What are Commercial Tenancy Agreements?

Though online stores offer many opportunities, many gains can come from having a physical store. If this is you, then you need to know what Commercial Tenancy Agreements are.

Tenancy Agreements are prepared by the mall landlord and can make or break your cash flow situation, before you enter an agreement, it is essential to understand all the finer details. You need to make sure that you commit to a monthly rent that you can’t keep up with. In this article, we’ll go through everything you need to know about tenancy agreements.

Lease duration

Lease agreements will all explicitly state the duration of the lease, which depends on the size of the commercial space to be leased. Generally, the duration of a lease agreement will be between 5 to 6 years. However, if the space is small, it can last between 2 to 3 years.

Towards the end of the lease, most landlords will offer an option to renew at the current market rate. Generally, the option to renew for a further term is:

• For a duration that is similar to the lease that is about to end; and 
• For a rental amount that was either agreed on beforehand or at the prevailing market rate at the time of renewal.

Rent

CTAs will also state the amount of rent that is payable by the tenant to the landlord. This rent is usually calculated per square foot of the floor area, GST and service charges. 

It will also state that the service charge amount can change during the duration of the lease, allowing the landlord to recover any increase in service charges from the tenant. The service charges cover payments to the landlord for general services provided by the landlord, such as building maintenance, building repairs and security.

Deposits and other Fees Payable

The tenant has to make a refundable security deposit that is equivalent to three months worth of rent. When this lease expires, the security deposit can be refunded without interest. However, the amount of refund is subject to the tenant’s performance of the terms of the commercial lease agreement.

If you breach any terms of the CTA, or there is damage to the premise, the landlord may deduct from the security deposit any costs and expenses incurred to repair the damage.

Utility and Maintenance

Most CTAs will state that you, the tenant, is responsible for all general electricity and telecommunication bills. However, you are responsible for proper maintenance of your space and ensuring the cleanliness of the interior premises and common areas. The exterior space should be maintained by the landlord.

Sub-lease

CTAs will include terms that prevent you from subletting the commercial space in full or in part unless explicit consent has been given. 

Insurance

Tenants are generally expected to maintain a public liability insurance policy against allegations of personal injury, death or property damage or any form of loss arising out of any of their operations in the premises throughout the lease.

Office Renovation Work

If you are looking to customise the commercial space to your taste and preference, you can only do so in compliance with the CTA on fitting-out works at the premises.

This is as commercial spaces in Singapore mostly come with certain standard fittings, standard protection and fire sprinkler systems, window fittings and air distribution ducts. Any modifications to existing fittings can only be carried out with approval from the landlord.

Reinstatement

When you return the commercial space to the landlord in its original form, this is called reinstatement. A CTA will state the extent of reinstatement that needs to be done before the tenant can officially hand the premise back to the landlord. This includes removing all furniture, repainting walls and repairing any damage done to the premise.

The reinstatement clause can also state that the contractor engaged to conduct all reinstatements can be appointed by the landlord at your cost. In this case, you will have to pay for any reinstatement works conducted by the landlord’s appointed contractor.

CTA in Singapore

Now that you know what CTAs are and what to look out for, you can go and start searching for your ideal rental space! However, if you need any help with your paperwork or administration, feel free to drop us a call or WhatsApp chat.