12 Leases & Strata Titles Board

Objectives- Explain some of the important considerations in preparing and advising on leases- Describe the functions of the Strata Titles Board- Outline the steps involved in obtaining approval for a collective sale - very popular in market now – owners

agree to put bloc up in market - Refer to the excellent Practice Paper in pages 276 to 290 of your manual

- Leases and types of leaseso Short term long term, for comm and residential prpoerites, leases on var terms and conditions

- Who prepares leaseo Vendor owns property so vendor’s sol prepares sale => by this logic, landlord prepares the

leaseo But with real estate agent, they may force u to use std form – so venor’s lawyers shld tell

landlord tt he will prepare one forhis own rights and benefitso Landlord, Landlord’s solicitors, or Landlord’s housing agent.

- Other important considerations:o Letter of Intento GSTo Approved use of premiseso Deposito Special clauses

Applicable Law• Landlord (LL) and tenant relationship created by contract is called a lease.• Relationship governed by:

o Terms and conditions of contract o General law of LL and tenant

• Lease has to be in writing and signed to be enforceable: o Section 6(d) of the Civil Law Act – disposition of property has to be in writing and signed

Contracts which must be evidenced in writing6. No action shall be brought against —(d) any person upon any contract for the sale or other disposition of immovable property, or any interest in such propertyunless the promise or agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or some other person lawfully authorised by him

• S.53(1) of CLPA o Lease exceeding 7 years must be made by deed (less than tt may be made by writing under hand

only)o Legal assignment of leases must be effected by a deed in the English language: “conveyance”

includes assignments S53. of CLPA —(1) A conveyance of any estate or interest in land other than a lease for

a period not exceeding 7 years at a rack rent shall be void at law unless it is by deed in the English language. (2) This section shall only apply to conveyances executed on or after 1st March 1994.

o However, Courts may act in absence of written memorandum, provided oral agreement is clearly proved, and has been performed by the Plaintiff to the extent inequitable for Defendant to set out defence of absence of writing.

• Short term leases for terms not exceeding 3 yrs referred to as tenancy agreements

• Agreement to Lease =

o Executed when intention that relationship of LL and tenant is not established until the stipulations of the agreement have been complied with.

o Usu followed by eceuction of formal lease to give effect to demise agreed and form of lease annexed or incorp as sched to agremenet for lease

• Conveyance under s53.1 CLPA includes assignments

• S25 of Registration of Deeds Act and S87 of the Land Titles Acto Leases > 7 years may be registered.

S25 RDA(1) Nothing in this Act shall extend to any lease for a term not exceeding 7 years or any assignment thereof where accompanied by actual possession from the making of the lease or assignment.

(2) For the purposes of determining whether or not an instrument may be registered under this Act — (a) the right or option to extend the term of a lease for any further period granted by the lessor to the lessee shall be deemed to be part of the term of years granted by the lease; and (b) no account shall be taken of the fact that the lease may be determined on the happening of an event during the duration of the lease.

- Look at term of extension – if shall grant – then takes it beyond 7 yrs. If worded in manner tt at terms to be agreed/ price to be agreed then open as to whether or not taken into account

- Case auth – way extension defined is prob – if wording to effect tt SHALL grant but price/ rental nt determined then not obiged to grant extension

o but where YOU SHALL GRANT and price shall be the market rate – courts have ruled that in such stn, landlord is obliged to grant extension because market is easily determinable.

• S 87 LTA(1) Registered land may be leased for any term of years exceeding 7 years by an instrument of lease in the approved form.

(2) The Registrar shall not register any lease unless — (a) the term is expressed to exceed 7 years; (b) the date of commencement of the term and its maximum duration are certain; and (c) the lease purports to confer on the lessee exclusive possession of land.

(3) For the purposes of this section — (a) the fact that the term of a lease may be extended in pursuance of an option shall be taken into consideration in determining whether the term of the lease exceeds 7 years; and (b) the fact that a lease for a specified period of time is determinable on the happening of an event within that time shall not be taken into consideration in determining the term of the lease.

(4) A lease is not unregistrable by reason only of the fact that the possession of the lessee is expressed to be non-continuous.

o Leases 7 years or less may be registered under general law (S87 (5) of LTA ) S 87 LTA

(5) Nothing in this Part shall affect the law relating to tenancies for terms of 7 years or less.

o Caveat can be lodged: S46(1) (vi) of the LTA provides statutory protection – tenant under such lease who is not in occupation can prxt interest

46. —(1) Notwithstanding —

(a) the existence in any other person of any estate or interest, whether derived by grant from the State or otherwise, which but for this Act might be held to be paramount or to have priority; (b) any failure to observe the procedural requirements of this Act; and (c) any lack of good faith on the part of the person through whom he claims,

any person who becomes the proprietor of registered land, whether or not he dealt with a proprietor, shall hold that land free from all encumbrances, liens, estates and interests except such as may be registered or notified in the land-register, but subject to —

(vi) the rights of any person in occupation of the land under a tenancy when the proprietor became registered as such, being a tenancy the term of which does not exceed 7 years and could not have been extended by exercise of the option of renewal to exceed an aggregate of 7 years

• Consideration should be given to the following Actso The Planning Act: Time needed for registration

S4: person subdivides land if, by any deed or instrument, he conveys , assigns, demises or otherwise disposes of any part of the land in a manner that part becomes capable of being registered under

