What are the common office leasing terms to know when renting an office in Singapore?

There are certain terms that tenants will commonly come across when renting an office or leasing an office (renting and leasing are used interchangeably in Singapore). Different countries might have different leasing terms and different common practices for leasing commercial space. Here is a list of common office leasing terms and common practices adopted for commercial leases in Singapore.

Rental Rates

Rental rates are typically quoted as gross rent per month or in per square feet (PSF).

PSF = (Base Rent + Service Charge) / Size of office (in sqft)

Service Charge

Typically included in the gross rent. This covers expenses such as centralised air-conditioning expenses during office hours, maintenance and security of the common areas etc.

GST

Rent is paid on a monthly basis and subject to 7% Goods and Services Tax (GST).

Lease Term

The usual length of lease for offices is three years. Longer leases may also be negotiated.

Option to Renew

Renewal may be for a period of between one to three years.

The rental rate will be renegotiated according to the prevailing market rent at the point of renewal.

Possession Date

This is the date agreed upon for the Tenant to take possession of the property. Also commonly termed as handover date.

Lease Commencement Date

The agreed start date of the lease. The tenant will also have to start paying rent from this date.

Fitting Out Period

The period between the Possession Date and the Lease Commencement Date for the Tenant to renovate the new premises. The fitting out period can vary according to market conditions and size of each office. It usually ranges between two weeks to two months.

Security Deposit

A refundable security deposit equivalent to 3 or 6 months gross rent is payable by the tenant upon signing the Letter of Offer. It is refundable without interest when the lease expires. The number of months usually depends on tenant’s paid up capital. The landlord reserves the right to deduct costs and expenses properly payable by the tenant on account of any breach by the tenant.

Legal fee

The fees incurred by the landlordfor the preparation, negotiation and execution of the Lease documents. It is common practice for the Tenant to bear the legal fees.

Stamp Duty

Tax on rental transactions payable by the Tenant for each new lease agreement. Stamp duty is paid to the Inland Revenue Authority of Singapore (IRAS).

Renovation Deposit

Before the commencement of any renovation works, the Landlord usually collects a renovation deposit from the tenant to cover any damages to the property that may potentially result from the renovations.

Reinstatement

The Tenant is required to reinstate the office premises to its original bare condition upon the expiry of the Lease, at their own cost, unless otherwise requested by the Landlord.

Letter of Intent (LOI)

Letter of Intent (LOI)is a non-legally binding document submitted by the Tenant to the Landlord. It should outline the main terms and conditions for the lease to be negotiated on by both parties.

Letter of Offer (LOO)

The Landlord will issue the Letter of Offer (LOO)after the main terms and conditions on the LOI are agreed upon. The Tenant will be given a specific amount of time to respond to the LOO, usually 3-5 working days. To accept the LOO, the Tenant will have to sign the document and make the necessary payments.

Tenancy Agreement (TA) / Lease Agreement (LA)

The TA/LA is the full set of legal terms and conditions pertaining to the lease. Both LOO & TA are legally binding upon acceptance.

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