, no addition or removal of locks, no pets, no smoking, use of premises, no illegal activities. Breach of legislation, compliance with management corporation, yield up premises, viewing of premises, sale with tenancy.

• Landlord’s obligations: taxes, quiet enjoyment, insurance, receipt, maintenance of premises.

• Termination, right to terminate, right of re-entry, default in rent, interest payable.

• Suspension of rent, damage or destruction of premises, right to terminate.

• Exclusion of liability, en-bloc notice, approval by mortgagee.

• Notices, service of notices, deemed service by certificate of posting.

• Applicable law, governing law, dispute resolution, special conditions.

• Inventory list, property condition report.

• Severability.

• Rights of Third Parties.

• Waiver.

• End of tenancy conditions, curtain cleaning.

• Definitions and interpretation of subject matter.

3. Annexures

• Annexure A: End of tenancy checklist, it is a helpful guide for items to look out for at the end of the tenancy.

• Annexure B: Inventory List, a description of the quantity and condition of each furniture, fixture and fitting within the Premises at the commencement of the Term. This Inventory List shall be prepared in duplicate and duly endorsed by the Landlord and the Tenant.

• Annexure C: Condition Report. The Tenant shall prepare this Property Condition Report in duplicate within thirty (30) days of the commencement of the Term which shall be duly endorsed by the Landlord and the Tenant. The Property Condition Report shall be conclusive evidence of the condition of the Premises at the commencement of the Term.

For further clarification on any of the above items, or terms and conditions, please seek professional advice or you may contact our real estate agents here.

Useful references:

• Council for Estate Agencies (CEA) Tenancy Agreement Templates for Residential Properties, HDB and Private Residential Property

• Checklist for Rental Transactions

Engaging a property agent for rentals

Great location, next to MRT, fantastic view, surrounded by amenities and facilities, cozy decor and nice furniture. What else could go wrong?

What if things start to break apart, who bears repair and maintenance costs, ambiguous dates from payment dates to notice period, unclear scope of rental terms and conditions…, these are some of the possible areas which are not discussed and negotiated when renting a place.

TLDR:

Suitability and issues. Besides facilitating the transaction, a property agent can assist with negotiating the terms and conditions of the rental to suit your requirements. A property agent can also advice on the rights of both tenant and landlord, roles and responsibilities of each party and the terms and conditions.

While the commission rate for property agents is not prescribed, property agents are not allowed to collect commission from more than one party in the same transaction. The commission rate and scope of work should be discussed before the start of any work.

Here’s an overview of the scope of work:

Tenant's Agent

• Check validity of tenant’s documents and passes

• Ensure that procedures are adhered to, such as legal and regulatory compliance

• Understand tenant’s requirements

• Search and enquire suitable listings

• Arrange viewings

• Negotiate offers

• Prepare letter of intent for lease if applicable

• Prepare tenancy agreement if applicable

• Go through tenancy agreement and explain the terms and conditions, its implications, rights of each parties, responsibilities and risk and make necessary amendments where necessary.

• Prepare inventory list and condition report, where applicable.

• Help tenant stamp the tenancy agreement

• Assist with the application of power supply, utilities where necessary

• Prepare inventory list and condition report, where applicable.

• Facilitate handover

Landlord's Agent

• Check documents, property details and ownership, and gather requirements if any

• Ensure that procedures are adhered to, such as legal and regulatory compliance

• Advertise listing, list rental property on portals, take and upload photos and videos

• Respond to enquiries

• Arrange viewings

• Check and verify tenant’s documents

• Assess tenant needs and suitability

• Negotiate and convey offers to landlord

• Check validity of tenant’s documents and passes

• Prepare tenancy agreement

• Go through tenancy agreement and explain the terms and conditions, its implications, rights of each parties, responsibilities and risk and make necessary amendments where necessary.

• Prepare inventory list and condition report, where applicable.

• Facilitate handover

How much to pay?

The commission rate for property agents is not prescribed and it is privately agreed with. Property agents are to act in the best interest of his/her client and are not allowed to collect commission from more than one party in the same transaction. The commission rate and scope of work should be discussed before the start of any work.

Some common practice:

One agent in the picture:

Landlord’s agent only. The landlord pays the agent one-month commission. Tenant does not pay any commission.

Tenant’s agent only. Either the tenant or landlord pays the agent one-month commission.

Two agents in the picture:

Both tenant and landlord have their agent respectively. Typically, the landlord pays the commission which will be split between the two agents. Alternatively, the landlord and tenant pays their agent the commission each respectively.

Note: no fixed rule but property agents cannot collect commission from more than one party in the same transaction.

Does a property agent's duties end after the tenancy agreement is signed and handed over to the tenant?

An agent's responsibilities typically end after the tenancy agreement is signed and the property is handed over to the tenant. Agents are not obliged to resolve landlord-tenant issues but may step in out of goodwill.

Agents can be engaged to manage the rental formally through an agreement including any fees payable in writing for certainty.