RDA Separate folio in registrar for LTA

Outside of S4(2) registration is required for: Condo, townhouse, cluster housing, strata-bungalow and residential flat – 21

years Devpt which is or to be lawfully used for: Flatted factories, flatted warehouse,

office, shopping, any combo for term not exceeding 21 years Rest: - not exceeding aggregage of 7 years

Fact that term may be extended is to be taken into consideration but fact tt lease for specified time determinable on happening of event within tt time not taken into csnideration in determinig term

o Previous act: Section 10 (3) – person not permitted to subdivide land unless written pemissoin of

competent auth – Section 2(2) – person sai to subdivide if by deed or instrument he conveuys, assigns,

demises or dipsoes any part of land in such manner tt part dposed of becomes capable of being registered under RDA or for registered land, being included in sep folio of land register under LTA; provided tt lease for period not exceeding 7 yrs without option of renewal or purchase shall not be deemed to be disposal within this defn

Aso qn as to whether lease exceeding 7 yrs reqd subdivision approval – ways to circumvent need for approval – hving lease of 3 yrs with option to renew ith sep side letter or agreement pursuant to which landlord agreed to grant further terms each not exceeding 7 yrs; enfor of agremenets not tested in court

Question as to whether these arrangements applicable to new act Also interpation of above sections as apicable nly to deeds in registrable form – chin hwa

trading v united overseas bank 1986 1 MLJ 207 approved in golden village multiplex v marina center holdings 2002 1 SLR 333

o Sale of Commercial Properties Act If lease > 7 years ensure compliance with the Act Less than 7 yrs not sale within s3 of act

o The Residential Property Act S4(7): foreign person can acquire estate or interest in any development under any

agreement, lease or assignment for term not exceeding 7 years S4(7) Nothing in subsection (3) shall prevent a foreign person from acquiring

any estate or interest in any development under any agreement, lease or assignment for a term not exceeding 7 years, inclusive of any further term which may be granted by way of an option for renewal.

o Registration of Deeds Act (RDA)

o Land Titles Act

o Land Titles (Strata) Act “subsidiary proprietor” includes registered proprietor of an unexpired leasehold interest

not less than 21 years from the date of the lodgment of the instrument. Lessess under lease entitled to ex all rights and powers of subsid proprietor

during term of lease Section 32 - Contract cannot deprive the rights of the registered proprietor of an

unexpired leasehold of not less than 21 years

o Immigration Act S 57(1)(d):

Offence to harbour illegal immigrants – mandatory custodial sentence PP V Ong Phee Hoon James [2000] 3 SLR 293

o Leasing premises constitute “habouring”

S57. of Immigration Act(1) Any person who —(d) harbours any person who has acted in contravention of the provisions of this Act or the regulations

shall be guilty of an offence and —

(ii) subject to subsection (1A) (N.B for (e) – irrelevant to our purposes), in the case of an offence under paragraph (b), (d) or (e), shall be punished with imprisonment for a term of not less than 6 months and not more than 2 years and shall also be liable to a fine not exceeding $6,000

S 57(7): presumption of mens rea

S57(7): Where, in any proceedings for an offence under subsection (1) (d), it is proved that the defendant has given shelter to any person who has remained in Singapore unlawfully for a period exceeding 90 days after the expiration of any pass issued to him or who has entered Singapore in contravention of section 5 (1) or 6 (1), it shall be presumed, until the contrary is proved, that the defendant has harboured him knowing him to be a person who has acted in contravention of the provisions of this Act or the regulations.

S 57(7A): not a defence to prove that person harboured possessed a pass or permit unless

Defendant further rproves tt he exercised due diligence to ascertain tt pass or permitwas at material time valid under immig act or regulations

period of validity of pass shld be eq to or exceed period of lease

S57(7C) and (7D): Defendant not deem to have exercised due diligence unless he:

o Inspects permit or pass isud to immig offender under the acto Checks pass or permit to ascertain tt parrs on passport materially

corresp with partrs set out in passo Check with

Comptroller of immig or controlle orf work permits tt pass valid at material time

Check with employer to veridy tt immig offender employed with employer and partrs corresp with his crecrods

Person charged under 57.1.d.ii deemed to have exercised due dioligenc eony if carried out any two of acts enumerated above

Chaged under 57.1.d.iii deemd to have exercised due diligence only if carried out ALL acts above

Personal duty tt cannot be delegated – ramli bin raud v PP 1996

REGISTRABLE LEASES

Leases for duration of more than 7 years registrable (s 25 RODA, s87 LTA)

s25(1) RODA:Nothing in this Act shall extend to any less for term not exceeding 7 years………

s87(2)(a) LTA:Registrar shall not register any lease unless term is expressed to be more than 7 years

For leases less than 7 years, general law appliess87(5) LTA:Nothing in this Part shall affect law relating to tenancies for terms 7 years/less- Protected under s46(1)(f) LTA which recognises such interest- Additionally, could lodge caveat to protect interest

After 1/4/98, s4 Planning Act made it clear that certain types of leases are not to be regarded as disposal of land

- Importance lay in fact that if subdivide land, need subdivision approval- ‘Subdivision’ occurs when person by deed/instrument disposes of any part of land registrable under

RODA/LTA

Leases not regarded as disposal of land: (NO approval required)- lease not exceeding aggregate of 14 years for developments to be used as condominium, town house,

cluster housing, strata-bungalow and residential flat- lease not exceeding aggregate of 14 years for development to be used for flatted factories/warehouses,

office, shopping or any combination of above- for all other land, lease not exceeding 7 years

- If provide for option to extend term, would be factor taken into consideration for deciding if 7 or 14 years/more

