What are the common terms to know when renting an office?
Rentalrates are typically quoted as gross rent per month or in per square feet (PSF).
PSF = (Base Rent + Service Charge) / Size of office (in sqft)
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.
Rent is paid on a monthly basis and subject to 7% Goods and Services Tax (GST).
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.
This is the date agreed upon for the Tenant to take possession of the property. Also commonly termed as handover date.
Lease Commencement Date
Theagreed 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.
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.
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.
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).
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.
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.