Guides, Rental News

99.co Guide: Breaking lease and early termination of tenancy agreement

June 18, 2018

In Singapore, tenancy agreements typically include a lease term of between six months to two years. During this period of time, the tenant is legally obliged to pay the amount of rent outlined in the tenancy agreement (TA) with the landlord. However, due to unforeseen circumstances, there could be a need for either party to break the lease. We explore what these circumstances are, and their consequences, so landlords and tenants will know what to do in the event of early termination of the TA.

Breaking lease and early termination of your rental contract can bring about a world of frustration and stress

Breaking lease and early termination of your rental contract can cause a lot of frustration and stress.

What a Tenancy Agreement (TA) entails

Tenants and landlords should be aware of the terms set out in the Tenancy Agreement before they sign it. After all, the very nature of the TA is to avoid any conflict or miscommunication between both parties.

(Read this article for more info about what should be included in the TA)

In most cases, the TA should contain terms which ensure the tenant(s) has exclusive possession over a property within a stipulated duration. Moreover, tenant(s) should be able to live without intrusions and disruptions to their personal space, security and/or belongings during the aforementioned period of occupancy.

On the other hand, tenants too have a responsibility to uphold the obligations set forth in the terms of the contract. Basic terms include:

  • Rent payment for the duration of stay
  • Upkeep and maintenance of the property
  • An agreement not to sublet the property for personal profit
  • An agreement to bear the burden for utilities/repairs (unless otherwise stated)
  • The start and end date of occupancy

Ending a tenancy early

It is often concerning the last point mentioned above where disputes arise. Once the Tenancy Agreement has been signed and approved, the tenancy may be terminated only when either the landlord or tenant gives prior, and appropriate, advance notice. The notice period corresponds with the length of the tenancy period and the frequency of rent payment. In tenancies where the rent is paid monthly, the appropriate period of notice should be one month. In most instances, one month is the minimum notice period.

When tenants break lease early

Tenants should not end their tenancy prematurely without first notifying their landlords. It is always advisable to obtain the landlord’s consent before proceeding with vacating the premises. Sometimes, the landlord may object to the tenant’s request to end the tenancy if it does not comply with the TA, hence may request for full payment of the month’s notice or other forms of compensation if the minimum rental period or lease is not fulfilled.

This is where the security deposit comes into play. Typically equivalent to one month’s rent, the security deposit is often used as a safeguard against early termination of a tenancy. This is in addition to its intended function of paying for reparations to damages (if any) found during the course of the tenancy.

To avoid legal conflict, landlords should ascertain the likelihood of early termination of lease and, based on this, clearly establish the parameters for early termination terms and penalties to be specified in the TA.

Tenants, meanwhile, should inform landlords of any factor(s) that may contribute to early termination of lease, for example, a work transfer overseas.

There are instances when breaking lease is inevitable such as:

  • Tenant relocated overseas by his or her company
  • Tenant’s employment terminated
  • Tenant is ordered to leave the country by authorities (e.g. employment pass not renewed)

As a tenant, to indemnify against monetary penalties when such issues occur, it’s best that he/she negotiates such clauses to be included into the tenancy agreement before signing it.

The Get-out Clause (Minimum rental period)

Because of cultural norms and public housing policy, the rental market in Singapore tends to be very expat-centric. This is why most tenancy agreements will include a Get-out Clause — also known as a Diplomatic Clause or minimum rental period. This are the typical terms for a Get-out Clause:

Six month lease: no Get-out Clause or 3 month’s minimum rental

One year lease: 6 months minimum rental

Two year lease: 12 months minimum rental

The get-out clause is not only a safeguard for a tenant who encounters unexpected changes in lifestyle/work arrangements, a landlord may also exercise the clause to end the tenant’s stay prematurely without having to rely on proving that the tenant infringed the terms in the TA.

For example, if the Get-out Clause is specified at one year and the notice period is one month on a lease of two years, the landlord or tenant can issue the one month notice on the first year anniversary of the lease. The total rental paid up till the end of the lease would be 13 months.

The Reimbursement Clause

Auxiliary to the Get-out Clause is the Reimbursement Clause. Seldom included in the TA nowadays, this clause covers fees paid to the agent by the landlord at the commencement of the lease. Upon exercising the Get-out Clause, the tenant is liable to reimburse the landlord with these fees on a pro-rata basis, if the Reimbursement Clause is included in the TA.

The En-Bloc Clause

The En Bloc Clause serves to provide the landlord with the option to terminate the lease prematurely in the event of the entire building being sold for redevelopment. While this is relatively rare, the inclusion of this clause gives the landlord the ability to end the lease without having to compensate the tenant.

Breaking lease without these clauses

What happens if your tenancy agreement did not include these clauses or you find yourself in the predicament of breaking your lease before the Get-out Clause period? What are your options then?

The purpose of the Get-out and Reimbursement Clauses is to ensure an equitable and fair resolution in the event of a trying situation. Without these clauses, it is still possible to negotiate this with your landlord on your own by understanding the losses that he will incur with your early termination of rental.

Primarily, there is a loss of rental income. Finding a replacement tenant takes time and effort and having the property remain empty would be a significant loss. To mitigate this, as a tenant, what you can do is search for a tenant to take over your lease until the end of its term. Prior to searching for a replacement tenant yourself, however, you should make sure the landlord is agreeable to this arrangement and be prepared to make sure that the replacement tenant pays the same amount of rent. Sometimes, this could entail subsidising the replacement tenant’s rent until the termination of the lease.

These clauses are vital to protecting yourself as a tenant. If these clauses are not in the tenancy agreement, you are liable to pay for rent until the end of the lease term.