Useful references:

• Council for Estate Agencies (CEA) Prescribed Estate Agency Agreements

• Engaging a property agent for rental transactions

• Can agents resolve landlord-tenant issues?

What makes a valid Lease?

Features of a valid Lease:

1. Right to exclusive possession

2. Intention of parties to create a lease

3. Certainty or definite period of term

4. Landlord's interest is reversionary - assigns the interest to Tenant during the lease term

A lease can be created by written agreement such as a Tenancy Agreement which is know as a legal lease. A lease can also be created verbally or created by the action of parties, which is know as an equitable lease or lease in equity.

Legal lease must be in writing if the lease term in more than 3 years. If the lease term in more than 7 years including option to renew, it can be registered under the Land Titles Act. If the lease term is equal or less than 7 years, it does not need to be registered but a caveat may be lodged. Tenant has legal interest.

Equitable lease can be created verbally or by the action of parties and no contract is signed. An equitable lease is valid and enforceable in courts based on fairness and justice. The term of an equitable lease must not exceed 3 years. Tenant has equitable interest.

Capacity to lease:

• Landlord must be 21 years of age and above with mental capacity to own real property as landlord.

• Tenant must be age 21 years of age and above with mental capacity to lease real property. For age between 18 to 21 years old, tenant can only lease for a term of maximum 3 years.

• A Singapore registered company registered under the Companies Act can be the landlord or tenant under the company's name, which is also know as a corporate lease.

• The donee appointed in the Lasting Power of Attorney have the capacity to sign the lease if the landlord or tenant has lost the mental capacity.

• A foreign person needs to obtain approval from the Land Dealings Approval Unit (LDAU) if the foreign person wishes to lease a restricted property for more than 7 years including the option to renew.

Types of Lease

The 3 common types of lease:

1. Fixed term lease

2. Tenancy at will

3. Periodic lease

1. Fixed term lease;

• Has a definite duration.

• Ends automatically when the term runs out.

• Example: HDB or private residential lease.

2. Tenancy at will;

• Landlord allows tenant to occupy till either party terminated by giving reasonable notice to quit or by death of either party.

• May last for many years without payment of rent, and could be ended at any time for any or no reason at all.

• May exist for a temporary period where a tenant wishes to take possession of a property and the landlord agrees (early handover), but there is insufficient time in which to negotiate and complete a new lease.

• May exist if seller gives buyer an early handover before completion of sale. This tenancy at will ends when buyer becomes the legal owner, likewise if seller extends to stay after completion of sale.

• Tenancy at will terminates any time with either party gives a notice to quit.

• Example: Lease starts in a month's time and landlord passes the key to tenant today.

3. Periodic Lease/ Tenancy

• Year to year, month to month, week to week, determined by the term of the payment of rent with the same tenant.

• No fixed term.

• Can be created without writing.

• Either party may terminate a periodic tenancy before the period has ended, without incurring an obligation to pay for the months remaining on the lease.

• Example: no specified lease duration and tenant pays weekly rent to landlord.

Rights and obligations Landlord and Tenant

A covenant is an agreement between parties which can be express or implied. Express covenants can be found in the Tenancy Agreement whereas implied covenants are implied under common and statue law. Express covenants override implied covenants. Hence, it is important we go through the tenancy agreement thoroughly and negotiate any potential issues with the other party.

The implied covenants of landlord and tenant:

Landlord:

• To give quiet enjoyment to tenant where tenant is able to exercise the right of occupation and having the full benefit of it. Non-disturbance to tenant, cannot enter leased property anytime or as and when.

• Not to derogate the grant and prevent the tenant from using the place for the purpose of renting it. E.g. landlord leased the bedroom but refuses to give tenant the main door key.

• Premises must be fit for human habitation. Landlord must do necessary repair works, house must not be infested with insects or pests.

• Pay all taxes. Landlord pays property taxes, building insurance and statutory charges.

• Repairs. Landlord is responsible for external and structural repairs and repairs due to wear and tear.

  • Advance notice of 2 days in writing to view the state of repair or commence repair works.

  • Repair works must not be interfering with the occupation and use of the premises by the tenant.

  • Notice is not required for urgent works such as a burst pipe or fire.

  • Landlord has the right to enter twice a year to inspect the state of repair and to require the tenant to repair any defect - s93(1)(a) of Land Titles Act

  • To comply with any public notice or statutory requirement, Landlord and landlord's agent may enter at all reasonable times.

  • Landlord can re-enter and terminate the lease if rental is not paid in 30 days or if the breach of covenant continues for 30 days - s82(1)(d) of Land Titles Act.

Tenant:

• Payment of rent "without deductions whatsoever"

• Not to assign or sublet any part or all of the premises without seeking landlord's consent which shall not be reasonably withheld.

• Payment of all utility bills, internet bills, telecom bills, etc. for own usage.

• To allow landlord and landlord's serviceman to enter for inspection and repair.

• Not to make alterations.

• To use premises for permitted purposes only.

