Tenancy Agreement and Security Deposit: What renters must know

· Rental

Renting A Property

What To Take Note

In essence, a Tenancy agreement (TA) is simply a more detailed, and legally binding version of the letter of intent (LOI). Typically, the landlord will prepare the Tenancy Agreement and fill out the details in accordance with the mutually agreed upon terms.

We cannot stress it enough, but this is the moment to take your time and read the agreement through back to front. While the tenancy often goes just fine, in the event that you are unlucky and end up having a bad (and costly!) rental experience, you want a good Tenancy Agreement to be able to fall back on.

Security Deposit

Before we move on to line out and further detail the Tenancy Agreement, a slight yet important diversion into the security deposit is warranted. Procedurally, the Tenancy Agreement always goes together with a security deposit, and when signing the Tenancy Agreement, a security deposit will have to be handed over to the landlord. It is common practise for the security deposit to be worth about one month’s rent for a one year lease and double for a two year lease.

The purpose of the security deposit is essentially twofold. Firstly, and most prominently, it serves as a safeguard for the landlord, in case the property will suffer damages due to negligence of the tenant. Secondly, if the lease term is terminated prematurely (and no clause was included in the Tenancy Agreement conditioning this), then the security deposit can be withheld to cover for the landlord’s inconvenience. 

Tenancy Agreement Outline

The Tenancy Agreement can be as short or long as you make it to be and there is no limit on clauses that can be included. Every Tenancy Agreement must include the following minimum information: 

The full name and contact address of the landlord and Tenant

The address of the property that is being rented

The date of the tenancy agreement is signed

The date the tenancy is to begin

Addresses for service for both the landlord and the tenant

A note stipulating whether the tenant is under the age of 18

The rent amount and frequency of payments

The place or bank account number where the rent is to be paid

Any fees to be paid (commission to the agent) if applicable.

Inventory List of all the items in the apartment.

What to look out for in a Tenancy Agreement?

In addition to what has been set out above, most Tenancy Agreements include clauses stipulating the rights and responsibilities relating to maintenance and repair, utilities, insurance matter, stamp duty, access to premises of prospective tenants and aircon servicing (if applicable), conditions of the security deposit and good faith deposit, an early termination clause, and a clause detailing what happens when rent is paid late or not at all. 

Seeing that the clauses of the contract are mostly case-specific and essentially infinite in number, it is difficult to give a helpful overview of them all. Still, we have assembled some clauses that are often experienced as problematic and as such deserve some elaboration. 

Diplomatic Clause and Reimbursement Clause (Early Termination of Lease)

In the event that you are signing a lease for more than 12 months, we highly recommend you to include a Diplomatic Clause in the Tenancy Agreement. This will allow you to terminate the lease prematurely in the event that you unexpectedly get transferred to another country. The clause can commonly be exercised after you are 12 months into your lease term, and allows you to terminate the contract without having to pay the additional months of rent. Necessarily, a notice period will be included (for instance 2 months). The clause then protects the tenant by allowing him/her to terminate the lease before the previously approved upon termination date. 

Noteworthy is that if you require the landlord to include the Diplomatic Clause, s/he will usually in turn demand a Reimbursement Clause to be included, which stipulates that you have to reimburse a part of the agent’s commission. The amount is prorated, meaning that the longer the lease term, the higher the agent’s commission. For more information on common commission rates and responsibilities check out our agent commission guide. 

Minor Repair Clause & Other Maintenance Clause

This clause is almost always included in the Tenancy Agreement and if it is not then you should request it to be put in there. The clause stipulates what happens to minor damages resulting from the wear and tear of the property and its items. The clause often specifies an amount above which the landlord is responsible for the damages. This way, if there are minor damages up until for instance S$150 the tenant would pay, whereas when damages exceed this amount the landlord would be liable. Note that this is only for damages that result from the aging, wear and tear of the items. Damages cause by the negligence of tenants, such as accidentally breaking fragile items fall wholly on the tenant. Of Course, if you can manage, you can attempt to come to an agreement with the landlord where s/he will pay for all damages that occur due to aging, irrespective of the degree of damage. 

Lastly, we advise all tenants to insert a problem-free period in the clause, preferably 30 days or more. This way you are not liable for any damages during the initial period of the lease, and in a way protect yourself from either damages you had previously overlooked or damages done by the previous tenant. 

It is common practise that the landlord is liable for any large damages that are not the result of a tenant’s negligence. And while most landlords will agree to this regardless of whether it is stipulated in the contract, it is best to include it just in case. 

Option to Renew Clause

This is a clause that lets tenants extend the lease for another term – usually a year – with a 2-month prior notice. If the clause is exercised, the landlord will prepare a contract for extension. The clauses usually stay the same as the current contract unless specified otherwise. Impotantly, negotiations are wide open again and both you and the landlord can propose different terms. 

What will happen if you either forget to or cannot pay rent on the due date?

The Tenancy Agreement will have a clause stating what happens when rent is either paid too late or not at all. In the event that you end up paying the rent too late (after a specified amount of hours/days) there will normally be an interest imposed on the amount unpaid. if correct, the clause should also state what happens when you cannot pay the rent anymore. If you deem this even remotely possible, make sure to know the terms of the actions taken in such an event. 

Access to Premises Clause

There are usually a series of “Access to Premises ” clauses, allowing landlords to enter the premises for whatever stated purpose. Commonly, the purposes for which a landlord would enter the premises is for repair work or the arrangements of viewings for future tenants. Towards the end of your lease, the landlord will in all likelihood arrange for viewings so as to minimize the vacancy period of the unit. As a tenant you may want to include some details into the clause such as timing of viewing and repair work. 

“Major Construction” Clause

This particular clause is not very commonly found. Still it may be worthwhile to know about it and perhaps try to include in the Tenancy Agreement. Basically, this clause allows you to break the lease if there is an unexpected demolition or construction taking place near the apartment, which may cause inconvenience or even health risks to the tenant. If you are thinking of including this clause in your Tenancy Agreement, then we advise you ot be as specific as possible and include precisely within what radius construction would fall under the clause, what inconvenience depicts and within what timeframe notice has to be given. 

“En Bloc” Clause

Unlike all previous clauses, this one is solely exercises by the landlord, and serves to protect his interest. Put simply, the clause allows the landlord to sell the property and end the lease prematurely without having to compensate the tenant. Generally, a notice period will be included. While it is relatively rare, development sometimes go on sale “en bloc”, meaning that the whole condominium is sold for redevelopment. In such instances, when this clause is included the landlord can terminate the lease without having to compensate the tenant. 

If there are any clauses that are out of your control to comply with, you disagree with, or do not fully understand, do not sign the agreement. Negotiate, and request for amendments if needed. All seems alright after all? Then it is at last time to give this the final push, commit and put the magic mark on that dotted line.

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