Having chosen your next home and negotiated the terms of the arrangement, it is time to make your move and secure the unit. While not obligatory, the letter of intent (LOI) is an often-used tool and many landlords would refuse to skip this step.
Especially when you plan to rent a place for a long period of time, or when you aim to rent an entire unit, it is common practise to employ this transitory option and make use of the LOI.
What is a letter of intent?
A letter of intent is really just that — A letter stipulating your intentions to eventually enter a rental contract with the landlord in respect to the agreed-upon unit.
In short, it serves as an intermediary step between the viewing/negotiation and the signing the tenancy agreement (TA). While the LOI can rightly be seen as an unofficial prelude to its official and legally binding brother that is the tenancy agreement, we still advise you to pay close attention to it.
The letter of intent serves a series of purposes.
Firstly, it shows the landlord that you are serious in wanting to rent the unit.
Secondly, and relatedly, it aims to secure the place, meaning that from the moment the LOI is signed, the landlord will cease to look for prospective tenants and exclusively focus on settling a deal with you.
Underscoring the significance of the LOI, its issuing goes accompanied with the hand-over of a good faith deposit (also known as a booking deposit). This is a mandatory measure and serves as a financial token to credibly back your intentions.
The good faith deposit generally amounts to one month’s rent for a 12-month lease, and double that for a 24-month lease. After the rental agreement is signed, the good faith deposit will become the security deposit or serve as an advance rental fee.
Before issuing the letter of intent, ensure the landlord is the real owner of the property
Importantly, before you write the LOI and transfer the good faith deposit, make absolutely sure the landlord you are dealing with is in fact the real owner of the unit.
A foolproof way to this is by e-validating someone’s ownership here (the cost is S$2.50).
As a precaution we also recommend to bypass the agent and send the good faith deposit straight to the landlord. It should be in the form of a cheque or bank transfer (instead of cash), so that it is traceable.
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What’s a good faith deposit?
Before we further dig into the letter of intent, we shall briefly elaborate on the good faith deposit. If all goes well, it will as stated earlier, be converted into either a security deposit or advance rental fee. This way, its value is essentially neutral.
However, there is a possibility that after the LOI is signed, but before the tenancy agreement is signed, the deal goes bust.
While really quite rare, it does happen and if you find yourself in this situation, you are probably wondering whether or not you can get your good faith deposit back.
In the event you get into an insurmountable dispute and you cannot agree upon the terms of the rental contract, you should get the good faith deposit back unless you, as a tenant, explicitly back out of the deal. In that case, the money is forfeited.
While exceedingly improbable, it could be that you and the landlord disagree over who is backing out of the deal, with the landlord refusing to return the money. If you find yourself at the centre of such a dispute, you have the option to file a claim at the Small Claims Tribunal. That said, the laws and procedures in Singapore are rather pro-landlord and you must have a good case to win.
To avoid the above-mentioned hassle, make sure to spell out and include a specification regarding the good faith deposit, so as to establish the terms and conditions under which it shall be returned or forfeited in the event that a dispute arises and the tenancy agreement is not signed.
If you are wondering what the difference is between the good faith deposit and the security deposit, check out this guide.
Is there a template for the letter of intent?
The letter of intent constitutes a framework of the terms on which you shall rent your unit. It is a written-down version of almost everything you and the landlord have already verbally agreed on.
It should include the following:
- Address of the rental property
- Lease start date
- Period of lease
- Monthly rental rate
- Security deposit
- Good faith deposit
- Whether utilities will be included
- Clauses to be included, eg. diplomatic clause
- Any additional requests
Also, be sure to include all clauses you intend to put into the tenancy agreement also in the LOI.
If you have engaged a tenant’s agent, your agent should have a letter of intent template that you can use. It should include an extensive set of clauses which most LOI have, but you can still add additional clauses that have been agreed upon.
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What’s next?
As the letter of intent is signed by both the tenant and landlord, and the good faith deposit changes hands, the landlord has the responsibility to send you a draft of the tenancy agreement within a previously agreed-upon timeframe. This is usually within three days.
You then have a week (more if you stipulated it in the LOI) to work out the details and sign the tenancy agreement.
Are you renting a property and need help? Let us know in the comments section below.
If you found this article helpful, check out Tenancy agreement and security deposit in Singapore: What renters must know and Black and white houses in Singapore: How to rent.
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Hi,
What is the maximum period given to Tenant / Land Lord to go for Tenant Agreement after signed on Letter of Intent. In my case, I have given my Sign on LOI and agreed to go for rental from May 1st, 2016. After paying good faith deposit my Land Lord is saying, she will go for forfeit the deposit because there is a delay of 1 week to sign on Tenant Agreement even though my actual committed date is 15 days far from the current date.
