Leasing Terminology

Leasing Terminology

Below are some of the common terminology that you can find in a normal leasing transaction in Singapore. You should familiarise and understand some these terms and common practises in order for you to successfully secure a fair deal with the landlord.

Security Deposit

A refundable security deposit equals to between 3 to 6 months’ gross monthly rent is to be paid by the tenant and to be retained by the Landlord for the duration of the lease term. The range of months typically is determined by the tenant’s paid-up capital in addition to the lease term secured. E.g 3 years Lease with security deposit equivalent to 3 month’s rental.

The security deposit, to be paid by the tenant upon signing the Letter of Offer , is retained as collateral for the tenant’s conformity of all the its commitments in the Tenancy Agreement . The landlord reserves the right to deduct damages and expenditures to be paid by the tenant as a consequence of any kind of default or breach by the tenant as indicated in the agreement . The deposit is to be refunded free of interest when the lease expires.

Fitting Out/Renovation Deposit

A Fitting Out or Renovation Deposit is to be paid by the tenant or their renovation contractors before any kind of renovations or fitting-out works to the office spaces can be done . The deposit , held by the landlord or the MCST as security for making good any kind of damage to the common spaces within the building , removal of all waste materials and debris etc , is refunded upon completion of renovations once the condition of the affected common spaces are in satisfactory condition.

Floor Area

The gross floor area is the total area of the covered floor space measured between the centre line of party walls, including the thickness of external walls and the area occupied by all pillars, columns within the premises measured in square metres(sqm) or square feet(sf).

Lease

Common lease term is for a period of minimum 2 or 3 years . Most landlords would normally propose a time period of 3 years together with with an option to renew in most cases . For large space tenants as well as companies who may have long term strategic plans , 4 to 6 years lease term may also be possible , combined with generally with a rent evaluation clause within the lease term.

Premises

Premises refers to the office space and they are usually in bare, partial fitted or fully fitted condition. Some will include ceiling boards, standard lighting, sprinklers and raised floor system for some buildings.

Rental

The gross rent, in Singapore Dollars, is paid monthly in based on gross rate (inclusive of maintenance and service charge rate) per square foot(psf) on the Floor Area and is usually subject to 7% Goods and Services Tax (GST).

Rent-Free Fitting-Out Period

Landlord normally provides rent-free period to the tenant for the purpose of renovating and fitting out the premises, typically between two weeks to one month. The time frame is dependent on area of the premises, large space users may be granted longer rent-free fitting-out period. Usually fitted office units has shorter rent-free period as these units are usually ready to move in except for some touch up that is required.

Rent Review

This usually applies to longer lease terms from 4 to 6 years, the lease or tenancy agreement would usually contain a provision for a rent review after the first 2 or 3 years, which revised rent would be at the then prevailing market rent.

Reinstatement of Premises

Just about all tenants, irrespective of the condition of the premises when they initially took possession of the premise from the landlord, i.e. bare or fitted (renovated), are expected to reinstate the premises to bare condition upon the expiry of the lease or contract. Exceptions could be made in the event that a new incoming tenant or landlord would like to maintain the pre-existing fittings and fixtures.

Service Charge

Refers to the monthly payment for general management services supplied by the landlord such as air conditioning within office hours, building maintenance, management fees, building repairs and security. The prevailing amount for service charge is normally stipulated in the tenancy agreement together with a clause that it is subject to increase during the lease term. This enables the Landlord to recover the increase in cost of general management services provided under the service charge from the tenant.

Sub-Letting

In most lease agreements, sub-letting of office premises is not allowed. However, some landlords will consider allowing sub-letting on a case-by-case basis.

Option to Renew

Most landlords offer tenant the option to renew for a further term at the end of the first lease term. The Option is non-binding as it only gives the tenant the “First Right of Refusal” should they decide to stay on for a renewed term. The rental rates for the renewed term will be negotiated usually about 3 to 6 months before the lease expiry date.

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