- BUT mere fact that lease for specified period of time is determinable on happening of an even within that time is NOT to be taken into consideration in determining term of lease

In such cases where registration not possible under RODA/LTA, then can give lease of more than 14 years even, without approval since cannot be registered

Leases regarded as disposal of land: (Approval required)- Industrial property/land other than as factory/warehouse for more than 7 years

Chin Hwa Trading v UOB (1986) 1 MLJ 207- Piece of property in qn was 1 of lots that original P had sub-divided into separate factory units without

obtaining any prior permission from Planning Authorities- Held:

- Implicit from definition of ‘sub-divide’ in s2 Planning Act that it was instrument which became capable of being registered before person could be said to sub-divide land within meaning of Planning Act

- RODA and LTA provided for registration of instruments affecting land and not land itself- Here, no sub-division since agreement itself was clearly not capable of becoming registered

NB: This was decided under old legislation which did not specifically state what amounted to ‘disposal of land’ and which created many problems for conveyancers

Here, held that only applies to deeds/instruments in registrable form With new legislation, this problem no longer exists

Golden Village Multiplex Pte Ltd v Marina Centre Holdings Pte Ltd (2001) 3 SLR 452- 15 year lease to run cinema complex- Held:

- Correct interpretation of s2(2) Planning Act is that it applies to instruments in an approved form- Thus if lease were to be in approved form and were to be executed but there was no certificate of

subdivision, lessor would be in breach but not otherwise- As present lease was not in approved form, no breach- Even if lease were to constitute subdivision of land and were to be in breach of relevant provisions of

Planning Act, did not necessarily follow that that would render lease void and unenforceable

FEES DUE

Under R. 9 Schedule II of Solicitors’ Remuneration Order

Steps for the grant of leases Where lease to be granted in consideration for payment of premium and rent, transaction wld be dealt as

with sale and purchase of property, with usual conclusion of contract, requisitions and completion On completion, instead of executing transfer, vendor executes lease in favour of lessee Article no 8(c) 1 st schedule of stamp duties act – same stamp duty payable in respet of premium paid

for lease as for conveyance on sale and for rent, same duty payable for lease under article no 8(a) (withut premium) Art 8 applies to lease or agreement for lease of any immovable property including any furniture,

chattels, fittings or equipment and from securing payment of provision for services or facilities or to other matters in connection with lease

If sep instrument executed for securing payment for hire of furniture, chattels, fittings or equipment in connection with lease of immovable property and for provn of services or facilities or to other matters of things in connection with such lease, Art 1 applies

8   LEASE or AGREEMENT for a lease of any immovable property including any furniture, chattels, fittings or equipment and for securing the payment for the provision of services or facilities or to other matters or things in connection with such lease —

  When the Lease is for a period

        Not exceeding one year

Exceeding one year but not exceeding 3 years

Exceeding 3 years or for any indefinite term

    (a) without premium and executed on or after 1st April 2003, for every $250 or any part thereof of the average rent and other consideration calculated for a whole year

  $1 $2 $4

    (b) in consideration of a premium only   The same duty as for a conveyance for a sum equal to the amount of such consideration

    (c) in consideration of a premium and reserving a rent or other consideration

  The same duty as for a conveyance on sale in consideration of the premium and a lease for the rent and other consideration

    (d) lease executed in pursuance of a duly stamped agreement for the same on production of the agreement to the Commissioner

  $2

    (e) lease of any other kind whatsoever not otherwise specially charged with duty

  $10

    Exemption:    

    Any lease or agreement for a lease referred to in paragraph (a) or (c) executed on or after 1st April 2003 where the average rent and other consideration calculated for a whole year does not exceed $1,000.

   

For short term leases parties usu enter into negotiations subj to tenant’s execution of forma lease and tenant’s solicitors need not send out legal requisitions/requisitions on title

- However, should make a search to ascertain if landlord is registered owner of property and whether there are any existing mortgages/other encumbrances on property

If existing mortgage, tenant’s solicitors to check terms to ascertain whether mortgagor’s power of leasing under s23 CLPA has been varied

- If so, must get prior written consent of landlord’s mortgagee for creation of lease otherwise it will not bind mortgagee who would be entitled to evict tenant in event that mortgagee decides to exercise power of sale/foreclosure

Tenant’s solicitors would review draft Lease forwarded by landlord’s solicitors/housing agents, propose amendments to reflect instructions received from client relating to principal sums and terms fairer to tenant

- When terms agreed, engrossment of lease in duplicate and sent to tenant’s solicitors for execution by tenant- After signing, returned to landlord’s solicitors for execution by landlord after which it gets stamped by

landlord’s solicitors and original stamped copy is returned to tenant’s solicitor for tenant’s retention- If lease to be registered, presented for registration at registry of deeds by tenant’s solicitor for unregistered

land and at land titles registry by landlord’s solicitor for unregistered land – - Reason why landlord’s solicitor presents lease for Regis at LTR is because duplicate cert of title which

is in landlord’s possession is reqd to be produced for Regis purposes

Format of the lease- For property under CL system of land titles, format the same wehtehr for Regis or not- For lease to be registered, descriptn of land in schedule wld follow tt used in conveyances for sale and

purchase- Also include attestation certn for purposes of compliance with s11 RDA- Must be in prescribed form an uif landlord registering more than one lease, memo of lease containing

common covenants and cinds applicable to all leases by landlord and which make ref to mem to be odged

