Letter Of Intent (LOI): A Simple Guide for Tenants

the letter of intent is an important document for rentals, and comes before the tenancy agreement

Whether you’re planning to rent a room or unit in Singapore, one of the things you may have heard of is the Tenancy Agreement, which you’ll need to sign before you can finally move in. But even before you sign the Tenancy Agreement, you may need to deal with another document: The Letter of Intent.

Renting a property for the first time in Singapore? Be sure to read our guide on what you should know as a tenant.

Renting

Renting a property for the first time in Singapore? Be sure to read our guide on what you should know as a tenant.

 

What is the purpose of Letter of Intent (LOI)? 

A Letter of Intent (LOI) is a document that outlines a preliminary agreement between 2 parties before a deal is finalised. In Singapore, a prospective tenant would give an LOI to a landlord to express his intention of renting a particular property from the latter.

Although not all landlords will ask for an LOI, some of them won’t rent out their property without getting one. As a prospective tenant, giving the LOI to the landlord serves to demonstrate that you’re serious about renting the property, and are no longer looking at other properties. 

After receiving the LOI, the landlord will also stop looking for prospective tenants and focus on sealing the deal with you.  

Do take note that when you submit the LOI to the landlord, you’ll also need to give him or her the good faith deposit. 

 

What is The Good Faith Deposit? 

Submitted together with the Letter of Intent, the good faith deposit is a downpayment to show that you’re serious about renting the property. It’s also known as the booking deposit.  

The amount for the good faith deposit is typically equivalent to a month’s rent for a one-year lease, or 2 months’ rent for a two-year lease. After you sign the Tenancy Agreement, the good faith deposit will typically be used as payment for the security deposit.

However, even after you’ve given the LOI and the good faith deposit to the landlord, there may still be a slim chance that the rental transaction falls through.

Although this is rare, it can happen if you and the landlord can’t agree on the terms of the Tenancy Agreement. If you find yourself in such a situation, the good faith deposit should be refunded back to you. You should also get your good faith deposit back if the landlord decides not to rent the property to you.

However, should you back out of the transaction, you won’t get the deposit back. 

Here’s a table summarizing what happens to the good faith deposit in various scenarios where the rental transaction falls through: 

Scenario

Good faith deposit  

Tenant and landlord don’t agree to the terms of the Tenancy Agreement

To be returned to tenant

Landlord doesn’t rent the property to tenant

To be returned to tenant

Tenant decides not to rent the property

To be kept by landlord


There’s also a rare possibility where it’s unclear which party is backing out of the deal. In this case, the landlord may refuse to give you back the good faith deposit. 

If you wish to get your good faith deposit back, you can consider filing a claim with the State Courts Small Claims Tribunals.

To minimise any misunderstandings and disputes between you and the landlord, be sure to include clauses in the LOI specifying terms relating to the good faith deposit. This should include clearly the circumstances in which the deposit must be returned to the tenant, or forfeited to the landlord.

 

What Are The Key Things to Note When Paying The Good Faith Deposit?

Here are some important things to keep in mind when paying the good faith deposit. 

Make sure the landlord is the actual owner of the property

Before submitting the Letter of Intent together with the good faith deposit to the landlord, make sure to check that he or she is the actual owner of the property.  

If you’re renting an HDB flat, you can get the landlord to log in to his HDB account to verify his ownership.

Alternatively, you may ask him to log into Singapore Land Authority’s (SLA) MyProperty portal, which lists down the HDB flats and/or private properties that are under his name. 

You may also confirm his ownership via the Inland Revenue Authority of Singapore (IRAS) portal. However, every successful inquiry through this portal costs $2.50.

Pay the Good Faith Deposit (and subsequent rental fees) directly to the Landlord

Once you’ve confirmed that the landlord is the property owner, be sure to submit the LOI and good faith deposit directly to him or her.

It’s best to pay subsequent monthly rental payments directly to the landlord too, instead of the property agent. There have been cases where property agents have absconded not only with the good faith deposit, but also with the monthly rental payments.

When you make any payment to the landlord, be sure to pay him or her either by a bank cheque or an online fund transfer. If the landlord accuses you of late payment when you actually paid on time, you can show the transaction records to prove your case. 

Avoid making payments in cash, since such transactions are hard to trace unless you’re provided a receipt.

A property agent showing a couple the Letter of Intent document on a clipboard

If you’ve engaged a property agent, he or she can prepare the Letter of Intent for you

 

What are the important things to include in the Letter Of Intent? 

Here are some key elements that should be in an LOI: 

  • Particulars of the landlord and tenant 
  • Address of the rental property
  • Agreed monthly rental
  • Duration of lease
  • Start and end date of the rental period
  • Amount for good faith deposit and security deposit
  • Tenancy Agreement date of issue
  • Last day for both parties to sign the Tenancy Agreement
  • Conditions in which the good faith deposit is to be returned to the tenant/forfeited

Additionally, you should specify in the LOI all the clauses that you want to include in the Tenancy Agreement, including the following: 

Diplomatic clause

If you’re an expatriate, you should state in the LOI that you want this clause included in your Tenancy Agreement. 

The diplomatic clause allows you to terminate the rental contract before it ends, protecting you in the event that you’re posted to another country during the duration of the lease. 

Do take note that you can only include this clause in your Tenancy Agreement if you’re renting the property for more than a year. 

Also, be sure to include the notice period as well (usually 2 months), so that the landlord has time to find a replacement tenant.

Not sure if you should rent an HDB flat or a condo? Find out which is the better property to rent as an expat in Singapore.

New to Singapore

Not sure if you should rent an HDB flat or a condo? Find out which is the better property to rent as an expat in Singapore.

Tenant’s specific requests

If you have any specific requests regarding the furniture, fittings, and appliances in the rental property, you should include them in the LOI as well. 

Perhaps you find that the fridge in the rental property is too old and might malfunction anytime soon. You can request for a new fridge from the landlord by stating it on the LOI. 

Submitting the Letter of Intent and signing the Tenancy Agreement 

After you’ve found the right property and agreed with the landlord on the monthly rental rate, you can start drafting the Letter of Intent to express your interest in renting the property. If you’ve engaged a property agent to help you with the rental process, he or she can prepare the LOI for you.

Here are the steps to submitting the Letter of Intent and finally signing that Tenancy Agreement:

  1. Give the LOI to the landlord along with the good faith deposit to confirm your interest in renting the property. 
  2. If the landlord accepts your LOI, he’ll provide you with a draft of the Tenancy Agreement within an agreed time. This will typically be 3 days. 
  3. Both you and the landlord will then have 7 days (or longer if indicated on the LOI) to sign the Tenancy Agreement. Once the Tenancy Agreement is signed by both parties, the good faith deposit can be taken by the landlord as the security deposit.
  4. If the landlord rejects the LOI, he’ll need to return the good faith deposit to you. But if you no longer want to proceed with renting the flat, the good faith deposit will be forfeited and taken by the landlord.

 

Thinking of renting an HDB flat? Read here to find out how you should go about doing it.

HDB Guides

Thinking of renting an HDB flat? Read here to find out how you should go about doing it.

You can also view the latest HDB rental listings here.

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You can also view the latest HDB rental listings here.

Click HERE to get more interesting guides like this, or check out PropertyGuru.

Property Guides

Click HERE to get more interesting guides like this, or check out PropertyGuru.

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