Hey Prasad, generally the period between a Letter of Intent (LOI) and a Tenant Agreement (TA) is for a week. So, here is something how it goes. Should the tenant pull out of the agreement before signing the TA, for any reason other than both parties failing to agree on the TA, then this deposit is forfeited. Should the owners pull out of the agreement, they must refund the deposit within the time specified in the LOI, usually within three to seven days. So, in your case, as I understand, you agreed to the tenant agreement but you signed it late, and that’s the reason, your landlord forfeited your deposit? Is she asking for that again? Thanks you for interacting with us!
if the contract did not state that the good faith deposit will be forfeited, can the landlord still forfeit if the tenant decides to back out before signing the TA?
If you decide to back out before signing the Tenant Agreement (TA), chances are high that your safety deposit might be forfeited by the landlord. If you happen to go through this, ‘negotiating’ is the best method to get your deposit back. Let me know if you need some more tips. Thank you commenting, Rong and have a good day!
We moved out of our apartment on april 30 and paid mays rent we legally are supposed to pay up to sixty days rent they assured us we would not have to pay junes rent as a letter of intent was signed to transfer apartments from the people below us who would move in to our old apartment on june 1st. they called us today 6 days before the next rent was due and told us the couple planning to move in that signed the letter of intent were backing out leaving us to pay the next monthes rent and not falling back on them. because the letter of intent was signed by them they did not show our apartment to anyone else for the full month we have been moved out not even giving us the chance to have other people see it and move in by june. should this fall back on us or the people that signed the letter of intent and backing out 3 days before their designated move in date
Hi Daniel,
Did your tenancy agreement explicitly state when you should move out from the apartment? If so, then it is legally binding to only pay rent for the duration mentioned in the agreement, regardless of the other agreements the landlord may have with other tenants after your tenancy ends.
Hope this helps!
Regards,
Adam R.
Our lease runs till November the contract said if we break the lease we can be subject to pay up to 2 months after we leave. The property manager assured us that we would only have to pay one month because the people that lived below us wanted our apartment. They signed a letter of intent to move in June first and they said legally they can’t charge us additional months rent if someone else moves in and is paying on that same apartment. Trying to figure out if their intent to move in agreement they signed keeping the complex from showing the apartment to anyone else and than breaking their signed agreement should come back on us to be responsible to pay
Hi Daniel,
If it is explicitly stated in writing about the conditions you have mention, then you should not be footing the additional month’s rent.
Regards,
Adam R.
We do not agree with the TA proposed by the landlord which is very harsh and have decided not to go through with the rental of a flat. Although a letter of intent was signed and a check was issued but I have requested to the bank to stop the check. Can the landlord sue me since I have backed out of the rental because I do not agree to the terms and conditions in the TA? The TA has not been signed yet.
Hi George,
The letter of intent is just to state that you are interested to rent the unit from the landlord and should not be legally binding. In your circumstance, the landlord would not be able to sue you on legal grounds as the tenancy agreement has not been signed.
That said, I think it is still best to go through the terms and conditions in the letter of intent (if any) to ensure that no such terms and conditions are stated in order to fully indemnify yourself.
Regards,
Adam R.
Hi, I already moved in to the rental unit. But the landlord still do not provide something we agreed on LOI stage. Actually I don’t see any clause about tenant’s requirements on TA. How can I handle this issue? Is it possible to hold my monthly rental till the landlord do his duty?
Hi Joseph,
Is it possible to elaborate on what was the service which your landlord promised? The best option will be to negotiate with your landlord further.
Non-payment of the rental may not be a good idea as the landlord may claim that you too have defaulted on the agreement set out in the TA.
Regards,
Adam R.
Hi, it was installing a ceiling fan on the balcony, chemical cleaning before handover to me.
My copy of letter of intent has my signature but not the landlord’s signature. Does it mean that this letter of intent is considered as void? Because a day after I signed, I realise I did not include something important in the tenant requirements. The landlord do not agree to it so I decided to back out of the rental 3 days after signing the letter of intent.
Am I able to get back my deposit since my letter of intent do not have the landlord’s signature?
Hi Lim,
A letter of intent is not, and should not, be taken as a formal document to finalise your tenancy. Does it contain any other terms such as exit clauses, monthly repayments etc?
Also, possible to clarify the amount of deposit you have place? The document should be signed by both yours and the landlord’s signature to be enforceable.
Regards,
Adam R.