Should state clearly:- precise extent of premises to be demised- rights to be granted to enable tenant to use premises- rights that must be excepted and reserved to avoid any restrictions being imposed upon landlord and tenant

in relation to adjoining premises- proposed arrangements regarding repair and maintenance of premises- if relevant, building which they form part of- exactly how rent is to be reviewed/fixed after agreed period/upon exercise of option to review

Letter of Intent- backdrop against which tenancy or lease doc is prepared- sets out basic terms on which premies are leased for/rented out- • Usually prepared by the estate agent or landlord- • Sets out offer to rent or lease premises to prospective tenant- • Usually refers to Tenancy Agreement or Lease – will refer to formal doc to be drawn up (usu more

for short term tenancies)- Whether terms of TA and L are negotiable depends on how letter of intent is worded:

o If says I hereby offer to lease to you these premises on the terms contained in the sample agreement attached ->

o Is this negotiable after signing?o If terms of offer are very clear and sth written for parties to refer to, the mmt u accept without

qualifn, u are accepting the terms in the sample agreement!

o So must look at letter of intento If u want to negotiate, say the prtes agree to enter lease the terms of which are to be

mutually agreed uponm ie letter of intent is subj to contract ie open to both aprties to state tt since canmot gree on terms of lease, can back out

o So check with client client’s intentions and how much he wants to rent out or how much tenant wants to rent the porperyt for

- Sometimes there is no room for negotiation – not ideal for the tenant- Sometimes contains conditions precedent e.g. Employment pass approval for potential tenant who wants to

work in Singapore or commercial license to be approvedo Note law tt imposes penalties on landlords who rent premises to illegal immigrantso So if rent to foreigner must ensure tt he is legally there, with requisite work pass, valid and

nonexpired etco Fr tenant’s pov, conds precedent may be – ask for place to be cleaned up/ Certain things to be

fixed/ replacement of fridge etco If tenant wants all these to be done prior to tenancy, must b put in letter of intent otherwise no

oblig => imt to take iunstructions and see if anything must be put in letter of intent fr start- Be mindful of provisions for either party to call off the deal: LOI to enable either party to back off without

payment of penalties.o When does it become so diff to deal with other party tt need to call offo Eg if one party is overly picky – does nt bode well for future rr – so need backdoor open to

call off deal without penalty on either side

Main Components Of A Lease

1) Premises Contain date, names, description of parties, recitals (if any), consideration, operative words, parcels,

exceptions and reservations Recitals

Seldom reqd Consideration – when only of rent and tenant’s covenants, appears suff fr subseq parts of lease, not nec

to refer to it in premises thgough often done Description – must be with absol certainty; if large scale plan available then include and made to

prevail Rights – s6 CLPA – lease by deed to include all easemtns, righyts and advantages subj to contrary

intention; but tenant’s sol shld stil isit tt rights which are reqd are specicially granted – s6 operat fr date of demise; also s6 only applies to property right and not services; parking needs to be considered since no implied right to park

Exceptions an reservations – to cover all rights to which demised presmies are subj – Distinction bet exception and reservation – former is subtraction fr demise in existence at time of

lease; reservation is right wich prev had no sep existence and comes into being by virtue of lease eg rent

2) Habendum Specifies commencement and duration of term for which lease granted State ‘from and incuding the ___ day of 20__

3) Reddendum Fixes amount of rent and specifies dates upon which it is to be paid Also the mechanism for ascertaing rent for part of term fr wchr ent becomes payable, amt of first payment

etc also to be stated

4) Covenants

Tenant’s Covenants:- Payment of rent, rates and taxes- To repair and not make alterations

- In absence of provn relating to repairs, netiher party laible apart fr law relating to waste- In long term leases, entire liab usu taken by tenant

- For short term leases and tenancies, liab og tenant limited to maintaining inside f premises in proper state of repair while landlord maintains exterior

- Note tt ‘interor’ may be vague – incudes several lawyers of walls etc. for avoidance of doubt, be specific

- To permit landlord to enter and view state of premises- To insure

Insurance- For leases 7yrs and above, usual for landlord or tenant to enter covenant to insure demised premises and

in event of loss or destruction by dire aply policy monies in reinstating or rebuilding premises- For less tha n 7 yrs, usu insurance effected by landlord- In absence of agremenet to contrary, rent will cont to be payable notwithstanding destruction of

premises by ire, whether tenant liable to rebuild or not – so tenant’s sol shld enure tt lease contains proviso for abatement of rent and service charge while premises rendered uninhabitable

- Also consider n of ownbership of insurance monies in event of rebuilding being prvrented or frustrated – expressly deal with in lese

- Usually landlord would insure and recover premium from tenants by way of service charge- Argue for abatement of rent and service charges when premises destroyed else still liable to pay rent- If after 6 months not ready, argue for tenant’s right to cancel tenancy

- To comply with statutory obligations- This may be wide – eg if soe new eyipment reqd by lw to be instilled, falls to tenant to install it at his

expense- To use premises for permitted purposes only- Not to assign/underlet without landlord’s consent

- Absol covenant preventing tenant fr delaing th demised premises shd be resisted, and shld let client to deal demised presmies with landlord consent suc consent not to be unreasonably withheld or delayed

- Covenant shld be comprehensive an refer to assigning, underletting, subletting, holding on trust for another, parting with or sharing possession or occupation – ref made to whole or part of premises

- S17 CLPA – unless lease with covenant agisnt assignment without consent contains express provision to conitrary, deemed to be subj to proviso to effect tt no fine payable for such consent but tt proviso shall not preclude right to req payment of resnalbe sum for legal or other expenses incurred wrt such consent

Under the common law, no subletting of the premises is permitted unless such a clause is present in the tenancy agreement.

