7 important rental clauses you never knew existed

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If you’re new to renting, it’s normal to be a little intimidated by all the technical language in your Tenancy Agreement (TA).

In this article, we explain seven important, yet lesser-known, rental clauses for both landlords and tenants. Note that these clauses may apply not only to residential, but also to commercial and industrial properties.

Rental clause #1: Diplomatic clause

Who the clause may benefit: Tenants (specifically, expat tenants).

First things first — the diplomatic clause is only applicable for expats in Singapore, not Singaporeans. This clause allows the tenant to terminate their lease under certain conditions (for example: if they’ve been let go, or transferred to an office in another country).

Note that the landlord might require the tenant to stay for a minimum period of time before they can exercise the clause. Once the clause is exercised, the security deposit held by the landlord must be returned to the tenant upon handover.

Rental clause #2: En bloc clause

The clause may benefit: Landlords.

If the TA comes with an en bloc clause, this gives the landlord the right to terminate the lease prematurely in the event that the building is being sold for redevelopment.

On the other hand, if the landlord does not include this clause in the TA, and a tenant has to move out due to en bloc, this tenant may claim compensation for their unfulfilled lease from the landlord — regardless of whether the landlord voted for the en bloc or otherwise.

Rental clause #3: Forfeiture clause

The clause may benefit: Landlords

A forfeiture clause specifies how a landlord might regain possession of their property should their tenant breach the terms of the lease.

While it is implied that landlords are allowed to take steps to repossess their property in two circumstances: A tenant defaulting on their rent or using the property for illegal means, landlords who wish to repossess their property for other reasons, should specify these clearly in the TA.

An example would be a shop in a commercial property failing to meet a specified target revenue in two consecutive quarters. A landlord that includes the forfeiture clause in the TA can exercise the clause to “free up” the unit for a potentially better-performing tenant, which could improve the footfall the property receives.

Note: The forfeiture clause, itself, does not allow a landlord to repossess a property without proper procedure. In the event that a situation matches the one specified in the forfeiture clause, landlords would have to follow formal proceedings (e.g. give prior written notice) if they wish to do so.

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Rental clause #4: Interest on arrears clause

The clause may benefit: Landlords

The interest on arrears clause is pretty straightforward; it serves to protect landlords from tenants who consistently delay their payments.

Using this clause, the landlord can specify that in the event that the tenant does not pay their rent within a certain period of time, it is under the landlord’s jurisdiction to claim a certain amount of interest on the amount unpaid.

Again, this is more common in commercial property, as it might not make monetary sense to evict a tenant when there is existing vacancy in the property.

Rental clause #5: Repair clause

The clause may benefit: Landlords and tenants

A repair clause specifies to what extent a tenant should take care of their rented property, and helps puts landlords and tenants on the same page. As a general rule of thumb, it is in the landlord and tenant’s best interests to go into as much detail as possible when working out their repair clause.

For instance, a repair clause might stipulate that the tenant will pay for all repairs up to $150, with the landlord paying for repairs above that amount. In this case, the landlord and tenant should also state in their TA whether this applies to all items within the flat, or whether it only applies to items that are damaged due to carelessness or misuse.

Here’s an example: if an expensive rug starts shedding due to normal wear and tear, is the tenant liable to pay for maintenance or a replacement? It’s up in the air, unless you word your repair clause clearly and non-ambiguously.

Rental clause #6: Option to renew clause (OTR)

The clause may benefit: Tenants

This clause stipulates that the landlord agrees to let the tenant have the priority option to extend their lease after a fixed term before the landlord puts the property on the market for rental or consider an offer from another tenant.

While the OTR is granted at the beginning of the lease, it may only be exercised by the tenant towards the end of the lease. Should the tenant choose to exercise the clause, the landlord will then prepare a contract for extension. Any terms stated in the OTR clause (eg: terms specifying that the extension should be granted at the prevailing market rate) need to be satisfied in order for the clause to be exercised.

Rental clause #7: Non-disturbance clause

The clause may benefit: Tenants

Under this clause, a tenant has the right to continue occupying a property even when the property is sold or taken over by creditors. If the property’s lease is mortgaged, the bank may or may not recognise this lease, depending on whether the lease is authorised or mandated by law (i.e. property forfeited via court order).

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This article was first published in 99.co.