Renting a home in Singapore doesn’t have to be difficult. But if you’re dealing with a certain kind of landlord, it will be. To answer a flood of questions commonly asked by tenants using our portal to find rental property, we’ve decided to clarify six important rental terms. It happens that these terms often confuse tenants who’s looking for a unit or room to rent in Singapore, especially when it’s his/her first time renting. So, before you sign anything make sure you understand these rental terms:
Good faith deposit
The most ironically named deposit in the rental process. Because some landlords have no faith in your seriousness or ability to rent, they might demand a good faith deposit, also known as a booking deposit.
But in all seriousness, the other reason is that the payment of the good faith deposit stops the landlord from searching for new tenants. The deposit is valid between the time that you sign, and the signing of the actual Tenancy Agreement (TA).
The good faith deposit is usually requested upon signing the Letter of Intent (LOI). The standard amount is one month’s rent for each year of the lease.
In the event that you sign the (TA) later as expected, two things can happen to the good faith deposit – the most common result is that it’s converted to the security deposit. Otherwise, it’s treated as the first month’s rent, received in advance.
The sticking point is this: what happens if you already put down the good faith deposit, but the TA ultimately doesn’t go through? In this case, there are three possible outcomes:
– If the landlord is the one who wants to back out, the landlord must refund the good faith deposit.
– If the tenant is the one who wants to back out, the deposit is non-refundable.
– If the tenant or landlord want to end the deal, because the TA is not acceptable, the tenant can appeal to the Small Claims Tribunal (SCT). A little more on this last point:
Disputes can arise in between the LOI and TA, and this puts the good faith deposit in jeopardy.
Let’s say, for example, that the landlord appears agreeable when you sign the LOI. But after you hand over the deposit, the landlord hits you with a TA that’s thicker than a phone book, with ridiculous clauses such as “no coming home after 10pm” as if you’re a 12-year old on curfew. Or that you’re not allowed to have your maid, your dog, or your nose hair longer than 10 millimetres while on the property.
This is when you might want to back out. Even if you do keep your nose hairs trimmed anyway, the TA is a sure sign that the landlord is a basket case. But here’s the thing: If you signed the LOI but refuse to sign the TA, the landlord may very well decide to keep the good faith deposit.
In this situation, you’ll need to appeal to the SCT. While Singapore’s laws are pro-landlord, tenants have won cases where they have solid reasons (such as a TA with terms that significantly diverge from what was discussed in the LOI).
If you don’t want to risk taking things to the SCT, read the next bit:
Letter of Intent (LOI)
The Letter of Intent, or LOI in short, states the tenant’s interest in renting the unit. Once signed, the good faith deposit/booking deposit is paid along with it (see point 1). The LOI is effectively a promise to rent the unit to that tenant.
The LOI is usually prepared by the tenant’s agent, and sometimes by the landlord’s agent as a precaution (since many tenants approach listings directly).
The LOI is more than that, however. This is also where tenants specify certain needs or requests. For example, if there’s no wi-fi installed and the landlord promises to get it done, it should be stated in the LOI. Once they sign, the landlord is obliged to meet the terms of the LOI.
The important bit about the LOI is that it’s not necessary; it’s just a common practice. One advantage is that if there’s no LOI, there’s no good faith deposit. There are tenants who never sign an LOI, as they don’t want to risk losing the good faith deposit if they don’t like the TA.
Likewise, many tenants who don’t engage an agent may not bother drafting the LOI. It’s up to you whether you want to go through this step.
Tenancy Agreement (TA)
The TA is a legally binding document that sets out the terms and conditions of the lease. The landlord, or landlord’s agent, will prepare the TA.
Note that the TA is supposed to carry the agreed-upon terms and conditions that were in the LOI, but it’s your responsibility to check. Beware of landlords who sneak in new terms and conditions.
Some key things that are covered under the TA include:
– The consequences of paying rent after the due date
– Acceptable modes of payment
– Diplomatic clause, which allows you to break the lease if you lose your employment in Singapore (it will also specify the type and amount of any reimbursement)
– The rules regarding maintenance (note that this applies to wear and tear. Damage inflicted by the tenant, like breaking a window or setting a sofa on fire, is always on them to pay).
– Options to renew. If the landlord promises not to raise the rent if you want to renew in two years, this is where it should appear in writing.
– The inventory list, of items in the house
The TA is always accompanied with the…
The security deposit is given to the landlord, after the TA is signed. It’s usually one month for each year of the lease.
The landlord can withhold the security deposit, to pay for any damages you cause. In addition, the security deposit can be retained if you break the terms of the lease. If you illegally sublet the unit, for instance, the landlord can give you the boot while keeping your deposit.
In addition, any unpaid rent, or late fees for unpaid rent, can be taken from the security deposit.
This is the person who’s supposed to be on your side if you’re a tenant. In Singapore, it is illegal for property agents to represent both the landlord and the tenant in the same deal.
Your agent is supposed to help you ensure the LOI and TA are fair, and to help negotiate the price. For example, your agent should be checking the rental rates of surrounding properties, to let you know if you’re getting a good price.
Tenant’s agents also help to negotiate terms if you’re busy. If you insist on bringing your cat, but the landlord doesn’t often allow pets, you can leave your agent to try and convince him/her otherwise.
Don’t scoff. We know veteran agents who may have actual mind control powers when changing the landlord’s mind. Nonetheless, as a tenant, you may choose not to hire a agent if you want to negotiate on your own.
A note on commission due to a tenant’s agent:
If your rental cost is above $3,500 a month, and you sign a two-year lease, the landlord usually pays your agent’s commission. If it’s a one-year lease, you will usually pay half a month’s rental in commission.
If the rental cost is below $3,500 a month, and you sign a two-year lease, the tenant pays his/her appointed agent the equivalent of one month’s rent. If it’s less than two years, the tenant’s agent collects half a month’s rent.
On the other side of the fence is the landlord’s agent. The landlord’s agent will vet you, and decide if you’re okay to rent to. They’ll also try and keep you from negotiating the price down.
Note that some landlords never meet their tenants at all, and will request that you direct all issues (such as a burst kitchen pipe) to his/her agent.
Make sure you don’t have a problem with your landlord’s agent. You may be dealing with this person more than the actual landlord; if you sense you’re going to hate this agent’s guts, then look somewhere else.
Check out other rental related articles here: 5 under the radar HDB housing and rental schemes and Should Ask Questions (SAQ) for tenants in Singapore
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