How to draft a Tenancy Agreement to your advantage?
6 Things you need to know about the Tenancy Agreement in Singapore
Renting a property in Singapore involves signing a tenancy agreement, which serves as a legal contract between the landlord and tenant. Whether you are a first-time tenant or an experienced tenant, understanding the key aspects of a rental tenancy agreement is crucial to ensure a smooth and mutually beneficial renting experience.
Singapore’s rental market is highly regulated, providing a framework that protects the rights of both landlords and tenants. By understanding the intricacies of rental tenancy agreements, you can navigate the rental landscape with confidence and make informed decisions.
Here are six important things that every tenant should know about rental tenancy agreements in Singapore. Furthermore, we will discuss the legal requirements, dispute resolution mechanisms, and the importance of seeking professional advice when necessary. Armed with this knowledge, you can safeguard your rights, fulfil your obligations, and maintain a positive and harmonious relationship with your landlord.
Whether you are embarking on your first rental experience or seeking to enhance your understanding of rental tenancy agreements, this article will serve as a comprehensive guide to ensure a smooth and successful tenancy in Singapore.
1. Key Clauses in a Rental Tenancy Agreement
A rental tenancy agreement in Singapore typically contains several key clauses that govern the rights and responsibilities of both landlords and tenants. These clauses may include:
a. Rent Obligation and Payment Terms:
This is a common clause in most agreements. It should clearly state the monthly rent amount, the due date payable, and the accepted payment methods. It should also outline penalties for late payment and grace period (if applicable).
Your Tenancy Agreement should also include the procedures for any future rent increments (if applicable), should you wish to further extend your length of stay.
b. Security Deposit:
The agreement should specify the amount of the security deposit and the conditions for its return at the end of the tenancy.
While there is no stipulated amount for the Security Deposit, typically the market practise is 1 months’ rent for a 1 year lease and 2 months’ rent for a 2 year lease.
The Security Deposit is usually used to cover the cost of replacing or repairing any damaged items during your stay at the property.
In Singapore, the usual practice is to hold the deposit and return it within a specified period after the tenancy ends, subject to deductions for any outstanding rent or damages to the property.
c. “Quiet Enjoyment” and “Exclusive Possession”:
Also commonly included in tenancy agreements, this clause requires the landlord to provide tenant with exclusive possession and the freedom to live in the property without any disturbance from strangers, including the landlord.
This clause also means that your landlord will have to request for your permission to enter the premises. For example, viewing for potential tenants and/or buyers, minor renovations and/or repairs.
d. Maintenance and Repairs:
The responsibilities for property maintenance and repairs should be clearly defined. Generally, tenants are responsible for day-to-day maintenance, while landlords are responsible for major repairs and/or structural issues.
Do note that, should the damage be caused by your own negligence/fault, you will need to bear full responsibility for the said damage.
e. Diplomatic Clause (for Early Termination of Lease):
A Diplomatic Clause allows for the lease to be terminated before it expires at a predetermined period (or times) with a mutually agreed notice period without penalty.
This is particularly important for foreigners living in Singapore indefinitely. This clause safeguards the tenant in the event he/she is unable to continue living in Singapore (for example, if he/she is being transferred out of Singapore due to work or is being terminated by his/her company during the period of tenancy).
In most cases, the Diplomatic Clause can only be exercised after 12 months into the rental period.
Should you decide to include the Diplomatic Clause in your Tenancy Agreement, your landlord will likely include a Reimbursement Clause.
Under the Reimbursement Clause, you will need to reimburse your landlord the real estate agent’s commission, should you exercise the Diplomatic Clause. As your landlord has paid the agent’s commission in full, you will need to reimburse part of the commission pro-rated when you terminate early.
f. Sale with Tenancy
This clause commonly found in Tenancy Agreements will state if a property will be sold with tenancy.
For example, if the said property is sold with tenancy, and you are the current tenant, you may continue to live in the property until the end of your lease, under the same stipulations and conditions previously agreed.
If the property is sold without tenancy, and the new owner wishes to move in, the Tenancy Agreement will be terminated and you will have to vacate the property within a certain timeframe.
g. Subletting and Alterations:
The agreement should outline whether subletting is allowed and any restrictions or permissions required. It should also specify whether tenants are allowed to make alterations to the property.
h. En bloc Clause:
Most Tenancy Agreements in Singapore will also include the Enbloc Clause. This clause gives the right to landlords to end the lease early without any penalty in the rare event if the property undergoes an Enbloc sale.
Understanding these key clauses is crucial to avoid any misunderstandings and disputes during the tenancy period.
2. Stamp Duty and Other Legal Requirements
In Singapore, rental tenancy agreements are subject to stamp duty, which is a tax levied on the legal documents executed for specific transactions. The stamp duty amount varies depending on the rental amount and the duration of the tenancy.
In Singapore, the rental stamp duty is paid for by the tenant. The Tenancy Agreement must be electronically stamped and fully paid in order for it to be a legally binding agreement in the eyes of the law. The stamp duty must be paid within 14 days of signing the Tenancy Agreement.
*There will be penalties for late stamping.
Additionally, landlords must comply with legal requirements such as providing an inventory list of the property’s contents and conducting a joint inspection with the tenant to record its condition at the beginning and end of the tenancy.