If all the clause states is that there would be “no subletting without the prior consent of the landlord”, then the landlord has absolute discretion not to consent.

Cf the clause stating that there would be “no subletting without the prior consent of the landlord which shall not be unreasonably withheld”.

- To yield up premises (without additions) at expiry of term- Right of tenant to remove fixtures – ensure tt tese can be removed

- Covenant against harbouring- See immig act above

If breached, provide for re-entry clause But under s18A CLPA, tenant has right of relief against forfeiture

Landlord’s Covenants:- Quiet enjoyment (implied even if not express)- Where covenant by tenant to pay service charge as contribn towards all cost incurred by landlord in manaing

and maintiangn bulding, tenatn’s sol to ensure tt corresp covenant on part of landlord to perform services in respect of which landlord claiming reimbursement

- Covenant to renew- To be assred of enforceable option – mechanism for third party to determine rent for further term in

event of landlord and tenant failing to reach agreement as to rent- If terms and conds favourable to tenant in current lease, then sol shld ensure tt lease fo frutehr term

contains ame terms and conds with exception of option to renew- Tenant would propose ‘on same terms and conditions except that rent to be pegged to prevailing market

rate’ (But could be struck down for uncertainty OR court could decide that option enforceable and decide market rate itself)

- Landlord would propose ‘on terms to be mutually agreed and in even that parties fail to reach agreement, 3rd party will determine rent for further term’

- Service charge

5) Provisos

Sample leases (HDB, Condominium, landed property Pg 369-410 Manual)

Other matters

GST issues- Is it payable on rent?

o Read GST act – landlord is supplier. He is a taxable person then yes GST payableo But exemption on residential property, even if landlord is taxable person – see act GST is only payable when:

(a) the lease is a commercial or mixed lease (and not a residential lease); and(b) the landlord is GST-registered.

o Eg Far East - But if landlord charges maintenance charges – whether this is part of exemption? – check – NO it does not fall in exemption

o So rent x attract GST but maintenance charges doeso Stimes may break up rent for premises anda rent for maintenance and hiring charges – then

GST payable on the second part o Commercial property – gst payable on all components if landlord is taxable

- Who pays?o According to GST act – supplier who has oblig to collect GST fr person to whom gds and

services suppliedo See law soc conds

When Law Soc conditions apply, purchaser to pay GSTo Must provide in tenancy agreement or lease otherwise lqndlord may have to fork out of own

pocketo Landlord is supplier - if a taxable person, he/it must charge GST, and provide in TA or L for

tenant/lessee to payo Liability to collect GST = on supplier.o If nothing in contract stating GST has to be paid by tenant, then the landlord has to account

GST out of own pocket. Under s8(3) GST Act, GST is liability of person making supply (i.e. landlord)

S8(3) of GST Act: Tax on any supply of goods or services is a liability of the person making the supply and (subject to provisions on accounting and payment) becomes due at the time of supply.

- But if landlord wishes to pass on GST to tenant, express provision must be made for it- If silent, tenant not liable to bear GST- Look to new landlord for refund of any monies paid after expiration of their tenancy

agreement- Payable on what?

o GST is chargeable on rent for non-residential premiseso Payable on rent for commercial premises, not for rent on commercial remises, on hiring

charges for furniture and fittings for both residential and commercial properties, and where applicable maintenance fees for both types of properties, and any other goods or services supplied

This applies to both residential and non-residential premiseso Rent on residential properties AND refundable rental deposit is NOT subject to GST.o If landlord is ‘taxable person’ who rents out property in course of business, then GST

chargeable on rent, service charge and other payments made by tenant, in respect of leases made on/after 1/4/94 of premises not within exemptions set out in Fourth Schedule

o Residential properties exempt, but commercial/industrial property subject to GST (i.e. GST registrable)

o But if residential lease includes any lease/hire of any furniture/furnishings/fittings/ appliances/effects, GST chargeable in respect of lease/hire of furniture etc

- Implications for lease agreemento When acting for the landlord of a GST-registered company, you must remember to insert in

the clause that “if there is any GST payable in respect of any GST supply, the lessee will pick up the GST”.

o Because GST is a consumer tax, we assume that it is the consumer who will be liable for the GST i.e. that the tenant is legally liable to pay the GST if it is payable.

o This is a wrong assumption. The primary liability to pay GST is that of the landlord to the Controller.

o If the lessee does not pay the GST to the landlord, the landlord will have to pick up the GST: Love v Norman Wright (Eng) and Kuo Ching Yun v H&L Investment Holding Pte Ltd [1996] 1 SLR 47.

o If GST is payable, unless the lease specifies that it is the lessee who is to pay, the default position is that the landlord will have to pay for it:

Kuo Ching Yun v H&L Investment Holding Pte Ltd (1996).Facts: The vendors were a GST registered company. The dispute between the purchaser and the vendors was whose responsibility it was to pay the GST on the

day fixed for completion of the sale of the property, it not being provided for in the option.Held, that the purchasers were not liable to pay GST: S 8(3) GST Act provided that tax was a liability of the person making the supply, in this case, the vendors. Since there was no provision in the option for the purchasers to pay the vendors’ GST liability or the GST

attracted by the sales, the principal rules under the Act, namely, reg 65(1) GST Tax (General) Regulations 1994, applied, i.e. where the vendor quoted a price, then that price was inclusive of GST, the exceptions under reg 66 not being applicable.

