The commercial lease terms in Singapore are defined as the contract between the landlord and the tenant where the landlord agrees to provide a commercial place on rent to the tenant, provided get both tenants and the landlord complies with the specified terms and conditions of the lease agreement.
However, there are no such regulations in Singapore that indicate the terms that can or cannot be specified in the commercial lease agreement. This means that the terms are only added in agreement upon the negotiation among the parties.
It has been said that there are several terms that both tenants and landlords in Singapore usually specify in the commercial lease agreement. This article is all about the various terms and conditions of the commercial lease agreement in Singapore.
Lease Duration
The commercial lease agreements notably specify the actual duration of the lease. For example, in Singapore, the lease agreement term is based on the actual size of the commercial space that needs to be leased.
Basically, the duration of the lease agreement for the larger commercial space is somewhere between 5 to 6 years. On the other hand, if the commercial space is quite small, then the duration of the lease agreement will be in between 2 to 3 years.
When the duration of the lease is about to end, several landlords offer the tenants the option to renew the agreement at a market price generally during the renewal. Basically, the options for renewing to the further term are as follows:
- For the rental amount which was previously agreed on or specified market rate during the time of the renewal
- For the duration, that is all the more similar to the lease, which is about to end.
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Rent
The commercial lease agreement in Singapore basically states the amount of the gross rent or the rent usually payable by the tenant to the landlord.
The gross rent is basically payable on a monthly basis. It is determined from the following things:
- The base rent is usually determined based on per square feet of the floor area.
- The goods and service tax of 7% is also payable only if the landlord is the GST registered company.
- Service charges
The service charge is the payment usually made to the landlord by the tenant for receiving some basic services from the landlord, including building repairs, security, and building maintenance. The amount that needs to be paid by the tenant for the necessary service is usually mentioned in the commercial lease agreement.
The lease agreement basically includes that the service charge amount can be altered during the duration of the lease, which enables the landlord to manage any increase in the service charge from the tenant.
Deposits and Other Fees Payable
The tenant must also pay the refundable security deposit to the landlord, which is usually equal to the three months worth of gross revenue. Upon the expiry of the lease, the refundable security paid by the tenant will be refunded back to the tenant’s account without any interest. Moreover, the amount of refund will depend upon the tenant’s behavior towards the commercial lease agreement.
This simply means that if the tenant has breached any terms of the commercial lease agreement, in that situation, the landlord can utilize the security deposit done by the tenant to recover any losses suffered due to the breach of the agreement.
For instance, if the tenant has done any damage to the premises, in that situation, the landlord has the complete right to deduct some amount from the security deposit as an expense to repair the damage done.
Utility and Maintenance
As per the commercial lease agreement, the tenant will be completely responsible for all the general telecommunication and electricity bills that need to be paid from the tenant’s account to the concerned service providers.
Additionally, the landlord will manage several other matters related to property, including proper maintenance, ensuring the cleanliness of the exterior premises, and several other property-related maintenances. The tenant will be only responsible for some basic maintenance and maintain the cleanliness of the interior commercial spaces that have been provided on lease to the tenant.
Sub-Lease
Basically, as per the commercial lease agreement, including the terms and conditions that restrict the tenant from subletting the commercial space no matter in full or in part, unless the landlord has given the written consent.
Insurance
The tenants are usually required to maintain the public liability insurance policy against all the allegations related to the death, property damage, personal injury, or any form of loss arising out of any and the entire operation in the premises throughout the lease duration.
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Office Renovation Work
When tenants prefer to customize the commercial space according to their convenience and tastes, they can only do so by being under the terms of the commercial lease agreement.
This is because a commercial space provided in Singapore usually comes with several standard fittings, protection systems, standard fire sprinklers, air-conditioned distribution ducts, basic window fittings, and basic lightening.
However, any alteration in the commercial space to the existing fixed fittings can only be carried out upon the landlord’s approval. The reason behind this is because the tenant has to return the commercial space to the landlord in its original condition when the lease agreement comes to an end.
Reinstatement
The tenants’ criteria to return the commercial space to the landlord in its original form by the end of the lease agreement are commonly known as reinstatement.
