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Key Terms in a Tenancy Agreement
We routinely and sometimes unthinkingly sign off on tenancy agreements, whether we are landlords or tenants. This may be a huge mistake because some terms are very important or may have so many repercussions if things go wrong.
Do look out for the following seven key terms in all tenancy agreements you sign off on. Better still, approach Lions Chambers LLC for all your tenancy needs – whether it’s drafting tenancy agreements, reviewing tenancy agreements, negotiating on your behalf or when you’re faced with a tenancy dispute.
These are the clauses we discuss in this article:
- Option to Renew
- Termination
- Notice of Re-entry/Notice to Quit
- Quiet Enjoyment
- Repair
- Reinstatement
- Yielding Up
Option to Renew
An Option to Renew Clause typically states whether the Tenant can renew the tenancy for an additional term/tenure. This clause normally provides for a notice of renewal to be made within a certain number of days before the expiry of the current term, provided there are no preceding breaches of the tenancy.
The crucial things to look out for are the new rate of rental and the terms upon which such renewal is granted.
Many such clauses are drafted in an open-ended manner, for example, “…to be renewed for a further two years at a rate to be mutually agreed…”. Such clauses do not give either the Landlord or Tenant any certainty. All it really amounts to then is just a promise to consider renewal.
Sometimes, such clauses offer a degree of specificity. Examples of this include a maximum limit for the new rent – “at a rate of not more than 20% above the current rate”. Also common in tenancy agreements is “prevailing market rate”. If you have entered into a tenancy agreement with “prevailing market rate” as the rate for renewed terms of rental, do take note that the Courts allow landlords quite a lot of room to decide what the prevailing market rate is.
Termination
Tenancies are usually for fixed terms – typically one, two or three years.
Nevertheless, there are occasions when the tenancy has to be terminated early. If it’s by amicable and mutual agreement between the Landlord and Tenant, such early terminations are smooth affairs. This mutual agreement may be anticipated in the contract itself:
- If the Landlord is considering redevelopment of the property or anticipates an en bloc sale, an acquisition by the government or a sale, he may include terms within the tenancy agreement to reserve his rights to terminate the agreement early for specified reasons and include a notice period for early termination.
- Another common clause allowing for premature termination is found in residential tenancies where the Tenant is an expatriate employee. Such clauses are called ‘diplomatic’ clauses. They allow the expatriate tenant to terminate the tenancy early if he or she is deported from the country, transferred overseas, or has left his employers.
If the Landlord is in breach of the agreement and unilaterally terminates the tenancy prematurely, the difference in rent which the Tenant must pay for securing alternative premises and related costs, agency fees, etc., may be claimed in court.
If the Tenant is in breach of the agreement and unilaterally terminates the tenancy prematurely, the security deposit is forfeited, and damages for rental for the full term may be claimed from the Tenant by the Landlord, provided the Landlord mitigates his loss by, for example, undertaking reasonable efforts to secure a replacement tenant.
Notice of Re-entry/Notice to Quit
Many tenancies allow the Landlord to re-enter the premises upon breach by the Tenant. Such re-entry or formal notice to quit automatically terminates the tenancy. The Landlord may then claim for further losses (for example, for damage to the property and reinstatement) after gaining re-entry to the premises.
Quiet Enjoyment
By paying rent, the Tenant earns the right to the quiet enjoyment of the property without undue disturbance or nuisance. This is seldom a problem in commercial premises or residential premises.
However, when the property in question is ‘mixed use’, i.e. residential-commercial or residential-retail, problems may crop up.
Residential tenants need their peace and quiet. Commercial or retail establishments, however, may require a bit more ‘noise’ to create the right atmosphere to optimize commercial performance.
Do approach Lions Chambers LLC if you are ever faced with any tenancy issues relating to quiet enjoyment. We have acted for both landlords and tenants in tenancy disputes and know exactly how to negotiate and resolve the matter effectively and without burning a hole in your pockets.
Repair
The basic rule here is that if the Landlord wants the Tenant to foot the bills for certain items, he should make sure it is included in the tenancy agreement.
In commercial tenancies, the Tenant is usually responsible for the maintenance and repair of the premises (except for fair wear and tear, which the Landlord should pay for). The Landlord is usually responsible for the maintenance and repair of common property.
In residential tenancies, we have seen many different ways of apportioning responsibility for repair and maintenance. One common method is to separate small items from big items. You could, if you’re a landlord, make the tenant pay for all repairs and maintenance below S$X for any one item while choosing to pay for all repairs and maintenance for any one item which cost above S$X.
Need Advice ?
Speak to a Lawyer Now
At Lions Chambers LLC, we pride ourselves on being responsive. We understand that some problems need immediate attention, let us assist you.
Reinstatement
Typical tenancy agreements include a clause making the Tenant responsible for reinstating the premises to its original condition before handing the premises over to the Landlord upon expiry of the lease.
Whether you’re a landlord or a tenant, please make sure that the agreement provides sufficient time for the Tenant to perform reinstatement works.
If the reinstatement works are not complete at the time of handing over, the clause in question may allow the Landlord to undertake the reinstatement at his own expense and claim the same from the Tenant.
On some rare occasions, the Landlord may waive such reinstatement because the Tenant has already undertaken extensive renovations, which may have enhanced the possible rental yield of the property. Sometimes, the new, incoming Tenant may not require such reinstatement and may accept the premises in their original condition.
Yielding Up
Almost all tenancy agreements contain an express term stipulating that the Tenant must yield up possession of the premises at the expiry of the term in its original condition. Even when such terms are absent from the agreement, they are implied at law. The Tenant must vacate the property and ensure any sub-tenants or occupiers also vacate the property. This implied term extends to anything that has become part of the property like improvement works by the Tenant, fixtures and fittings.
How can we help you
Blindly signing a Tenancy Agreement may be the worst decision you can make. We understand that figuring out your rights and obligations may be hard. Worry not, at Lions Chambers LLC, and we have experienced lawyers who are well versed in Singapore’s Contract Law. We will be able to guide you through your contract and clarify any issue for you.
If you are having any concerns on whether you can breach or have potentially breached your contract or agreement, do reach out to us.
Lions Chambers LLC is an established law firm in Singapore. Our team of lawyers specialise in various areas of law and will be able to assist you. Our consultations are free. Please call +65 8777 3677 or click here to WhatsApp us today.