5 clauses to look out for in a Tenancy Agreement
If you’re new to the rental scene, you’re bound to come across a list of unfamiliar terms. One of the items you shouldn’t overlook is your Tenancy Agreement (TA). Read on to find out what exactly it is, and what should you look out for.
Working towards the Tenancy Agreement
You’ve viewed a property, managed to drive the price down, and now want to ‘chope’ it. That’s where the ‘Letter of Intent’ (LOI) kicks in.
The LOI states the terms of rent that you and the landlord have agreed on verbally. Be as comprehensive as possible, and include details like the agreed rental rate, lease duration, terms of payment and any deposits, responsibilities of both parties, utilities, maintenance and other clauses.
The LOI should be signed by both tenant and landlord, with the tenant handing over a Good Faith Deposit, an amount equivalent to one month’s rent for every 12-month lease. This will become part of the security deposit or advance rental fee, after the Tenancy Agreement has been signed.
In rare situations where the tenancy does not go through due to disputes, or if you, as a tenant, decide to back out, the money here will be at stake. For the latter, you won’t be able to get your Good Faith Deposit back.
Now let’s explore what a Tenancy Agreement is.
What’s in a Tenancy Agreement?
The Tenancy Agreement is a more detailed, and legally binding, version of the LOI. It is prepared by the landlord, and spells out the details that both parties have mutually agreed on. It is important that the tenant understands every clause stated on the TA.
An outline of a Tenancy Agreement will include these details:
- Full name and contact address of both the landlord and tenant
- Address of property on lease
- Date of signing of the TA and the official start date of tenancy
- Agreed rental amount and payment schedule
- Payment details – typically listing out payment methods for rent
- Any additional fees to be paid (e.g. agent commission) – do ensure that you agree with the stated responsibilities of which party is to pay for agent commissions
- Inventory list of all items in the rental unit – do ensure that the items listed within the inventory list, and their condition, is as per stated. If there are discrepancies, ensure that the inventory list is updated
- Diplomatic Clause – typically for foreign tenants in case they get posted overseas and thus have to break their lease
It is important to note the rights and responsibilities of both parties in accordance to the TA. This includes (but is not limited to) issues regarding maintenance and repairs of the building structure and inventory items, utilities usage and charges, additional fixtures to the existing building and structure, access to property by landlord and technical service crew, insurance matters, stamp duty, termination clause, plus late payment or evasion of rent clause. Beware of any clause, term or demand that you do not feel comfortable with. Seek detailed and written clarification on clauses you find problematic or need further elaboration. Do not sign, if you do not agree to any of the clauses stated.
What to look out for in the Tenancy Agreement
Here are some clauses which you will need to take note of especially, when it comes to signing of a TA.
1. Rental payment: Missing a due date or unable to continue paying
The TA should have a clause stating when the rent is to be paid, and what happens when rent is paid late or even defaulted. If you only pay up after a grace period, an interest will be imposed on the amount unpaid. The clause would also state what happens in the event you are unable to carry on paying the rent. Be aware of the terms of actions that will be taken under such circumstances – you wouldn’t want to be left homeless, or worse.
2. Diplomatic Clause and Early Termination of Lease
If you are a foreigner to Singapore, and there is a chance that your job might require you to be transferred out, be sure to have a Diplomatic Clause included in your TA. This will allow you to terminate the lease prematurely without penalty, in the event you are required to leave the country permanently for work. In most cases, it can be exercised after 12 months into the lease term. This clause can be linked to a Reimbursement Clause, whereby the tenant would reimburse part of the agent’s commission, should the Diplomatic Clause come into action. The reimbursement amount is prorated accordingly.
3. Minor repairs and maintenance
This clause spells out what happens when wear and tear occurs to the property, resulting in minor damages. It specifies an amount above which the landlord is responsible for the repairs. For example, if the amount is stated as S$150, a tap repair costing S$120 would be covered by the tenant, but a $160 roof leak would require the landlord to foot the bill. Damage due to negligence is usually not covered under this clause. The specific amount, together with the coverage of the damage, will have to be agreed upon by the two parties.
4. Privacy and access to premises
This clause protects both the tenant’s privacy, along with the landlord’s authority over the property. It states a list of purposes under which the landlord is allowed access to the property premises. This usually includes repair and renovation work, and arrangement of viewings for future tenants. The clause should advise the notice period the landlord needs to provide before appearing at the property.
5. Option to renew or extend lease
This clause allows the tenant to extend the lease for another term, subject to prior notice. If you tell your landlord you’d like to renew or extend the lease, the landlord will prepare a contract for extension. The clauses in the new contract should be the same as the standing one, unless otherwise specified. However, any new contract to be signed would have negotiations opened.
What to pay and where to sign
Apart from the Good Faith Deposit, the next amount the tenant would have to pay upfront would be the Security Deposit. This is paid during the signing of the TA, upon both parties’ agreement of the listed terms and conditions. The Security Deposit is usually a multiplication of the monthly rent, and can be used to pay for the final month(s) of stay. It can also be carried over from the Good Faith Deposit.
Separately, in Singapore, there is a stamp duty applicable for the processing of documents in relation to the rental. This fee is paid by the tenant.
For both the TA and LOI, it is advised that the signing be done in the presence of both tenant and landlord, and possibly a third-party witness, such as the agent. For payment matters, the tenant and landlord should also designate a fixed and regular method, such as through GIRO or online banking. This is to ensure that the monetary transactions are clear on record. Avoid any payment, be it deposit or regular rent, made via cash terms, unless necessary.
Tenant–Landlord disputes: What can you do?
Of course, it is best to avoid any dispute between you and your landlord. Should any misunderstanding occur, refer to the TA, and attempt to settle the differences amicably. Otherwise, you may consider some avenues to move forward.
If you have engaged an agent to broker the deal, you could approach him/her for advice. Otherwise, reach out to a third-party mediator, such as the Singapore Mediation Centre, or the Consumer Association of Singapore (CASE), to resolve any issue. These Alternative Dispute Resolution councils have helped dissipate the majority of tenancy disputes in Singapore. You may also bring your case up to the Small Claims Tribunal or Singapore Civil Court, if you deem the dispute necessary to be heard under jurisdiction.
Singapore does not have a comprehensive law, or set of laws, governing landlord-tenant relations. Therefore, what is specified in the Tenancy Agreement is important, to protect the rights of both tenant and landlord. Be clear, be safe, and enjoy your stay in your new haven.