Singapore has one of the world’s highest property prices, so it is little wonder that many savvy investors are putting their money in the local real estate market for both capital gains and rental income. With the easing of COVID-19 travel restrictions, many companies are again hiring foreign workers, who will need a place to stay during their tenure here.
As a property owner, you would think that renting out your unit would be easy money and a sure win situation. But, is that always the case?
As a landlord, the absolute worst situation is renting out your property to a nightmarish tenant - one who doesn't take care of the appliances and furniture, or someone who possesses undesirable hygiene standards and does not bother about the cleanliness of the area he lives in. What can you do in such a situation?
In 2020, I bought my first investment unit in the Tanjong Rhu area. It was a 3-bedroom condo. I purchased it for pure investment purposes, in the hope of gaining capital value through a steady (and hopefully, growing) income from rental. I rented the unit out to a Singaporean PR at market rate. During the pandemic, I decided to divest the property and began listing it on Mogul.sg for sale. The tenant was not cooperative at all to accommodate the viewings, and even breached a few clauses in the contract. Left with no choice, I had to send him a letter of demand and almost commenced a lawsuit. In today’s article, we take a look at how we can minimize such an unfortunate situation.
Select Tenants Carefully
Before renting out your unit, do your due diligence and screen potential tenants thoroughly. Someone who is sloppy in appearance and unkempt is likely to be the same when it comes to the accommodation.
If the tenant is a foreigner, it is paramount to ensure that he/she is eligible to work here by checking on the relevant permits such as S-Pass, Work Permit, Employment Pass etc. Take note of the tenant’s employment details, such as place of work, company, employment status (contract/permanent). This could come in useful when you need to contact the tenant if he/she defaults.
Next, you should be asking important questions such as:
Having pets (trained or untrained)
How many people will be sharing the unit (noise, clutter, hygiene)
Hobbies (disturbance)
Tenancy agreement (TA)
When you have found the right tenant, it is important to sign the tenancy agreement or TA. A TA is a legal agreement to protect both landlord and tenant. It lists down the terms and conditions agreed by both parties and will be referred to should there be any disagreements. If clueless, you can adopt the template developed by the Council for Estate Agencies (CEA). In any case, a typical TA should contain the following information:
Full name and address of both the landlord and tenant
Address of the property to be rented
Tenancy period
Payment of rent, specifying if it includes the utility bill
Payment schedule and details
Any additional fees, such as stamp duty or agent commission
Inventory list of all the items in the rental property, including their condition
Diplomatic clause
Use of premises
The immigration status of tenant and occupiers
Maintenance of property and effects
Tenant’s covenants, such as paying rent, no subletting, and keeping the property in good condition
Landlord’s covenants, such as providing a property suitable for people to live in
Notices
Termination rights
Suspension of rent
When signing the TA, the landlord usually collects a security deposit (SD). As a simple rule of thumb, the landlord would usually collect 1 month SD for a tenancy period of 1 year, and a 2-month SD for a 2-year tenancy. Why is the security deposit important? If everything is good, the SD will be refunded to the tenant at the end of the tenure. However, if there are any damages or repairs to be rightfully performed by the tenant before vacating the property, the landlord can opt to deduct such costs from the SD if the tenant refused to make payment.
Do note that the TA will only be in effect after the stamp duty is paid by the tenant to the Inland Revenue Authority of Singapore (IRAS).
Take photos or videos
As a landlord handing over the unit, it is best to document the handover condition. Take photos or videos showing clearly the condition of the property, so as to prevent any disagreement or dispute at the end of the tenure. It is advisable that the tenant is furnished with a copy upon taking over the property from the landlord. With proper documentation, risk of a dispute is minimised whether it is a pre-existing condition/damage.
Maintenance Checklist
As a landlord, it would be best to provide a maintenance checklist for the tenant. This will help to ensure that the property is well-maintained and in good condition to prevent any major repairs when the tenancy expires.
If the property is furnished, all furniture and appliances and their condition should be listed upon the landlord handing over the property to the tenant. When it is time for the tenant to move out, there will be no dispute which items belong to him or the landlord. Allow the tenant to inspect all the appliances such as air-con, TV, refrigerator, gas cookers etc, to ensure that they are in good working condition
Damages
Regardless the extent of damage, e.g. broken door handle or hole in the wall, the landlord can either request the tenant to make good (as common practice) or upon mutual agreement, the landlord can do the repairs and claim from the tenant. If the damage was caused by the tenant and the tenant refused to pay for such repairs, it is usually provided for in the TA that the landlord can deduct such costs from the SD. As long as there is proper documentation on the original condition of the unit, there can be no dispute on who is responsible for the rectification. Should there be any major incidents during the tenancy period (e.g., pipe burst, gas leakage, broken window pane), tenants should alert the landlord immediately for an amicable solution.
When moving out at the end of the tenancy period, tenants should return the property in its original condition subject to fair wear and tear.
If you (as a tenant) rent it unfurnished, dispose of all unwanted items and not leave any old broken furniture behind in case the landlord deduct removal charges from your SD. You should also ensure that the property is thoroughly cleaned before returning to the landlord. This can be easily done by engaging a professional cleaning company and the cost is typically not that much.
As a landlord, you may also want to conduct checks every few months or so. That way, you can be assured that your investment is well-maintained and in proper condition. Landlords should accept that normal wear and tear such as friction wear on wood surfaces and decolouration on acrylic surfaces will happen.
In the unfortunate event that both landlord and tenant get into a dispute and cannot come to a resolution, both parties can fall back on the dispute clause in the TA to resolve. Nowadays, most TA would provide an avenue via Small Claims Tribunal or SIAC (Singapore International Arbitration Centre) to resolve the matter.
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