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5 Important Clauses to Take Note in the Tenancy Agreement

5 Important Clauses to Take Note in the Tenancy Agreement

As we know, the Tenancy Agreement or TA can sometimes consists of many pages. 

For Corporate Landlords, it is also common to have detailed Tenancy Agreements. While we may not always have the time to go through every single word in the rental agreement, here are 5 common clauses that you will probably see in agreements and should take note of.

No Subletting

You will probably find this clause in almost every tenancy agreement. While it may sound stringent, it is necessary for any landlord to know and control who are the tenants occupying the premises and hence you will find it in almost any tenancy agreement. No subletting means that the tenant of the premises should not rent any part of the premises whether it is a just a small part or the whole unit to anyone else or try to be a landlord themselves if they are already renting the premises from the landlord. This clause is important as any landlord would want to know exactly who are the tenants occupying the premises. Also, the last thing that the landlord wants to know is that the occupiers that are occupying the premises are using it for a purpose such that the insurance coverage purchased by the landlord for the premises will be void.

Interest on Late Payments

Timely payments are important to maintain a healthy relationship between landlords and tenants especially if the lease is a long term one. Landlords may also have mortgages in place and it is only fair to for the tenant to make the monthly payments on time at the agreed date which is also stated in the tenancy agreement. As a form of control, interests on late payments are chargeable to ensure timely rental payments. To avoid paying late charges, it is advisable to set up GIRO arrangements which will instruct the bank to transfer the rents at a specified date on a monthly basis. Although the setting up of GIRO may require some effort initially, it is only a one time set-up which will help you to avoid late payment charges.

Comply with Building Rules & Regulations

As we know, buildings usually have their set of by-laws, rules and regulations to be followed. These are not meant to be penalise tenants but are used as a form of control in order to have a fair and just system. For example, if you are looking to install new ventilation fans or windows which may sometimes affect the facade or the appearance of the building, you may confirm with the building management if it will be allowed. Most of the time, installations that affect the facade are not allowed unless these installations are in line with the approved building guidelines. Although it may sound restrictive, it may be a good for the image and future value of the building. For factories and warehouses, the fitting out or renovation details may also need to be submitted to the building management for their approval. A refundable fitting out deposit may also be required to ensure that the process of the renovation or fitting out goes smoothly without any damage to the common property.

Option to Renew

Most tenants want to find a comfortable space to be in for the long term. With this clause, tenants will have the option to extend or renew their lease for the stated number of years at a mutually agreed rate. The rate is to be mutually agreed and discussed among both the landlord and the tenant. We sometimes hear of 3 + 3 years lease period which usually means 3 years with an option to renew for another 3 years at a mutually agreed rate.

Usually, the clause will also indicate that if the tenant has intentions to renew the lease, the tenant may notify the landlord in writing prior to the expiry of the lease. The advance notice required prior to the expiry is usually around 3 months but may also vary for depending on the tenancy agreement.

Holding Over

This clause can usually be found in industrial and commercial tenancy agreements where reinstatement of the premises at the end of the lease is necessary and the premises is to be returned in original bare condition. Usually when the lease expires, the premises have to be returned to the landlord in the agreed condition at a specified date. However, if no renewal or extension agreement has been reached and if the tenant continues to occupy the premises without notifying the landlord, the landlord may sometimes charge a double rent.

Important Points to Note

While the tenancy agreement may contain various other clauses, it is important to identify and understand the important details and terms of the tenancy. Tenancy agreements may also vary slightly but generally contain similar clauses with similar meanings.

Also, whenever there are any clarifications required for the details of the tenancy, it will be good to first refer back to the tenancy agreement which is usually quite detailed and is likely to contain the details that you are looking for.

One most important point that people may sometimes overlook is that although having a formal agreement in writing is important, it is even more crucial to have a good and long standing relationship among both tenants and landlords where both parties are happy.