The commercial lease agreement will include the extent of reinstatement that needs to be performed prior to officially returning the premises to the landlord. The extent of reinstatement includes repainting all walls to their original color, repairing any damage to the premises for which the tenant was responsible, and getting rid of all the additional furniture.
The reinstatement provision might also include the reinstatement contractor hired by the landlord, but its expenses are to be borne by the tenant. In this case, the tenant will be completely responsible for paying for all the reinstatement work performed by the landlord’s appointed contractor.
Illegal Employment of Foreign Workers
It’s quite natural that Singapore businesses are highly based on foreign workers in the operation of their daily business. These workers must follow all the relevant statutory regulations and apply for the relevant permits before getting employed.
No matter you are the landlord or the tenant, both need to make sure what is specified in the commercial lease agreement which was undertaken between you and the other party concerning the terms of the lease.
You must get a complete understanding of the terms of the lease agreement so you can get familiar with the actual extent of the rights and obligations of both.
FAQs
For additional information about property buying in Singapore, you can go through our step-by-step guide on buying property in Singapore.
Is rental income taxable in Singapore?
The rent you obtain from providing the land on rent will be subjected to income tax. In addition, any income that you earn in Singapore will be taxable under the Singapore income tax act. This includes the investment’s payment or profit unless the particular investment scheme is specifically exempted under the income tax.
How is the tax on rental income calculated in Singapore?
You will be taxed rental income, calculated by determining the profit you have made, i.e., by adding all the rental income you have received in a particular year from several properties and then reducing all the rental income tax allowance, allowable expenses and relief.
Can a foreigner rent a property in Singapore?
The foreigner has been granted to rent property in Singapore as long as they fulfil the certain criteria to do so. One of the criteria that each foreigner needs to fulfil to rent a property in Singapore is to hold a long-term stay past that Ministry of manpower issues. Some of the certain passes are mentioned below:
- A valid employment pass
- Work permit such as an S-Pass
- A Student Pass
- A Dependent Pass
- A long-term social visit pass
Can a foreigner buy cluster houses in Singapore?
The Singapore permanent resident and foreigners are granted to buy the cluster house in Singapore that is situated within the approved consolidation development as per the Singapore planning act. Additionally, there are certain restrictions related to purchasing the landed property. In that situation, you will only obtain approval from the land dealings (approval) unit if the house is not situated within the condo development. Obtaining approval will take up to 6 weeks.
Can foreigners buy freehold property in Singapore?
Obviously, all the foreigners are eligible to purchase both freehold and leasehold private properties in Singapore, provided they need to pay the additional buyers to stamp duty of 20%.
Can foreigners purchase the landed property in Singapore?
Singapore citizens or permanent residents are only granted to purchase the landed property in Singapore. Therefore, no foreigners are allowed to purchase a landed property like semi-detached houses, bungalows, and terrace houses. But, the foreigners are granted to buy the condominium. This means if you are not the local, you will need to first apply for permanent resident for a minimum of five years to get eligible to buy property in Singapore.
Can foreigners get a mortgage in Singapore?
Yes, foreigners are entitled to receive a mortgage in Singapore, but there are several things that they need to keep in mind.
The foreign is granted to get the 75% of the financing on the cost of the particular property when buying the first property and 55% for the second and following property.
Bank loans rates are kept on fluctuating means their rates suddenly rise or get low down.
In Singapore, banking authorities are very strict about accepting repayment from the customer, and they do not hesitate to visit your house for receiving the payment.
Additionally, you can refer to our Guide on Stamp Duty on Buying Property in Singapore to get familiar with all the details related to Stamp duty.
Can foreigners rent a condo in Singapore?
As a foreigner, there are no restrictions for you to rent a condo in Singapore. However, you do not require to pay any additional buyer stamp duty if you decide to rent out your condo unit.
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By reading the above article, you might have understood the most common commercial lease terms in Singapore. These terms are enough to let you understand the complications involved in renting out or acquiring the property on rent in Singapore. However, it is advised to carefully read each term so that you do not make any mistakes in the future while giving or acquiring the property on rent.
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