This document explains how to complete the rental process once you have found a property that you want to rent, and the landlord has verbally accepted your offer. The formal offer is done in form of a ‘Letter of Intent’. The landlord officially accepts your offer by signing the ‘Letter of Intent’. Your agent or the landlord’s agent will typically prepare the necessary documents for the rental.
Letter of Intent
The ‘Letter of Intent’ is a proposal from you to the landlord to lease the apartment with the conditions set by you. By signing the document the landlord accepts the conditions, which normally has been agreed verbally beforehand. The tenant typically gives the landlord one month’s rental as a good faith deposit at this point.
Typically the Letter of Intent specifies the following:
Term of Lease – Usually 12 or 24 months, with optional renewal of another 12 or 24 months – but not necessarily with same rent). Also the date when the lease is supposed to start. Generally, landlords are reluctant to accept leases less than 12 months, and when the market is good, they actually prefer to have 24 month leases and the tenant may have to pay premium for shorter term lease.
Monthly rental – The ‘Letter of Intent’ usually only states the amount of rent to be paid.
Good faith deposit – usually one month’s rent. Once the landlord signs the Letter of Intent and accepts the deposit, the landlord promises not to lease the apartment to anybody else. When the tenancy agreement is signed, the good faith deposit will be deducted from the first rental or security deposit.
Security deposit – The amount of the security deposit is usually stated in the Letter or Intent, but not be payable until Tenancy Agreement is signed. The typical security deposit is one month’s rent for every 12 months of lease. When the lease term ends, the security deposit will then be refunded without interest. However, the landlord reserves the right to deduct from the deposit all costs, damages and expenses arising from the tenant for breaching any of the covenants stated in the Tenancy Agreement.
Additional requirements – e.g. Diplomatic Clause, Furnishing. The Diplomatic clause is to safeguard the tenant in the event the tenant is no longer employed. Typically it states that you can terminate the lease after 12 months by giving 2 months notice. The ‘Letter of Intent’ may also state that the property is leased furnished or partially furnished. You should also state in the ‘Letter of Intent’ if you are planning to sublet any part of the property, or if you plan to have pets in the property. Standard tenancy agreement states that this is subject to landlord’s written approval, and you may want to agree this beforehand in order to avoid problems later.
Expiry of ‘Letter of Intent’ – The Letter of Intent has a clause that specifies a period which within the landlord has to sign it, or it otherwise expires. In case of expiry, the landlord has to return the good faith deposit back to the prospective tenant immediately.
The ‘Tenancy Agreement’ is the binding contract to lease the property. It will be signed by both the tenant and the landlord. The ‘Tenancy Agreement’ will state the same things as the ‘Letter of Intent’, but in more detail. It is advisable to use the standard tenancy agreement provided by the agencies as a template. At this point you need to furnish the landlord with copy of your passport and employment pass or Identity Card (IC). The landlord will need to check that you are eligible to stay in Singapore as it is illegal for landlords to have illegal immigrants to stay in their property. Also, normally the security deposit and the first month’s rent is payable at this point, minus the good faith deposit given with the ‘Letter of Intent’.
You should check at least the following in the Tenancy Agreement:
Tenant’s full details – name, address, ID details
Landlord’s full details – name, address, ID details
Payment details – including when the rent is due and how it is to be paid
Security deposit – should be 1 month’s rent for every 12 months of lease term
En-bloc – with Singapore’s recent ‘enforced block sale’ fever, many Landlords are including ‘en-bloc’ clauses to protect them from early termination compensation. If you are renting an older block, make sure that either this clause is negotiated out or reduced otherwise you may be looking at inconvenience and additional costs of moving within the term.