Hi,
We have signed the letter of intent but still haven’t paid the deposit yet. I’m not sure the house will suit us finally. Can we pull out at this stage ?
Thanks
Isabelle
Hi Isabelle,
Yes, it is possible so long as the tenancy agreement has not been signed. It is also best to indicate to the landlord of your decision to pull out of the agreement.
Regards,
Adam R.
Hi
The LOI is signed by landlord in Sep 16 and TA to be signed by Nov16.
What legal avenues can the tenant pursue if landlord back out o the LOI besides getting back the good faith deposit?
Hi Sarah,
You mean if the landlord backs out from the TA, instead of the LOI?
Regards,
Adam R.
Hi
I have signed the LOI followed by TA for renting a house. After moving in for a month, I found that the place is unsuitable to me and would like to break the TA.
There is a clause stated in LOI but not TA. Can the landlord makes use of the clause in LOI to sue me?
Hi Mimi,
It is best to clarify with the landlord and agent (if the landlord and/or you were using one). Sometimes, the LOI will be used in tandem with the TA once the TA has been endorsed.
Regards,
Adam R.
If I signed LOI and did not transfer good-faith deposit, can you back out of the deal as a tenant. Can the landlord and agent take legal actions against you because you have signed LOI and they have stopped looking for other tenants.
Hi Tharindu,
The Letter of Intent is not a legal document that outlines the terms of the tenancy agreement, hence the landlord should not be able to take legal action against you.
Regards,
Adam R.
My LOI states diplomatic clause while TA doesn’t reflect. Because of which my owner forfeited by security deposit. What should I do.
Hi Ba,
I’m assuming you terminated the contract earlier than expected? Possible to find out what was your lease period and after how many months did you terminate it?
Regards,
Adam R.
Will the TA superseeded the LOI? A month of warranty is stated in the LOI, but not in TA, so will this one month warranty still hold?
Dear Jay,
The terms and clauses in the TA are binding. If there are clauses in the LOI (not obligatory in nature) you would like included in the TA (like the one month warranty you have mentioned above), you can request for the agent to include it in the TA.
Best,
Krristy
Hi there,
I signed an LOI and transferred 4200 to my agent by bank transfer about a week ago. The agent issued a cashier order and my signed LOI to the landlord. The landlord came back 7 days later with a signed LOI but scratched out the final clause which states ‘the landlord agrees to lease to the tenant mentioned below the premises and undertakes to refund the Tenant the holding deposit of $4200 in the event the TA is not executed for any reason whatsoever and further agree not to conduct parallel negotiation with potential tenant during the period’.
My agent stated we should not agree to this clause and called of the LOI and requested the Landlord to refund the deposit immediately as we are not agreeable to this amendment. Turns out the landlord has banked the cashier order and we are now having difficulty getting the money back.
My question is we have not agreed on an LOI as the Landlord has made amendments without our consent but has banked the cheque. Do we have any way of pursuing the landlord in Small claims?
Would I have any rights to purse my agent for handing over my money (cashier order was in her name) prior to the LOI being signed?
Appreciate your comments….
Hi Dillon,
Please refer to our latest article for more information:
https://www.99.co/blog/singapore/landlord-tenant-disputes-faqs/
In future, all cheques/cashier’s order should only be made out to the landlord’s name. Agents should not be involved in any monetary transactions.
Given the circumstances you have described, you may wish to pursue this at the Small Claims Tribunal.
https://www.99.co/blog/singapore/small-claims-tribunal-rental-disputes/
We wish you all the best and hope the situation can be resolved amicably.
Cheers,
Krristy
hi Ya
My LOI had a termination clause / diplomatic clause but it was not in the contract. owner now says TA succeeds that LOI and i cant terminate the tenancy.
what is my cause of action
Hi there,
You may want to refer to the following blog article for some tips:
https://www.99.co/blog/singapore/landlord-tenant-disputes-faqs/
In future, please check the terms of the Tenancy Agreement carefully and check that it has all the terms you want before signing off on it.
We hope you get things sorted out with your landlord.
Thank you!
Cheers,
Krristy
Hi, I would like to ask for an opinion in the situation I found myself in. I have signed an LOI, that states the lease terms to be 3 months. And the conditions state that “failing to fulfil the conditions and stipulations the 1 month deposit will be forfeited”. The problem is that I have only paid 10% of the good faith deposit, and agreed to pay it a few days later with the landlord. But later on, due to reasons, I decided to not take it anymore, and didn’t pay the rest. And the owner filed a Small Claims Tribunal claim on me. Can LOI be brought to Small Claims Tribunal? And am I obliged to pay it? And what are the chances of winning? Thanks in advance