The price quoted by the defendants for the sale was all inclusive and it included the GST.

ACS Computer case [1998] 1 SLR 72Facts- The plaintiffs ACS offered to sell units in a Henderson Industrial Estate to the defendants Rubina under two

separate options. The options were subject to the Singapore Law Society’s Conditions of Sale 1994. Clause   17 of the terms and conditions of the option provided that the purchaser was laible and must pay the goods and services tax (GST) and stamp duty for and in connection with the sale and purchase of the property. The sale was in each case completed by an instrument of transfer. There was no mention of GST by either party before the completion of the sale. There was no mention of it until some time in May 1996 when ACS’s solicitors raised it with Rubina’s solicitors and asked that it be paid. Rubina refused, arguing that upon completion of the sale by the execution and registration of the transfer, the obligation of Rubina in that regard had merged with the transfer, and that they were no longer under any liability. The main question involved the question of merger under s 66 of the Land Titles Act (Cap 157) (“the Act”). ACS argued that under the common law, the conveyance of land extinguished obligations under the contract only in so far as the deed of conveyance was intended to cover the same ground as the contract. These obligations did not merge in the conveyance. The assistant registrar held that the doctrine of merger did not disentitle ACS from claiming GST under cl 17 of the option. Rubina appealed.

Held, dismissing the appeal:(1)    Section 66 of the Act appeared to negate the doctrine of merger as developed by and entrenched in the common law. Instead of approaching the question whether a contractual provision had merged in the transfer in the manner of the common law, the terms in which s 66 was cast prescribe that all obligations in the sale contract merge in the transfer unless express provision in writing was made to the contrary. It was entirely possible to reconcile the apparently wide wording of s 66 with the common law doctrine of merger by construing the section in the context of the Act as a whole as well as the context of the neighbouring provisions in the part of the Act where s 66 was found.(2)    In the context of the part of the act where s 66 was found, particularly s 63(1), s 66 could be reconciled with the common law rule and full effect could be given to both if one were to confine the operation of s 66 to those provisions of the contract of sale which dealt with estates and interests in the land contracted to be sold, and all easements rights and powers belonging or appertaining to the land. Provisions of the contract relating to such

matters, in the absence of any express provisions in the contract to the contract, would merge in the transfer, since according to s 63(1), the registration of the transfer would pass and vest the land and such easements, rights and powers to and in the transferee. Section 66 thus made perfect sense when read as an adjunct to s 63(1).(3)    Construing s 66 this way would lead to the result that the rules of merger applied similarly to dealings in land subject to the Act and dealings in unregistered land. There was no reason at all why different rules should apply depending on whether land had or had not been brought under the Act. As such, notwithstanding the registration of the transfer in both cases, Rubina’s liability for GST had not been extinguished.

Important Clauses Tenant’s Solicitors Should Consider Seek to avoid absolute covenants and to qualify them by inserting term ‘reasonable’/’use best endeavour’

when appropriate- Would mean that tenant will not be in breach of covenant where failure to comply strictly was due to

circumstances beyond tenant’s control- e.g. Do NOT just state that ‘tenant not entitled to sub-let unless landlord consents’ else landlord can

withhold consent- Argue for clause that tenant can deal with whole/part of demised premises with landlord’s consent, which is

not to be unreasonably withheld- Then can proceed to sublet if landlord unreasonably disallows subletting

Right of landlord to access to premises and other rights should be made exercisable only upon reasonable notice and by prior appointment, unless emergency

- Also, landlord should be given residual right (licence) to enter to carry out repairs, show prospective tenants flat near end of lease

Provide that where landlord’s consent required, should propose that ‘consent cannot be unreasonably withheld/delayed’

Apply for copy of any document, terms of which tenant covenants to observe e.g. insurance policy effected by landlord

Tenant’s solicitor has to be satisfied that use for which his client requires premises will be permitted under relevant planning permission obtained by landlord/approved use/zoning

Approved use of premises- • It is important to provide for approved use of premises. WHY?

o Remember legal requisitions – one of this is to chief planner (URA)o Govt dept tt regulates zoning and use of propertieso If regulation and breach this, penaltyo Landlord who owns property and rents it out – if use for unaproved purposes, owner will get

into trouble o So must make sure tt tenant sure of what to use property foro If residential property, to make clear tt can ony use for residential poperty and not anything

elseo Eg rental for landed property quite low – nowadays turned into childcare center – ie change fr

residential usage to childcare center req approval fr URA- • If necessary, provide for whose responsibility it is to apply for change of use, and at whose cost

o fees to be paid to URA- • Implications of cost, timing, and damages if authorities do not approve – whose fault?

o How long do u allow the approval process ot take place because want it in place before tenancy commences

o Must be consideredo If landlord not at fault – no approval – might have wasted one or two mths – who pays? Must

provide in agreemento If due to someone’s fault, to spell out consequences?

- • Consequences of breach of this covenant by tenant/lesseeo Re-entry to terminate the leaseo Owner still liable if there was unauthorized use – owner must make sure that there is no

authorized use.

