99.co Guide: Breaking lease and early termination of tenancy agreement
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. We explore what these circumstances are, and their consequences, so landlords and tenants will know what to do in the event of early termination of the TA.
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.
In most cases, the TA should contain terms which ensure the tenant(s) has exclusive possession over a 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:
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, advance 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 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 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. 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 early termination of lease 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 lease, for example, a work transfer overseas.
There are instances when breaking lease is inevitable such as:
As a tenant, to indemnify against monetary penalties when such issues occur, it’s best that he/she negotiates such clauses to be included into the tenancy agreement before signing it.
The Get-out Clause (Minimum rental period)
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 Get-out Clause — also known as a Diplomatic Clause or minimum rental period. This are the typical terms for a Get-out Clause:
Six month lease: no Get-out Clause or 3 month’s minimum rental
One year lease: 6 months minimum rental
Two year lease: 12 months minimum rental
The get-out clause is not only a safeguard for a tenant who encounters unexpected changes in lifestyle/work arrangements, a landlord may also exercise the clause to end the tenant’s stay prematurely without having to rely on proving that the tenant infringed the terms in the TA.
For example, if the Get-out Clause is specified at one year and the notice period is one month on a lease of two years, the landlord or tenant can issue the one month notice on the first year anniversary of the lease. The total rental paid up till the end of the lease would be 13 months.
The Reimbursement Clause
Auxiliary to the Get-out 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 Get-out 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 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 Get-out Clause period? What are your options then?
The purpose of the Get-out 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 he will incur with your early termination of rental.
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 and 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 lease 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, opening communication with the landlord and seeking fair compensation would be the best solution in the case of any disputes.
Landlords breaking 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 his or her 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 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 he wishes 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 his affairs, in most cases, this is 4 weeks.
A landlord may also choose to invoke his right to distress under the Distress Act. This allows him to claim up to 12 months’ arrears prior to the distress application. This is followed by sending the tenant a notice of seizure of goods and writ of distress. If the tenant does not reply within 5 days, the landlord may then sell off his 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, however, it’s ideal for landlord and tenant to have empathy for 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.
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