Renting Guide
This document explains how to complete the rental process once you have
found a property that you want to rent, and the landlord has verbally
accepted your offer. The formal offer is done in form of a 'Letter of
Intent'. The landlord officially accepts your offer by signing the
'Letter of Intent'. Your agent or the landlord's agent will typically
prepare the necessary documents for the rental.
Rental Documents
Letter of Intent
The
'Letter of Intent' is a proposal from you to the landlord to lease the
apartment with the conditions set by you. By signing the document the
landlord accepts the conditions, which normally has been agreed
verbally beforehand. The tenant typically gives the landlord one
month's rental as a good faith deposit at this point.
Typically the Letter of Intent specifies the following:
Term of Lease -
Usually 12 or 24 months, with optional renewal of another 12 or 24
months - but not necessarily with same rent). Also the date when the lease is supposed to
start. Generally, landlords are reluctant to accept leases less than 12
months, and when the market is good, they actually prefer to have 24
month leases and the tenant may have to pay premium for shorter term lease.
Monthly rental – The 'Letter of Intent' usually only states the amount of rent to be paid.
Good faith deposit –
usually one month's rent. Once the landlord signs the Letter of Intent
and accepts the deposit, the landlord promises not to lease the
apartment to anybody else. When the tenancy agreement is signed, the
good faith deposit will be deducted from the first rental or security
deposit.
Security deposit – The amount of the security
deposit is usually stated in the Letter or Intent, but not be payable
until Tenancy Agreement is signed. The typical security deposit is one
month's rent for every 12 months of lease. When the lease term ends,
the security deposit will then be refunded without interest. However,
the landlord reserves the right to deduct from the deposit all costs,
damages and expenses arising from the tenant for breaching any of the
covenants stated in the Tenancy Agreement.
Additional requirements –
e.g. Diplomatic Clause, Furnishing. The Diplomatic clause is to
safeguard the tenant in the event the tenant is no longer employed.
Typically it states that you can terminate the lease after 12 months by
giving 2 months notice. The 'Letter of Intent' may also state that the
property is leased furnished or partially furnished. You should also
state in the 'Letter of Intent' if you are planning to sublet any part
of the property, or if you plan to have pets in the property. Standard
tenancy agreement states that this is subject to landlord's written
approval, and you may want to agree this beforehand in order to avoid
problems later.
Expiry of 'Letter of Intent' – The Letter
of Intent has a clause that specifies a period which within the
landlord has to sign it, or it otherwise expires. In case of expiry,
the landlord has to return the good faith deposit back to the
prospective tenant immediately.
Tenancy Agreement
The
'Tenancy Agreement' is the binding contract to lease the property. It
will be signed by both the tenant and the landlord. The 'Tenancy
Agreement' will state the same things as the 'Letter of Intent', but in
more detail. It is advisable to use the standard tenancy agreement
provided by the agencies as a template. At this point you need to
furnish the landlord with copy of your passport and employment pass or
Identity Card (IC). The landlord will need to check that you are
eligible to stay in Singapore as it is illegal for landlords to have
illegal immigrants to stay in their property. Also, normally the
security deposit and the first month’s rent is payable at this point,
minus the good faith deposit given with the 'Letter of Intent'.
You should check at least the following in the Tenancy Agreement:
Tenant's full details – name, address, ID details
Landlord's full details – name, address, ID details
Payment details - including when the rent is due and how it is to be paid
Security deposit – should be 1 month’s rent for every 12 months of lease term
En-bloc –
with Singapore's recent 'enforced block sale' fever, many Landlords are
including 'en-bloc' clauses to protect them from early termination
compensation. If you are renting an older block, make sure that either
this clause is negotiated out or reduced otherwise you may be looking
at inconvenience and additional costs of moving within the term.
Termination –
Typically this includes the Diplomatic Clause on its own, or sometimes
accompanied by a reimbursement clause. The latter states that if you
exercise the Diplomatic Clause, you will have to reimburse part of the
commission the landlord had paid to his/her agent - pro-rated to the
remainder of the lease term (for example, if you leave 3 months before
the end of a 24-month lease, you will pay the landlord 3/24 of the
commission he/she paid to the agent). In most cases, the tenancy
agreement does not include this in case the landlord sells the property
during the lease period. If there is no specific condition for this,
the new owner has to honour the existing tenancy agreement. The tenant
will just pay the same rent to the new owner.