Deposit/ Security Deposit Clause• Purpose of deposit:

• Spelt out in lease

• Security for due perofmnace by tenant of all terms and conds in lease• Ie if tenant x perform oblig and money to be paid, deposit will go towards paying what is to be

paid• Eg tenant to look after premises – if eg window broken tenant shld pay, if he refuses, landlord can

use deposit to deduct• Deposit is for purposes of making sure the property is being taken care of.• Owner can deduct from the deposit for unauthorized use, damage caused by the tenant, and

improper care by the tenant• Important to prohibit setting-off rent against deposit

• Restrict deposit to only cover its purposes: any outstanding sums should be recovered separately.• Deposit usu only small sum, 2 mths rent is the norm• May be nominal sum only compared to value of property• Stimes tenant may hold back 2 mths rent at end of tenancy and ask this to be set off• Shld NOT allow – because when tenant leaves, may have left the property in bad state – need to

use the deposit to deduct!• Practical problem of enforcement

• Tenant may refuse to pay rent or decides to fly off – owner has no choice but to set-off from the deposit.

• Provide for time frame in which to effect refund – implications for both landlord and tenant• Usually 1-2 months• Provn for return of rentak deposit – stimes immed upon expiry of tenancy• This is NOT wise fr landlord’s pov• Not advisable to allow tenant to insist on immed refund – because he may have for eg cut off

electricity supply because x want more bills – and it takes 2 to 4 days to turn on electricity to check whether any applicances have spoilt

• So to do all this to inspect, need time• Only if in gd cond, fair wear and tear excepted, then can return deposit• As long as deposit held by landlord, tenant will not vamoose

• Transfer of deposit when landlord sells: Usually dealt in completion account – Deposits are usually a personal covenant, therefore the Tenant can get the $ from the previous owner

• Contractual oblig of landlord to return deposit when tenancy expires• When landlord sells the property – there is privity of estate but no privity of contract – new owner

has no contractual oblig to return the rental deposit• To get tenant to agree tt deposit changes hands, need to get his consent• Note tt if draft by assignment, attracts stamp fees -> so use mere deduction of purchase price (in

completion acct)• If no consent of tenant, he does not look to new owner, but goes back to orig landlord – orig

landlord will have to go to new owner, very awkward• Best way is for new owner is to get the tenant to consent to the transfer of the deposit therefore

estopping him from insisting on the money back

Landlord can use this deposit for enforcing covenants but which should be released at end of lease interest free

Clause does not run with land and does not pass to assignee/3rd parties Right to refund of deposit is personal covenant (with original landlord) Original landlord to state that tenant should look to new B for total recourse Possibility of novation, but tenant must consent Hence ask for consent before signing agreement for tenancy else tenant might not be bound by it Original landlord to transfer deposit to new landlord In the standard lease, a security deposit is paid by the tenant on the signing of the lease.

The security deposit will be returned if the tenant does not breach any covenant and the landlord does not need to set off.

If the landlord sells the property, the purchaser will take over the security deposit, because both encumbrances and benefits pass on to the purchaser.

In a Privy Council case (appeal from Hong Kong), it was held that the liability to pay the deposit to the tenant is personal.

The original landlord has to pay back the security deposit to the tenant at the end of the lease if the purchaser is unable to do so.

Draft the lease such that in the event of sale of the land, the tenant agrees to transfer the security deposit to the new landlord and looks to him solely for the refund of the deposit.

If you are acting for the tenant, advise him to agree to the above term because at least the new landlord as an asset in the form of the land. Also, if the new landlord becomes insolvent, the tenant can offset the security deposit by not paying rent for the last 2-3 months.

Novation Agreement In the event of sale of the land, the tenant is to enter into a novation agreement with the purchaser.

Because in an assignment, the assignor can only assign the benefits but not the obligations under the lease.

A novation agreement is a new agreement that rises from the ashes of the old agreement – ensures that the only landlord who is liable to the tenant after the sale of the land is the purchaser.

Bailment If tenant at expiration of lease/sooner leaves, his things can be sold and landlord can take proceeds to cover

such expenses and indemnify landlord against any loss Else, would have to get court order Especially for commercial leases

Option to renew:- length of term: usually 3 month before expiry

o note how longo stimes option to renew only 1 more yr when agreement for 2 yrs – because unsure of property

market- Procedure

o When is time in which tenant must write in to rewquest for teeancy to renewo One mth/2 mths/3 mthso The longer, the better for the landlord so tt he can prepareo Three mths prior to expiry, he can start advertising and look for new tenants

- New rate: Market rate, rate mutually agreed upon, present rate, or rate at Landlord’s discretion…… o Peg it to old rent and not more than ten percent plus minus?o Or at prevailing market rateo Don’t use at rent to be agreed upon because then no certainty of agreement – will be

renegotiating lease all over again- Usu clause will say renew tenancy for x no of yrs on same terms contained in ease or tenancy

agremenet except for renewal calsue (because x want perpetuity of renewal)

If the tenant thinks that the rent will fall in future, it is good to have such an option. An option to renew “on terms/rent mutually agreed” is unenforceable for uncertainty – the landlord does

not even have to pretend to negotiate when the time comes. Make sure that the option is on secure terms and conditions except for the rent, which shall

be:(a) at the prevailing market rent, or (b) to be decided by the average value of the valuer that each party appoints or the

referee of the 2 valuers should they not agree.(c) Even if there is no mechanism to decide on the amount of rent payable, the option to renew is

sufficiently certain for the court to impose a mechanism of its own to enforce the option.

Right of first refusal- More in commercial leases- Landlord owns several units- Tenant rents property, he thinks tt he might expand in future but not sure when- so tenant may want right of first refusal for nearby units- when right arises:

o when existing adjoining units become vacant/ existing tenants fail to renew leases, LL must inform tenant first (if tenant not in breach of any cond)

o when LL sells, must inform existing tenant first - Breach by LL

o What happens?

