WHAT IS THE DIFFERENCE BETWEEN A TENANCY AND A LEASE ?
A contract term which is less than three (3) years is referred to as a tenancy. If a contract term is more than three (3) years, it is known as a lease. Under the National Land Code (NLC), the lessor is entitled to register their leases in the title deed.
WHAT IS THE NORMAL TENANCY TERM ALLOWED ?
Most common tenancy carry a fixed term of three (3) years with an option to renew for a further term of two (2) or three (3) years. However, a shorter tenancy period of 2 years with an option to renew for 1 further term of one (1) year is also allowed. A longer tenancy period allows the tenant to lock in the rental rate in a growing property market.
WHEN DOES THE TENANT EXERCISE THE OPTION TO RENEW THE TENANCY?
This is always stated in the tenancy agreement, either three (3) or six (6) months before the expiration of the fixed term. In order to exercise the option to renew the tenancy, the tenant is required to serve a written notice to the landlord before the aforesaid time. The landlord shall grant the option to renew provided there is no breach on the part of the tenant in performing the covenants as stipulated in the tenancy agreement.
WHAT ARE THE REQUIRED PAYMENTS OR DEPOSIT TO BE MADE?
Upon the confirmation and the acceptance of the offer, the tenant is usually required to pay a sum equivalent to one month’s rental as earnest deposit (which shall be treated as advance rental upon the commencement of the tenancy). The tenant is required to pay the followings upon the execution of the tenancy agreement or upon the handover of the premises, whichever is earlier;
WHO PREPARES THE TENANCY AGREEMENT?
In normal circumstances, it is the landlord solicitor who prepares the tenancy agreement. Generally, the landlord prefers to maintain a standard agreement for all the tenants within the same building.
WHO PAYS FOR PREPARATION OF THE TENANCY AGREEMENT?
Generally, each party shall pay their own solicitor fees. However, some landlords may impose a certain administrative fee towards the preparation of the tenancy agreement.
HOW TO CALCULATE STAMPING FEE?
The stamping fees is calculated based on the duration of the tenancy and the monthly rental or known as ad valorem.
CAN THE TENANT OR LANDLORD TERMINATES THE TENANCY AGREEMENT BEFORE TENANCY EXPIRY?
Unless there is a provision in the tenancy agreement which allows the tenant or landlord to do so failing which the parties are committed to the fixed term. In the event of any breaches, the tenancy will require the injured party to be compensated for the remaining term. However, subject to agreement, some landlords may allow the tenant to find a replacement tenant to take over the premises for the remaining unexpired period.
CAN LANDLORD REVISE THE SERVICE CHARGE DURING TENANCY TERM ?
“Service charge” are charges incurred by the landlord for the maintenance of the buildings including the provision of security services, general cleaning, maintenance of lift and air-conditioning, utilities charges for the common area and others.
The revision of the service charge depends on the provision of the agreement and the rental rate being imposed. The landlord may increase the service charge if it is quoted/stated separately from the base rent.
IS SUB-LETTING ALLOWED?
Unless there is a provision in the tenancy agreement, sub-letting is generally not allowed. However, some landlord may consider if the sub-tenant is a reputable tenant.
WHAT IS RENOVATION PERIOD AND RENT-FREE PERIOD?
Renovation period is the duration of time given to the tenant to conduct the renovation to the premises and generally there are no rental charges. It ranges from one (1) month to several months depending on the size of the space taken by the tenant. Some landlords may provide “Rent-free period” as an incentive without payment of rental after the completion of the renovation period.
WHAT ARE THE REQUIRED DOCUMENTS WHEN SIGNING A TENANCY AGREEMENT ?
The tenant is expected to furnished to the landlord the following documents “certified true copy” upon the execution of the tenancy agreement;
DO I NEED TO REINSTATE THE PREMISES WHEN TENANCY EXPIRED ?
Generally, the tenant is required to reinstate the premises to its original condition upon the expiry or determination of the tenancy. However, if the renovation, fixtures and fittings are in good condition, some landlord may allow the tenant to vacate the premises without the reinstatement.
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