You should also change
the standard Tenancy Agreement if you are planning to sublet any part
of the property, or if you plan to have pets in the property. The
standard tenancy agreement states that this is subject to landlord's
written approval, and you may want to change this at the time of
signing in order to avoid problems later.
In any case, you should
not be afraid of the legalities and your agent can help you to explain
all this and negotiate on your behalf. It is still useful to understand
the basic responsibilities, especially as the Singapore law can be
considered landlord friendly. For example, if the tenant fails on
his/her rental payments, the landlord can get a court order to
re-possess the property as well as seize and sell the goods inside the
property to recover any rent and legal costs from the tenant. This is
contrary to many other countries where it may take years to get rid of
uncooperative tenants – if ever.
Inventory of Contents
'Inventory of Contents' is supplementary to the Tenancy Agreement. It
lists all the fittings and furniture that is rented as part of the
apartment, as well as their present condition. You will need to sign it
when you move in. The contents of the property will then be checked
against it when you move out. Your agent can help you with checking the
inventory and will help you on dealing with the landlord to fix any
problems.
Moving In
When
you move in, you need to inspect the property against the Tenancy
Agreement and the Inventory of Contents provided by the landlord. You
will then need to sign the Inventory after the inspection. We would
advise you to either take photos of every detail that you think is not
in order, or ask the landlord to fix them immediately. This can
potentially avoid a lot of problems when you are moving out.
Also,
one of the first things that you need to do is to connect the
electricity and water – these are not typically provided by the
landlord. You need to call SP Services to get them turned on, and you
should do this already before moving in as it can take a couple of days.
Moving Out
You
should go through the 'Inventory of Contents' and check that everything
is as when you were moving in. Normal wear and tear is acceptable, but
any breakages or lost items during the tenancy are payable by the
tenant. Also, typically the 'Tenancy Agreement' states that when moving
out, the apartment is clean and all air conditioning units has been
serviced.
Remember that the landlord has every right to deduct
any of the expenses from your deposit – and they may seem sometimes
arbitrary. Therefore, we really do recommend that when you move in, you
do a proper inspection and take photographs for evidence to avoid any
misunderstanding. Also, it is usually cheaper for you to fix the
problems than what the landlord might quote (e.g. you may not want to
pay for getting an electrician to change a light bulb).
Fees and Commission
Agent's Commission
The commission is typically full month's rent for every 12 months of
lease. The landlord also pays commission a full month's rent for every
12 months of lease. If there are two agents involved, the agents will
split the landlord's commission based on their mutual agreement.
Stamp Fee
The
tenant will pay for the stamp fee. Usually the tenant will give the
money to the agent and the agent will pay it to the relevant government
agency (Inland Revenue Authority of Singapore). Stamp Fee is calculated
based on Annual rent using the following rules:
If the lease term does not exceed 1 year - S$1 for every S$250 or part thereof of annual rent;
If the lease term exceeds 1 year, but does not exceed 3 years - S$2 for every S$250 or part thereof of annual rent;
If the lease term exceeds 3 years, or has any indefinite term - S$4 for every S$250 or part thereof of annual rent.
Example calculation:
Rent
is S$4,000/month (S$48,000 annually) – lease term is 24 months: Stamp
fee payable = S$48,000 / S$250 x S$2 + S$2 (for duplicate copy) = S$386
Check out Inland Revenue of Singapore (IRAS) website for more details - www.iras.gov.sg
Utilities Deposit
Singapore
Power Services (SP Services) will require you to pay a deposit before
they will turn on the electricity and water, which you need before you
can move in. The deposit will be reflected in your first bill. The
deposit currently varies from S$40 to S$800, depending on your
residency status as well as what kind of property you are renting. For
a foreigner renting a private apartment, the deposit required is
currently set as S$500. Please check SP Services website for more
details - http://www.spservices.com.sg/
