The Consequences of Broken Leases and Early Terminations

signing rental agreement contract

Tenants and even landlords in Singapore may decide to prematurely terminate a Tenancy Agreement. But what are the ramifications to both parties if this happens? In this guide, we look at the usual reasons for ending a rental contract earlier than agreed and its potential consequences, so that tenants and landlords won’t be caught unprepared.

 

Typical reasons tenants end a tenancy agreement

Below are the usual reasons a lessee ends the rental contract prior to what is stated in the Tenancy Agreement and subsequently vacates the premises:

  • Occupant is instructed by the government to leave Singapore.
  • Tenant is assigned to work in another country by his employer.
  • Lessee is fired from his job.
  • Landlord fails or refuses to undertake a major repair, imperilling the health and safety of the tenant.

 

Usual reasons landlords terminate a rental contract

Although the tenancy law in Singapore mainly favours the landlord, they rarely end the Tenancy Agreement prematurely, as it’s not easy finding tenants; and having their space vacant translates to a substantial loss in rental income. Nevertheless, below are some of the typical reasons why a property owner would end a rental contract prior to what is stated in the Tenancy Agreement and evict the occupant from the premises. Most of the reasons involve violation of the Tenancy Agreement such as:

  • Tenant’s failure to pay rent
  • Occupant sublets space without owner’s permission
  • Lessee fails to maintain property in clean and good condition
  • Tenant uses space for vices or illegal purposes like prostitution

 

Consequences of ending tenancy agreement prematurely

Basically, the ramifications depend on what is stipulated in the Tenancy Agreement. That is why it’s important to have a comprehensive rental contract with clauses that allow the tenant or landlord to terminate the deal and prescribes the manner for such situations. It’s also important to lay out penalties and compensation that either party must pay for ending the Tenancy Agreement prematurely.

To help you, here are recommended templates for tenancy agreements, courtesy of ERA Realty and HDB.

 

Impact on tenant for terminating rental contract earlier

If the lessee ends the rental contract and vacates the premises earlier than agreed, he will most likely lose the entire “Security Deposit” he gave to the landlord, who may even demand additional compensation from the tenant.

The Security Deposit – which is given to the property owner upon signing of the tenancy agreement – is equivalent to one month's rent for a one-year lease and two months’ rent for a two-year lease. If the tenant follows through with the rental contract, the Security Deposit is fully refunded at the end of the tenancy. However, the property owner has the right to deduct from the deposit all expenses and costs due to the lessee’s violation of any provision in the Tenancy Agreement.

 

What if the property owner ends the tenancy prematurely?

Unless there are clauses in the Tenancy Agreement that allows the landlord to terminate the rental contract earlier, the tenant has the legal right to continue living in the property until the expiration of the lease. As such, the lessor must properly compensate the tenant if the property owner wants the latter to leave.

If the occupant is wrongful evicted without being duly compensated, the lessee can seek the intervention of the Small Claims Tribunal as long as the lease tenure is two years or below. For details on the procedure of filing a case with the tribunal, please visit this link.

 

How to amicably end a Tenancy Agreement without paying compensation?

As mentioned above, it all depends on the Tenancy Agreement, which should have provisions on early lease termination. As long as the tenant and landlord abides with the prescribed manner for ending the Tenancy Agreement earlier, either party doesn’t need to pay for any damages or compensation.

On the tenant’s part, it is advisable to inform the landlord before signing the Tenancy Agreement about the possibility that the lessee may terminate the rental contract prematurely due the aforementioned reasons.

If this happens after inking the rental contract, it is still advisable to inform the property owner in advance if you will be terminating the deal prematurely. This is to give the lessor sufficient time to look for another tenant.

To avoid a legal dispute, the Tenancy Agreement should be clear and include stipulations about early termination of the rental contract and the penalties thereof, along with the prescribed manner for ending the tenancy agreement prematurely.

 

Clauses/Provisions that allow early termination

Diplomatic Clause

Also known as the Get-out Clause, this provision in the tenancy agreement stipulates a minimum rental period wherein the tenant is not allowed to terminate the lease. Thereafter, the occupant can end the rental contract earlier without paying any compensation, provided the landlord is notified beforehand, typically two months in advance. Usually, it states that:

  • In a six-month lease, tenant is allowed to terminate lease after three months.
  • In a one-year lease, lessee is permitted to end rental contract after six months.
  • In a two-year lease, occupant is allowed to end tenancy after 12 months.

 

Important: Please note that the minimum rental period for private residential properties in Singapore has been reduced from six consecutive months previously to three straight months, while that for HDB flats remains at six months. This means private condos and landed homes cannot be leased for less than three months, while HDB flats must be rented out for at least six months.