When landlords break lease early

Despite property law in Singapore strongly favouring the landlord over the tenant, landlords terminating the lease is a fairly rare situation. As a tenant, opening communication with the landlord and seeking fair compensation would be the best solution in the case of any disputes.

Landlords breaking lease should also realise the costs incurred by the tenant and compensate the tenant accordingly. In some cases this could entail refunding the rent for the notice period the landlord provides, along with the security deposit.

Legally, however, the tenant is well within his or her rights to reside in the property until the end of the lease. If a wrongful eviction takes place, the tenant could resort to pursuing a case with the Small Claims Tribunal if the lease does not exceed two years.

Eviction of a tenant

If the terms of the Tenancy Agreement — such as non-payment of rent — have been breached, the landlord may choose to evict the tenant. To this end, it is important that the landlord expressly stipulates the right of re-entry in the TA. The landlord must also serve notice specifying the breach, the compensation sought and the course of action he wishes the tenant to take.

The tenant may also apply to the courts for relief to alleviate the forfeiture of the property. The courts may then choose to give the tenant an additional amount of time to settle his affairs, in most cases, this is 4 weeks.

A landlord may also choose to invoke his right to distress under the Distress Act. This allows him to claim up to 12 months’ arrears prior to the distress application. This is followed by sending the tenant a notice of seizure of goods and writ of distress. If the tenant does not reply within 5 days, the landlord may then sell off his goods.

In any case, consult a legal professional if you are not certain about your legal course of action.

Breaking lease equitably

Whether you’re a tenant or a landlord, the status quo can change without warning. So, it’s important that the TA anticipates what may happen in the course of a lease. Ultimately, however, it’s ideal for landlord and tenant to have empathy for each other. Open and honest communication is the key to coming to a reasonable settlement with fair outcomes for all involved, without things getting ugly.

Voice your thoughts in the comments section or on our Facebook community page.

 

If you found this article helpful, 99.co recommends Renting out a room? 9 landlord must-dos to avoid headaches and How to rent out a condo quickly in Singapore: a 7-step guide

Find the rental home of your dreams today at Singapore’s largest property portal 99.co!

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10 Comments

  • Reply gkb2016 November 4, 2016 at 12:06 pm

    You should make it tie to the employer. If the employer breaks contract then employee will break the lease but advance, agent fee will end up getting borne by employee along with return air ticket. Haze in Singapore is not employee problem.

  • Reply Help May 10, 2017 at 12:09 pm

    I need help. We are PR’s, we signed a 2 year lease, then we signed an extension for another 2 years. We are 14 months into the 2 year extension. My husband is being transferred out of Singapore so we need to break our contract. We have given our landlady two months notice but she is legally insisting that we pay the full amount out of the existing contract. The extension of the contract has nothing written in it regarding breaking the contract. Do we have any rights?

  • Reply Moon October 31, 2017 at 9:05 pm

    As a landlord, can I give one month notice to terminate my tenant early?

  • Reply Krristy Lam November 2, 2017 at 11:21 am

    Hi Moon,

    That depends on what was set out in the tenancy agreement. Please refer to our latest article for more details:

    https://www.99.co/blog/singapore/breaking-rental-lease-early/

    As explained by the lawyer who wrote the article “unless the landlord had previously incorporated an early termination clause within the original tenancy agreement, it’s still within the legal rights of the tenant to reside in the property until the end of the lease.”

    We hope you get the issue sorted out.

    Cheers,
    Krristy

  • Reply Ken November 15, 2017 at 12:36 am

    Hi,

    House owner intended to terminate the tenancy only 4 months stay. 1 year contract. What can tenant request for compensation ?

  • Reply Mona December 8, 2017 at 2:52 pm

    Hi! My tenant signed a 2 year contract on 24th Nov 2016. He informed us yesterday that he is leaving country in end Jan 2018 and to consider this his 2 month notice. He has said that he will not pay rent from now on and that we should balance it with the security deposit. When he came in last year we donated all the furniture as he wanted an empty house. Now he is leaving almost 10 months earlier, he is not giving rent for last month and not paying our agent fee pro-rata, has not given us complete 2 month notice and is overstaying a week too without paying. What are my rights as a landowner. I am afraid that if I ask him to pay for the above he may damage my house and go.
    Can police help me?

    Please advice.

  • Reply Tenant and Landlord December 13, 2017 at 10:06 pm

    Tenancy agreements are written skewed in favor of landlord to assure them on sure income for full tenancy period. This is a malpractice propagated by Agencies. Any TA should be allowed to terminate after sufficient notice. A landlord who is making income from investment property has no moral right to extract income from a tenant for un-used period of tenancy as long as sufficient notice is given.

    • Reply Simon March 8, 2018 at 10:17 am

      I agree with this point of view, but it is legally enforceable?

  • Reply one tenant March 11, 2018 at 10:17 pm

    Hi, just encounter this situation, one the other tenant is posted overseas for a long time(already nearly one year) and can this be considerred as diplomatic clause ? because i just realized that my current TA doesnt have the term to terminate after certain notice except for the diplomatic clause. As far as i am concerned, this can be applied as diplomatic clause.

  • Reply Jumbo March 26, 2018 at 5:21 pm

    As a tenant, I am encountering an unforeseen circumstance due to the job transfer by my employee. It caused to break my lease before the diplomatic clause period. I searched for a tenant with the agreement of landlord. I found a replacement. I agreed to reimburse the landlord with agent fee on a pro-rata basis. The landlord wants to return my deposit on the pro-rata basis.

    I would like to know if the landlord has right to refund security deposit on the pro-rata basis or he should return full deposit to us.

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