What Savvy Landlords Look Out For When Signing A Tenancy Agreement
Updated: Apr 22, 2020
Have you, your friend or family member ever had to rent out an apartment in Singapore?
If so, you would have had to sign a tenancy agreement. So, what is a tenancy agreement?
It is a contract between a landlord and a tenant. In this contract, the landlord is essentially agreeing to grant a lease of a specified property to the tenant for a certain period of time.
What is a lease?
Although there is some debate over the nature of a lease in legal terms, it is safe to say that a lease is a sort of ownership interest in the leased property. Thus, the tenant can be considered a sort of owner of the apartment for the duration of the lease.
Why a Tenant can be considered as an Owner?
The reason why the tenant is referred to as an “owner” is because the tenant has exclusive possession of the leased property for the duration of the lease e.g the sole right to possess and occupy the leased property to the exclusion of the landlord and others subject to certain exceptions). One could imagine the landlord being the main owner and the tenant being a sub-owner. The tenancy agreement determines and regulates this relationship between them.
Just this short introduction reveals how tenancy agreements involve specific concepts, which translates into somewhat complex terms which laypeople may find difficult to understand.
Despite this difficulty, it is important that every potential landlord understand such terms in order to be clear about what they are getting themselves into.
Legal obligations are binding, and could potentially be very detrimental if they are particularly one-sided against the tenant in favour of the landlord. Thus, it is important for potential tenants to understand the terms of the agreement they are signing. This article may help you by giving you a preliminary understanding of common terms found in a tenancy agreement.
Structure of a Tenancy Agreement
A basic residential tenancy agreement will likely contain the following provisions. These provisions are arranged largely chronologically, from the signing of the agreement to rights and obligations to be performed and observed by both parties in relation to the lease, to the termination of the lease and other ancillary issues:
Date When the tenancy agreement is signed;
Personal details Full name, identification number and contact address of the landlord and tenant;
Address Location of property being leased by the landlord to the tenant;
Term of lease The period of time for which the property will be leased to the tenant (including the commencement and expiry dates of the term);
Security deposit The sum of money to be paid by the tenant to the landlord and held by the landlord as security to ensure that the tenant performs its obligations under the tenancy agreement. The landlord is obliged to return the security deposit to the tenant less any authorized deductions upon the expiry of the lease term;
Payment Amount of rent, payment schedule, additional fees, and other payment details;
Use of premises What the property may be used by the tenant for;
Maintenance Who is responsible for maintaining the property, and other details such as how maintenance should be carried out;
Utilities Who is responsible for paying electricity, water, gas and telephone charges for the leased property;
Tenant’s covenants The tenant’s obligations to the landlord which are numerous;
Landlord’s covenants The landlord’s obligations to the tenant which usually consist of the obligation to provide quiet enjoyment to the tenant (see below for an explanation of what quiet enjoyment means) and to pay maintenance fees and property tax for the leased property;
Termination of lease The circumstances under which the lease may come to an end
Suspension of rent The circumstances under which the tenant need not pay rent
Notices When and how tenant and landlord should give notice to each other (see below for an explanation on what a notice is)
Default of tenant What happens if the tenant fails or refuses to perform his/her obligations under the tenancy agreement
Stamp fees Who is obliged to pay stamp fees on the tenancy agreement. The tenant is obliged to pay;
Applicable law and jurisdiction What law governs the tenancy agreement (for example, Singapore law)
Common Terms in Tenancy Agreements
Some of the common terms used in tenancy agreements with brief explanations of what they mean are set out below
An assignment means a legal transfer of right(s) or obligation(s) to another. For example, if X is supposed to pay rent to Y, X has an obligation to pay rent to Y, while Y has a right to collect rent from X If Y assigns his right to collect rent to Z, he transfers the right to collect rent to Z. Thus, X now has an obligation to pay rent to Z, and Z has a right to collect rent from X. Tenancy agreements commonly contain a provision that prohibits the tenant from assigning the lease to another without the landlord’s consent.
Breach of contract
A contract is a term used to refer to a promise that is legally enforceable. For example, if X agreed to pay rent to Y, X actually promises to pay rent to Y. A breach of contract is when the promise has been broken. For example, if X agreed to pay rent to Y but fails to do so, he has breached the contract to pay rent.
A diplomatic clause is a clause that allows the tenant to terminate the lease before the lease term expires without having to suffer any penalty. In cases where there is no diplomatic clause, the tenant may be required to continue to pay the agreed monthly rent even if he is no longer living there. The diplomatic clause thus protects the tenant from such unnecessary payments.
However, this clause only allows premature termination of the lease if the tenant needs to leave the country permanently for work or if the tenant is deported from Singapore or not permitted to remain in Singapore and supporting documentary evidence will have to be provided to the landlord. Some diplomatic clauses may also stipulate that the right to terminate only kicks in after the lapse of a certain period of time of the lease term. For example, a diplomatic clause may provide that the tenant may only prematurely terminate the lease 12 months after the commencement of the lease term. An additional 2 months notice must be given to the landlord. If the tenant terminates the lease any time before that, the tenant may have to pay damages/compensation to the landlord for breaching the clause. A diplomatic clause is therefore particularly appropriate for foreigners working in Singapore since they could be required to be transferred overseas or their employment in Singapore may be terminated at any time.
An indemnity is a promise by X to pay for any losses that Y may suffer as a result of X’s actions. This appears most commonly in tenancy agreements in the form of a promise by the tenant to indemnify the landlord for any losses that the landlord may suffer due to the tenant’s actions. For example, if the landlord suffers penalties for breaching the applicable laws or regulations because the tenant improperly installed or carried out certain works, the tenant will have to pay the landlord the sum that the landlord was penalized.
Notice refers to the communication of a certain fact within a stipulated period of time. The purpose of notice is to give the other party advance notice of your intentions, especially when your actions may affect them. This term usually appears in termination clauses which stipulate that the tenant or landlord must give to the other a certain number of months’ written notice of their intention to terminate the lease. For example, if the tenant wants to terminate the lease at the end of December, and the tenancy agreement requires 3 months’ notice to be given, the tenant must give the landlord notice of his intention to terminate the lease latest by October.
This refers to the landlord’s obligation that the landlord (and those lawfully claiming under him/her) will not disturb the tenant’s occupation, use and enjoyment of the leased property. It should be noted that the term “quiet enjoyment” does not refer to the absence of noise at or around the leased property.
Right of re-entry
A right of re-entry clause gives the landlord the option to re-enter the leased property, take over possession and terminate the lease if the tenant breaches the terms of the tenancy agreement. Tenancy agreements commonly provide that the right of re-entry may be exercised by the landlord when the tenant fails to pay his rent. In such cases, the landlord has the right to re-enter the leased property after service of a notice to the tenant to rectify his/her breach(es) and failure by the tenant to rectify the stipulated breach(es), and the act of re-entry effectively terminates the lease.
A waiver is an act which shows one party’s intention to give up his right to claim against another party for that party’s breach of obligations. For example, if the tenant fails to pay rent for a month, the landlord may gratuitously decide to waive the breach after finding out that the tenant was going through financial difficulties. The landlord may not in the future change his mind and decide to claim the money from the tenant. Because this entails giving up a right, a waiver must be so clear that it could objectively be considered to have conveyed an intention to give up a right. Any waiver should therefore be in writing. The term “waiver” is commonly found in waiver provisions in tenancy agreements which provide that any delay or omission by the landlord in enforcing its rights against the tenant does not amount to a waiver by the landlord of those rights, and