Tenants should be aware of these legal obligations to ensure compliance and to avoid any potential legal issues.
Rates & Computations for renting a property in Singapore:
AAR does not exceed $1,000 -> Lease duty exempted
Average Annual Rent exceeds $1,000
Lease period of 4 years or less -> 0.4% of total rent for the period of lease
Lease period of more than 4 years or for any indefinite term -> 0.4% of 4 times the AAR for the period of lease
*AAR refers to the Average Annual Rent
Monthly rent: $3,600
Total rent to be paid over a 2-year lease: $3,600 x 24 months =$86,400
Stamp duty payable: $86,400 x 0.4% = $345.60
For more information, see rates and computation for stamp duty on lease of residential property in Singapore.
3. Document and Photograph the Property’s Condition
Before moving into a rental property, it is crucial to thoroughly document and photograph the condition of the premises. This step is essential to protect yourself from potential disputes regarding damages or discrepancies in the property’s condition in the future.
Take detailed notes and photographs of each room, including walls, floors, fixtures, and appliances. Highlight any existing damages or issues such as cracks, stains, or malfunctioning equipment. It is advisable to date and sign the documentation to establish a clear record.
By documenting the property’s condition at the beginning of the tenancy, you can prove your innocence in case you are wrongfully blamed for any damages during your stay. This documentation can also serve as evidence for the return of your security deposit when the tenancy ends.
Remember to inform the landlord about any pre-existing damages you notice during the property inspection. This ensures that both parties are aware of the property’s condition before the tenancy commences, preventing any misunderstandings in the future.
In the event of any damages or issues that arise during your tenancy, promptly notify the landlord in writing and keep a copy of the communication for your records. This proactive approach helps maintain transparency and demonstrates your commitment to addressing any concerns.
By documenting and photographing the property’s condition, you not only protect your interests but also encourage a fair and transparent relationship with the landlord throughout your tenancy.
4. Dispute Resolution Mechanisms
In the event of a dispute between the landlord and tenant, it is essential to know the available mechanisms for resolution. Mediation is often recommended as a first step, where a neutral third party helps facilitate a resolution between the parties. If mediation fails, the dispute may be escalated to the Small Claims Tribunal or the Court for further adjudication.
To prevent disputes, tenants should maintain open communication with the landlord, promptly report any maintenance issues, and keep records of all correspondences and transactions related to the tenancy.
5. Understand the Renewal and Termination Procedures
As a tenant, it is important to be familiar with the renewal and termination procedures outlined in your rental tenancy agreement. This knowledge will help you plan ahead and make informed decisions regarding the continuation or conclusion of your tenancy.
Renewal Process: If you wish to extend your tenancy beyond the initial agreed-upon period, check your agreement for specific instructions on the renewal process. Typically, there will be a notice period mentioned, stating how far in advance you need to inform the landlord of your intention to renew your tenancy. Failure to provide timely notice may result in the automatic termination of the tenancy or the imposition of penalty fees.
Early Termination: In some cases, unforeseen circumstances may require you to terminate the tenancy before the agreed-upon end date (e.g. Diplomatic Clause). Familiarise yourself with the early termination clause in your agreement, which outlines the conditions, penalties, and procedures for ending the tenancy prematurely. Keep in mind that early termination may incur additional costs, forfeiture of your security deposit or reimbursement of the rent amount (for the remaining length of lease) to the landlord, so weigh the financial implications carefully.
Termination Process: Similarly, understanding the termination process is crucial should you decide to end your tenancy. Review your agreement for the notice period required to terminate the tenancy and the specific steps to be followed. In Singapore, the standard notice period is typically one month. Providing proper notice allows the landlord to make necessary arrangements and ensures a smooth transition for both parties.
Communication and Written Notices: When renewing or terminating a tenancy, it is crucial to communicate your intentions to the landlord in writing. Verbal agreements or informal discussions may not hold up in legal disputes. Provide a written notice stating your decision to renew or terminate the tenancy, adhering to the notice period stipulated in the agreement. Keep a copy of the notice and any correspondence related to the renewal or termination for future reference.
By understanding the renewal and termination procedures, you can effectively plan your tenancy and avoid any misunderstandings or conflicts with the landlord. It enables you to make well-informed decisions regarding the continuation or conclusion of your rental agreement, ensuring a smooth transition and a positive rental experience.
6. Professional Advice and Consultation
Given the complexities and legal implications involved in rental tenancy agreements, seeking professional advice is highly recommended. Consult a real estate agent who specialises in this area where they can help provide you with valuable insights, review contracts, and offer guidance on specific concerns or disputes. A real estate agent can also provide insights on the local rental market, assist you in finding suitable rental properties that suit your needs and budget, negotiate terms on your behalf.
Understanding the intricacies of rental tenancy agreements is essential for a hassle-free and mutually beneficial renting experience in Singapore. By familiarising yourself with the key clauses, legal requirements, dispute resolution mechanisms, and seeking professional advice when needed, you can protect your rights as a tenant and maintain a positive landlord-tenant relationship. Remember, a well-drafted and understood tenancy agreement sets the foundation for a smooth and enjoyable rental experience.
**While this information is accurate at the time of writing, please consult a professional real estate agent for more information/advice on your specific Tenancy Agreement.
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