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. In this article, we explore what these circumstances are and their consequences. So landlords and tenants in Singapore will know what to do in the event of early termination of the tenancy agreement.
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 that ensure the tenant(s) has exclusive possession of the 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 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 a 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, they 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 agreement in Singapore. 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 ending the lease early 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 the lease, for example, a work transfer overseas.
There are instances when breaking a lease is inevitable such as:
- Tenant relocated overseas by their company
- The tenant’s employment terminated
- The 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 they negotiate such clauses to be included in the tenancy agreement before signing it.
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 will include a Diplomatic Clause — also known as a Get-Out Clause or minimum rental period. These are the typical terms for a Diplomatic Clause:
Six-month lease: No Diplomatic Clause or three months minimum rental
One-year lease: Six months minimum rental
Two-year lease: 12 months minimum rental
(The minimum period for renting an HDB room or unit is six months, while the minimum period for private property rentals is three months.)
Usually, the Diplomatic Clause is included for a two-year lease, with a minimum stay of one year. After that, the tenant can exercise the clause and give at least a two-month notice or pay two months worth of rent in lieu of the notice.
It serves as a safeguard for the tenant who may encounter unexpected changes in work arrangements. With this clause, the tenant won’t need to provide any compensation as well.
The Reimbursement Clause
Auxiliary to the Diplomatic 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 Diplomatic 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 early 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 they will incur with your early termination of rental in Singapore.
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. 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 leases 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, having open communication with the landlord and seeking fair compensation would be the best solution in the case of any disputes.
Landlords breaking the 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 their 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 end the contract early and 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 they wish 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 their affairs. In most cases, this is four weeks.
A landlord may also choose to invoke their right to distress under the Distress Act. This allows them to claim up to 12 months’ arrears prior to the distress application. This is followed by sending the tenant a notice of seizure of selected goods and a writ of distress to recover the unpaid rent. If the tenant does not reply within five days, the landlord may then sell off their 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, it’s ideal for the landlord and tenant to be considerate towards 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.
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
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