Termination – Typically this includes the Diplomatic Clause on its own, or sometimes accompanied by a reimbursement clause. The latter states that if you exercise the Diplomatic Clause, you will have to reimburse part of the commission the landlord had paid to his/her agent – pro-rated to the remainder of the lease term (for example, if you leave 3 months before the end of a 24-month lease, you will pay the landlord 3/24 of the commission he/she paid to the agent). In most cases, the tenancy agreement does not include this in case the landlord sells the property during the lease period. If there is no specific condition for this, the new owner has to honour the existing tenancy agreement. The tenant will just pay the same rent to the new owner.
You should also change the standard Tenancy Agreement if you are planning to sublet any part of the property, or if you plan to have pets in the property. The standard tenancy agreement states that this is subject to landlord’s written approval, and you may want to change this at the time of signing in order to avoid problems later.
In any case, you should not be afraid of the legalities and your agent can help you to explain all this and negotiate on your behalf. It is still useful to understand the basic responsibilities, especially as the Singapore law can be considered landlord friendly. For example, if the tenant fails on his/her rental payments, the landlord can get a court order to re-possess the property as well as seize and sell the goods inside the property to recover any rent and legal costs from the tenant. This is contrary to many other countries where it may take years to get rid of uncooperative tenants – if ever.
Inventory of Contents ‘Inventory of Contents’ is supplementary to the Tenancy Agreement. It lists all the fittings and furniture that is rented as part of the apartment, as well as their present condition. You will need to sign it when you move in. The contents of the property will then be checked against it when you move out. Your agent can help you with checking the inventory and will help you on dealing with the landlord to fix any problems.
When you move in, you need to inspect the property against the Tenancy Agreement and the Inventory of Contents provided by the landlord. You will then need to sign the Inventory after the inspection. We would advise you to either take photos of every detail that you think is not in order, or ask the landlord to fix them immediately. This can potentially avoid a lot of problems when you are moving out.
Also, one of the first things that you need to do is to connect the electricity and water – these are not typically provided by the landlord. You need to call SP Services to get them turned on, and you should do this already before moving in as it can take a couple of days.
You should go through the ‘Inventory of Contents’ and check that everything is as when you were moving in. Normal wear and tear is acceptable, but any breakages or lost items during the tenancy are payable by the tenant. Also, typically the ‘Tenancy Agreement’ states that when moving out, the apartment is clean and all air conditioning units has been serviced.
Remember that the landlord has every right to deduct any of the expenses from your deposit – and they may seem sometimes arbitrary. Therefore, we really do recommend that when you move in, you do a proper inspection and take photographs for evidence to avoid any misunderstanding. Also, it is usually cheaper for you to fix the problems than what the landlord might quote (e.g. you may not want to pay for getting an electrician to change a light bulb).
Fees and Commission
The commission is typically full month’s rent for every 12 months of lease. The landlord also pays commission a full month’s rent for every 12 months of lease. If there are two agents involved, the agents will split the landlord’s commission based on their mutual agreement.
The tenant will pay for the stamp fee. Usually the tenant will give the money to the agent and the agent will pay it to the relevant government agency (Inland Revenue Authority of Singapore). Stamp Fee is calculated based on Annual rent using the following rules:
If the lease term does not exceed 1 year – S$1 for every S$250 or part thereof of annual rent;
If the lease term exceeds 1 year, but does not exceed 3 years – S$2 for every S$250 or part thereof of annual rent;
If the lease term exceeds 3 years, or has any indefinite term – S$4 for every S$250 or part thereof of annual rent.
Rent is S$4,000/month (S$48,000 annually) – lease term is 24 months: Stamp fee payable = S$48,000 / S$250 x S$2 + S$2 (for duplicate copy) = S$386
Check out Inland Revenue of Singapore (IRAS) website for more details – http://www.iras.gov.sg
Singapore Power Services (SP Services) will require you to pay a deposit before they will turn on the electricity and water, which you need before you can move in. The deposit will be reflected in your first bill. The deposit currently varies from S$40 to S$800, depending on your residency status as well as what kind of property you are renting. For a foreigner renting a private apartment, the deposit required is currently set as S$500. Please check SP Services website for more details – http://www.spservices.com.sg/