In preparing a Tenancy Agreement, I think the most mind-boggling clause relates to the diplomatic clause, pre-mature termination, etc.
Most people confuse themselves between a Diplomatic Clause and an Exit Clause. Here is the difference shared by agents:
DIPLOMATIC CLAUSE
This clause is to safeguard the tenants. If in the event you are no longer employed, transferred to other countries, you can terminate the lease after 12 months by giving 2 months notice. Proof of such transfer or cessation must be shown to the Landlord.
A letter from the company is sometimes not enough and you may need to show a letter from the immigration regarding the cancellation of your pass. Thereafter, the security deposit will be refunded to you. All this depends on your relationship with your landlord. Hence, we as agents always advise to keep cordial relations with your landlord or his representatives.
In Singapore, the diplomatic clause can be included only if the lease is more than a year. If in case this clause has to be included in a one year lease then you have to speak to your agent and get it done with a mutual consent between the landlord and the tenant through the agents and in the absence of agents between the parties in itself.
Usually landlords are reluctant to include this clause in a one year lease as landlords feel very insecure of tenants using the premises for a short term only.
Usually landlords are reluctant to include this clause in a one year lease as landlords feel very insecure of tenants using the premises for a short term only.
In a standard Singapore Tenancy Agreement, there is usually the reimbursement clause together with the diplomatic clause. This clause states that if you exercise the diplomatic clause, you will have to reimburse part of the commission the landlord had paid to his agent.
The reason behind this clause is that the landlord had paid the full one month's agent commission for a 2 years lease but if you terminate the lease by exercising the diplomatic clause, hence unable to complete the full 2 years, you will have to refund the pro-rata commission. Since landlord grants the diplomatic clause, they will usually demand reimbursement clause to be included in the tenancy agreement.
Example of the Diplomatic Clause
If any anytime after the expiration of twelve (12) months from the date of the commencement of this tenancy, the immediate occupant of the said premises
Example of the Diplomatic Clause
If any anytime after the expiration of twelve (12) months from the date of the commencement of this tenancy, the immediate occupant of the said premises
Mr______________________________________________________________________ (Passport No. :________________ FIN No. : __________________ ) shall be :
I.assigned, posted, transferred or relocated from Singapore to another country on a permanent basis;
II. required by the relevant authorities to leave Singapore or is otherwise incapable of working or residing in Singapore; or
III.no longer employed by the Tenant for any reason whatsoever,
The Tenant may terminate this Agreement by giving the Landlord not less than two (2) months’ notice in writing (this is in addition to the completion of the initial twelve (12) months lease aforesaid) or paying TWO (2) MONTHS’ rent in lieu of such notice. Proof of such transfer or cessation must be shown to the Landlord. In such event, the Tenant shall hand over the premises before the expiry of the said notice without prejudiced to the rights of the Landlord at law and equity to damages, compensation and consequential losses arising from the Tenant’s said repudiation. (Reimbursement Clause)- The Tenant shall also undertake to reimburse to the Landlord on a pro-rata basis calculated by reference to the unexpired term of the lease period the brokerage paid by the Landlord to his Agent for procuring the Tenant.
EXIT CLAUSE / ESCAPE CLAUSE
The Exit Clause is also known as the Escape Clause. This clause is not part of the Standard Tenancy Agreement here in Singapore.
It is usually added in the Tenancy Agreement in case of a special request from the tenant. Sometimes the tenant may have an idea to migrate overseas or buy his own property and may not be able to commit for a longer term.
We always advise tenants to be honest about their intentions and inform the agents of their intentions well in advance so as to safeguard themselves from financial losses or bitterness in the relationship with the landlord.
If in case this clause has to be included, then you have to speak to your agent and get it done with a mutual consent between the landlord and the tenant through the agents and in the absence of agents between the parties in itself.
Usually landlords are reluctant to include this clause in a one year lease as landlords feel very insecure about tenants using the premises for a short term only or as a stop gap arrangement.
If in case an exit clause is added then it is usually accompanied by the reimbursement clause as well. This clause states that if you exercise the Exit clause, you will have to reimburse part of the commission the landlord had paid to his agent.
The reason behind this clause is that the landlord had paid his agent the commission for a 1 year / 2 years lease but if you terminate the lease by exercising the exit clause, you are unable to complete the full term of your contract, hence, you will have to refund the pro-rata commission. Since landlord grants the exit clause, they will usually demand reimbursement clause to be included in the tenancy agreement.
Example of the Exit Clause
If any anytime after the expiration of twelve (12) months from the date of the commencement of this tenancy, the immediate occupant of the said premises
Mr___________________________________________________________________
(Passport No. :________________ FIN No. : __________________ )
may terminate this Agreement by giving the Landlord not less than two (2) months’ notice in writing (this is in addition to the completion of the initial twelve (12) months lease aforesaid) or paying TWO (2) MONTHS’ rent in lieu of such notice. (Reimbursement Clause)- The Tenant shall also undertake to reimburse to the Landlord on a pro-rata basis calculated by reference to the unexpired term of the lease period the brokerage paid by the Landlord to his Agent for procuring the Tenant.
Both these clauses are for the welfare of the tenant. If the tenants are honest and inform this at the time of renting the unit and it is agreed upon by the landlord, then, at the time of exit, the tenant does not have to bear much financial losses and can leave on a good note.
Clarity also ensures that the approach of the landlord is quite understanding at the time of the departure of the tenant as he is aware of the situation and this will enable him to have a better understanding with future tenants with similar needs.
"HONESTY IS THE BEST POLICY"
Source retrieved 26-Jul-2014