• To take reasonable care of the premises in a tenant-like manner except for fair wear and tear. Such as regular cleaning, taking care of blocked pipes/drains or chokes from usage.

• Not to commit waste.

Some common terms in the Tenancy Agreement

• Escalation clause - review of rent during lease term or expiry

• Rental clause - payment in advance or within certain number of days

• Covenant to allow access clause- such as viewings

• Deposit clause - condition on deposit money

• Charges clause - who pays what

• Repair clause - scope and definition of the extent of repairs

• Non-disturbance clause - provision on the occupancy when the property is sold or taken over by creditors

• Forfeiture clause - repossession

• Interest on arrears clause - interest on late rents

• Option to renew clause - first right/ option to extend lease

• Diplomatic clause - for expatriates

• En-bloc clause - provision to terminate lease if en-bloc goes through

Breach of covenants typical remedies:

• Damages. Usually settled via mediation, arbitration or tribunal - Small Claim Tribunal Court (SCT) for residential lease term less than 2 years.

• Specific Performance. A writ of distress/ seizure under Distress Act for the unpaid rent of up to 1 year though a court application by the landlord.

• Injunction. Landlord can forfeit the lease or eviction by applying to court for a writ of possession. The court will issue an injunction to prevent the tenant from entering the property after eviction.

Termination of lease:

• Expiration of lease term

• Forfeiture, repossession by landlord

• Notice to quit only for tenancy at will and periodic tenancy, must be in writing

• Mutual surrender by both parties

• Bankruptcy of tenant

• Merger where tenant buys over the property

• Frustration, Act of God

• Death of Tenant

• Predetermined or pre-termination clauses such as Diplomatic Clause or Constructive eviction clause - property becomes unfit for habitation due to landlord's actions or inconvenience has occurred.

Privity of Estate, assignment, novation and subletting:

Covenants binds successive parties as a lease is a proprietary right in land through the Privity of Estate. This means the buyer who is the new landlord cannot change any covenant in the tenancy agreement when the buyer buys with tenancy. Only legal lease will be passed on to the next owner, not equitable lease.

Assignment: where property is sold with tenancy and a change of landlord. No change of terms in the tenancy agreement, no consideration, need not stamp. Outgoing landlord transfers his reversionary interest to the incoming landlord by signing an assignment agreement. Tenant's consent is required to transfer the deposit from the outgoing to the incoming landlord. The tenancy agreement binds the incoming landlord via privity of estate.

Novation: change of tenant and no change of terms in the tenancy agreement. No consideration, need not stamp the novation agreement. Tenant must seek landlord's consent to transfer the lease to another tenant by signing a novation agreement. Landlord must not unreasonably withhold consent when a tenant tries to get consent to assign or sub-let. The novation agreement is a new agreement used to substitute the tenancy agreement by agreement of parties without changing the covenants in the tenancy agreement.

Subletting: Tenants can sublet the premises by seeking consent from landlord. The main tenant will be responsible for the subtenant. The subtenant pays rent to the main tenant and main tenant continues to pay rent to the landlord.

Subject to contract and Letter of Intent for Lease (LOI)

The "Subject to contract" is a useful label to express that the parties are still negotiating and have no intention to create a legal relation at this stage or until the final agreement is ready.

The Letter of Intent for Lease (LOI) is an offer from tenant to landlord stating the basic terms of the lease. It can be a contract if it is completed with the 3 elements of a contract - intention to create legal relations, acceptance, and consideration. The LOI is not final if it has 'subject to contract' labelled.

Private residential property rental regulations

Private residential properties are regulated by the Urban Redevelopment Authority (URA) of Singapore and the following rules apply:

• minimum 3 months, cannot rent out on daily basis like a hotel. Reduction from 6 months to 3 months from 30th June 2017.

• no transient occupiers that create disturbance and inconveniences to neighbors for company lease

• URA rules apply regardless if there is any tenancy agreement signed

• not allowed to create more rooms by partitioning or alteration of the layout

• occupancy cap: 10 sqm per occupant, up to a maximum of 6 no matter how large the unit is, including owner if owner living within the premises and renting out bedrooms

Useful references:

https://www.ura.gov.sg/Corporate/Property/Residential/Renting-Property

HDB rental regulations

• HDB Flats

  • minimum of 6 months for HDB Flats. Maximum of 4 occupants for 1-room and 2-room units, and maximum of 6 occupants for 3-room and larger units.

  • Renting out of spare rooms is not allowed for 1-room and 2-room units. Approval from HDB is needed for subletting of room, tenants must register within 7 days. No non-citizen quota restrictions.

  • Whole flat rental is allowed if MOP is fulfilled and with a minimum of 1 Singapore Citizen owner. HDB approval is required and Non-citizen quota applies: 8% for neighbourhood and 11% of block.

  • Whole flat rental is not allowed for Singapore Permanent Resident owners, or if the unit is within MOP. 2-room Flexi and those on enhanced lease buyback scheme are also not allowed.