Renting in Singapore, Getting Started

99.co’s guides: Breaking lease and early termination of tenancy agreement

November 2, 2016

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 breaking lease by either party. We explore what these circumstances are, and their consequences.

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 bring about a world of frustration and stress

A foreword on what a tenancy agreement 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 here for more info about what should be included in the TA)

In most cases, the tenancy agreement 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. The most fundamental of these include:

  • Rent payment for the duration of stay
  • Maintenance of the property
  • Agreement not to sublet the property for personal profit
  • Bear the burden for utilities/repairs (unless otherwise stated)
  • The start and end date of occupancy

Ending a tenancy early

It is often the last point mentioned above that causes disputes to 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, advanced notice. When this should be done must correspond with the length of the tenancy period, as well as the frequency of rent payment. For example, for a tenancy where rent is paid monthly, the appropriate period of notice should be one month. In most instances, the minimum notice period is 30 days.

Breaking lease as a tenant

Tenants should not end their tenancy prematurely without first notifying their landlord. It is always advisable to obtain their consent before proceeding with vacating the premises. Sometimes, landlords may object to the tenant’s request to end the tenancy, hence may request for monetary compensation in return.

This is where the security deposit comes into play. Equivalent to an additional 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.

However, it is still best for landlords and tenants to clearly establish the parameters for the penalties for an early termination as well as ascertain the likelihood of this happening, even before the TA is signed.

Of course, 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

As a tenant, to indemnify yourself of paying penalties when such things occur, it’s best that you ensure that such clauses are included into the tenancy agreement.

The Diplomatic Clause

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 of at least two years will include a Diplomatic Clause as a safeguard for tenants who encounter unexpected changes in lifestyle. These can include being transferred out of the country by their employer, termination of their employment or being ordered to leave Singapore. Should these unfortunate circumstances occur, the duration specified in the diplomatic clause allows the tenant to terminate the contract earlier, inclusive of the notice period. Naturally, documentary evidence will have to be provided to prove reason for such a termination.

For example: if the Diplomatic Clause duration is 6 months and the notice period is 2 months on a lease of 2 years, it is within the tenant’s rights to give notice after a year of rental, bringing the total rental paid to 14 months.

The Reimbursement Clause

Auxiliary to the Diplomatic Clause is the Reimbursement Clause. This typically covers the agent fees paid by the landlord at the commencement of the lease. Upon exercising the Diplomatic Clause, the tenant is liable to reimburse the landlord with these fees on a pro-rata basis.

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 Diplomatic Clause period? What are your options then?

The purpose of the Diplomatic 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 still liable for rent until the end of the lease term.

Breaking lease as a landlord

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 this case.

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 have been breached, such as non-payment of rent, 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  tenancy agreement . 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.

Breaking lease equitably

Whether you’re a tenant or a landlord, changes in life can present themselves without warning and it is important that we have empathy for each other. Open and honest communication is the key to coming to a reasonable settlement with fair outcomes for all involved.

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1 Comment

  • 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.

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