En-Bloc Provision

This clause empowers the property owner to end the Tenancy Agreement earlier due to the collective sale of a private residential project. As long as the occupant is provided sufficient time to look for another flat, the landlord doesn’t need to pay compensation to the lessee.

Nuisance Clause

Although rare, this provision allows the tenant to terminate the lease prematurely if an unexpected construction or demolition happening close to the rented flat impacts the health and wellbeing of the lessee. For instance, loud noises causing sleepless nights.

If you’re considering to include such provisions in your rental contract, it’s strongly recommended that it be specific as possible. For example, set a distance from the source of the nuisance and specify the inconvenience that will trigger the clause, along with a prescribed notice period to inform the landlord if you will be exercising this provision.

Provision on Property Repairs

This clause explicitly states whose responsibility it is to fix minor and major issues on the premises, as well as define what constitutes minor and major repairs. Optionally, the tenant may include a part which allows him to terminate the tenancy prematurely if the landlord refuses to carry out major repairs, putting the health and safety of the occupant at risk. Another trigger is if the owner fails to rectify the major issue within a reasonable period.

 

Evicting tenant for breach of agreement

If the lessee violates the Tenancy Agreement, the lessor has the right to end the rental contract earlier and evict the occupant.

If the tenant failed to pay rent for several months and is refusing to pay, the property owner may apply for a Writ of Distress from the court. This writ allows a court sheriff to distrain selected movable property found on the tenant’s premises. The items can then be sold on behalf of the landlord to recover up to 12 months worth of rent, if the occupant fails to pay the owed rent in five days.

On the tenant’s part, he can ask the court to intervene by suspending the execution of the writ, or return any items seized, provided the lessee has valid arguments.

 

What if the tenant still doesn’t want to vacate property?

If all other options failed, the landlord is advised to seek a forfeiture ruling from the court under Section 18 of the Conveyancing and Law of Property Act.

This can be done by serving a notice to the lessee stating the particular contract violation and amount of compensation sought by the property owner, as well as the course of action the owner wishes the occupant to take. The tenant must also be given reasonable time to remedy the breach.

However, the occupant may ask the court to be given more time to pay the rental arrears or to be given more time to find another flat. As forfeiture is a stringent legal option, the court usually grants an additional four weeks to the lessee to do the aforementioned.

But if the lessee is still unable to pay for the outstanding rent, the court can grant a writ of possession to the landlord and order the sheriff to reclaim the flat on behalf of the property owner.

If the occupant believes that the property owner has no valid basis for evicting the tenant or getting back the property, the lessee may apply for relief against forfeiture from the court.

Subsequently, the court will determine if the tenant really violated the terms of the tenancy agreement, if the landlord provided notice to the lessee to remedy the breach and if the violation of the contract has been addressed by the tenant. The judges will also look into the conduct of both parties.

 

Other Important Questions

Can a tenant refuse to pay rent if the property owner flouts any provision in the Tenancy Agreement?

No. The fulfillment of the tenant’s obligation is not dependent on the landlord doing his duties as stipulated in the contract. This means the lessee cannot refuse to pay rent or reduce the rent if the property owner flouts an agreed term in the agreement. However, the tenant can recover damages from the lessor for violating his covenant, likewise for expenses borne by the lessee arising from the landlord’s breach.

Depending if there are such provisions in the tenancy agreement or the landlord has agreed to such, the rent can be offset by such damages and expenses. But it is still better if the contract covers such situations, including a clause allowing early termination of the tenancy if the property owner fails to fulfil his duties in the agreement.

Can the Lessee prematurely end the lease and vacate the premises if the lessor refuses to fix the property?

It depends on the terms of the rental contract. If the repairs needed are minor and the property is still habitable even if the repairs are not carried out, the tenant may have the item/fittings repaired and ask to be refunded by the landlord.

However, if the repairs needed are significant and the landlord’s refusal to rectify it impacts the health and safety of the tenant such as clogged toilets, no electricity or water supply, then the lessee may claim damages from the lessor. The tenant may also terminate the tenancy agreement and vacate the premises, but it’s advisable to follow or do the following:

  • The major problem was not caused by the tenant or a guest, either deliberately or through carelessness or neglect.
  • Tenant has notified the landlord in writing and given him a reasonable amount of time to fix the major issue.
  • Lessee hasn’t failed to pay rent and followed the Tenancy Agreement. Please note that tenant can claim damages arising from defects that imperil the tenant’s health and safety.

 

Disclaimer: This guide should not be construed as legal advice or legal opinion. If you require specific legal advice, please consult qualified and competent lawyers or legal firms registered with the Ministry of Law.

 

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