Lease of common areas- Commercial preoprties where landlord owns whole building- Some offices – only tenant of partr unit every likely to use tt corridor- Landlord might allow tenant to close up tt part as common area and lease it out too- Whether LL entitled – does he own common area to ext tt he is entitled ot lease it out?- Property Tax implications

o Increases when rents out common property o Can he pass on increase to tenant?

Diplomatic Clause Diplomatic clause: Right to terminate with 3 months notice- Allows tenant to break lease without consequential damages- Impt to be accurate in phrasing – when does right arise?

o ‘when tenant ceases employment in sg’ here this wld mean by ANY company

o when tenant ceases to be employed by so and so so if tenant resigns and joins another com, he can still invoke the right

- usu only permitted to be invoked 12 mths after commencement – so landlord is guaranteed 1 yr- otherwise no pt to rent out- Condition precedent: Lease to diplomat or expatriate- When right arises:

o Foreigner who has rented property for 1 year proves that he has been posted out or repatriated, so that he may exercise early termination of the contract

o Sometimes LLs have early termination clause: 3 month notice before exercise - Length of term- Procedure- New rate- When right arises- Breach by LL- Whether LL entitled- Pty tax implications- Conditions precedent- when does right arise? If the tenant is an expatriate, he will ask for a diplomatic clause that “if the occupier or the tenant himself

has to leave Singapore, then the tenant shall be able to terminate the lease with the appropriate notice”. When acting for the landlord, make sure that such a clause only comes into effect after the 1 st 12 months

because when the expatriate takes over the premises, the landlord would probably have been asked to improve the premises at his own expenses 1st.

Terms of mortgage/ TITLE SEARCH ON THE PROPERTY - If rent out property, mortgagee’s consent must be obtained- This may otherwise amt to default- Or mortgage need nt recog tenant when selling out property- When handling transaction, always check if peorpty is mortgaged and whether mortgagee’;s consent is

required esp if acting for tenant- If mortgagee’s consent is obtained for client’s rental of premises, when mortgagor defaults later, bank has to

recog rights of tenant occupying the premises- If not can evict - Contractual fight but mortgagee has overriding right – because title search by tenant wld have found tt house

is mortgaged to bank If there is a mortgage on the property, the terms of the mortgage may require the mortgagor to obtain

the mortgagee’s consent before renting the property out.

Because if the mortgagor goes insolvent and the mortgagee enters the property to take possession, the mortgagee can ask the tenant to vacate the premises. The tenant will suffer a loss if he has improved the property at his own cost.

Require as a condition of the tenancy that the mortgagor provides written consent from the mortgagee of the tenancy.

Personal Effects Of The Tenant The tenancy agreement should provide a clause that in the event of the tenant vacating the premises at the

end of the lease and leaving behind personal effects, the landlord has the right to tale hold of those personal effects, sell them and keep the proceeds after deducting for expenses.

Otherwise, under the law of bailment, the landlord has a duty to take reasonable care of the tenant’s property.

The alternative is to get a court order (which is inconvenient).

Right Of Landlord To Enter Premises The tenancy agreement should provide a clause that the landlord can enter the premises to show it to

prospective purchasers, or to inspect the premises, with prior appointment. Contractual rights have to be drafted, because exclusive possession of the premises is the essence

of a lease.

Termination Or Destruction Of Premises Abatement of the rent if the premises cannot be used during that period. Or if the premises cannot be used for a period of time exceeding a certain agreed period, the both parties can

walk away from the lease. Otherwise the tenant’s obligation to pay rent remains.

Relief Against Forfeiture “Re-entry clause” – in the event of a breach by the tenant, the landlord is entitled to re-enter the premises

and terminate the lease, etc. If such a clause does not exist, then the landlord has no right to enter the premises without 1 st going

to court. But the landlord may only enter the premises without force or the use of arms because if the tenant

is still on the premises, the landlord cannot enter and throw him out. But note that the tenant always have a right to relief against forfeiture:

(a) under the CLPA, e.g. ss 18 & 18A(b) by a court order (that the tenancy is to carry on if the tenant can compensate the landlord).

DETERMINATION OF LEASES AND TENACIES- Lease may end by:

1. affluxion of time – expiry of term2. exercise of express power of termination3. surrender of lease that has been accepted by the LL4. merger where tenant retains lease and acquires both lease and reversion unless no intention for

such merger by the acquiring party – S 4 (6) of Civil Law Act5. Forfeiture –

a. expressed term allowing for re-entry on breach neededb. strict compliance with S18 and S18A CLPA needed

- S28(4) of Civil Law Act: Tenant who wrongly holds over after determination liable for 2X rent.

S28(4) of Civil Law ActDouble rent or double value on holding over by tenant (4) Every tenant holding over after the determination of his tenancy shall be chargeable, at the option of his landlord, with double the amount of his rent until possession is given up by him or with double the value during the period of detention of the land or premises so detained, whether notice to that effect has been given or not.

LL’S REMEDIES – if non paymen of rent or breach of terms specified in any partr provisoLL can:

1. sue for rent2. exercise right to distrain for arrears of rent upon the goods of tenant

a. subject to Distress Act – must ex right only in manner provided for by act3. Re-entry: if lease contains usual proviso for reentry – must do so by: -

a. Physically enter with intention of determining the leaseb. Where peaceful reentry not possible, Issue and service of proceedings for recovery of

possession. Service of writ of possession operates as final determination of the lease.