Long-term Rental of Singapore Office Space
The entrepreneurs who are looking forward to establish a new company or set up a branch in Singapore generally plan to rent a space but most of them are not aware of the process of undergoing a leasing contract, the paperwork related to it and all the protocols related to it. this guide will help you to a great a deal in understanding the office renting process and getting into a leasing agreement in the country of Singapore. This will help you in handling the task in an easier manner.
There are mainly two ways in which you search the search the best office space in the country. You can either hire a real-estate agent or can carry out the task yourself. If you are planning to carry out the task yourself, some tips that can help you is going through the newspapers, browsing the web and exploring the classified ads. Though you might be satisfied of the office space that you find but you should be ready to work hard as finding an appropriate space is a tough and time consuming process. However, the best option is to hire a real-estate agent. By doing so, you can get the best space according to your requirements. The agent gets a certain amount as commission from the landlord and you will have to pay nothing in the process.
If you have got the right space and are looking forward to sign a lease agreement, it is necessary that you consider all the costs associated with taking an office on rent in Singapore. Apart from the rent of the space, there are several other things which you will have to pay in addition. So, make sure that you have the capability of paying the extra expenses like telecommunication bills, electricity bills, office cleaning and much more. Insurance in another factor, that can be considered by you during the process.
Renting Office – Common Lease Terms & Practices in Singapore
The terms and conditions of the leasing agreements differ with countries and it is not necessary that the country in which you are renting a space follows the same guidelines as that of your home country. Here is a list of some common leasing practices and terms which are followed by the tenants and landlords in Singapore.
Lease duration is an important thing to consider. However, the general lease duration for lease agreement is 2-3 years in Singapore which can be extended to 5-6 years for longer leases and that too if you are renting a large space. After the expiry of the lease term, the landlords provide you an option to get the term renewed which is done at the current market price at the renewal time. Usually, the landlords offer an option to the tenant to get the lease renew for the same term at rent which is agreed upon by both the parties or the tenant has to get it renewed at the current market rate.
For rent, the term used in the country is Gross Rent. The rent in Singapore is paid on monthly basis. It includes a base rent which is calculated according to per square feet of floor area and the service and goods tax of 7%, if the landlord is a company registered with GST. An additional service charge is also charged by the landlord with respect to the management services like sir conditioning facilities, management fees, building maintenance, security, building repairs etc. The current amount for service charge is generally mentioned in the agreement. It also includes a clause according to which the service charge is subject to change within the lease duration. Hence, the landlord can increase and recover the charges from tenants in case there in any increase in service charge.
Deposits and Other Fees Payable
Security deposits are also asked by the landlords in the process and a security deposit of an amount equal to that of the gross rent of three months is payable by the tenant in 2 phases. The gross rent of one month is paid when the there is an exchange of the documents which includes the intention of the tenant to the lease the space and the offer letter by landlord. The remaining amount is payable at the time of signing the lease contract or agreement, starting of the lease term whichever is first.
With the expiry of the lease term, the tenant can get back the security deposit as it is refundable. There is no interest paid to the tenant for the security deposit and it is also subject to the performance of tenant as per the terms of the lease contract. The landlord has the right to deduct expenses and costs payable by tenant with respect to any breach or violation of the lease terms. The tenants are also required to make a renovation deposit to the landlord if he is intending to do any renovation in the work space. It covers the damage which can be caused to the building’s common areas during the renovation process.
Stamp duty, document preparation fees etc. are also to be finalized with the mutual consent of both the parties. Commonly, the landlord asks the tenant to either pay the cost in full or a partial cost. According to the law, it is necessary to pay the stamp duty on a tenancy agreement for leasing an immovable property. If the lease agreement is signed in Singapore, the stamp duty should be paid within 14 days of signing the agreement. However, if the act is carried outside the country, the stamp duty should be paid within 30 days of the date of receipt. The revenue authorities keep a close eye on non-stamping or late stamping. The stamp duty can be roughly estimated as 0.4% of the total rental value for the lease term.
The tax applicable on the property in Singapore is paid by the landlord. However, the landlord might add a clause in the lease agreement to recover the cost from the tenant if there is any increase in the rates of property tax during the lease term.
Utility and Maintenance
When it comes to maintenance and utility bills, the tenant is responsible to pay them all. These are additional costs of the services availed by them. Though you might have to pay additional charges for availing the air conditioning services that are provided during office hours but most of the work spaces have centralized AC the cost of using which is covered in the gross rent.
The next thing is the cleaning and maintenance of the building. The cost of maintaining and cleaning the exterior region is bear by the landlord and that of the interior spaces is the responsibility of the landlord. You can also seek the option of hiring the maintenance contractor of the landlord for the maintenance of the interior space.
As per the leased area, season parking areas are allotted to the tenants which is solely dependent on the place of rent. The parking facilities can be enjoyed by paying an amount which can range from SG$100 to SG$180 for the buildings located outside the CBD, Central Business District and for a parking area inside the CBD, you will have to pay an amount of S$170 to S$300.
The tenants are not allowed to sub-let a part or full of the work space until and unless he gets it approved from the landlord in writing. However, the landlord can allow the renter to search for another tenant who can take over the lease.
The tenants in Singapore are expected to get an insurance policy for the lease term against personal injury, property damage, death or any other form of loss that might arise due to any kind of operation carried out by the tenant within the premises. The tenants should also get the fixtures, furniture and fittings of the office insured against any kind of damage and risk. If the tenant conducts any renovation activity, they are also required to get fire insurance as well as special perils insurance within the duration of renovation activity.
Office Renovation Work
When you rent an office space, it is well-equipped with standard cemented fittings, raised floor system, standard protection systems and fire sprinkler, suspended ceilings, window lighting, basic lighting, centralized air-conditioning etc.
The tenants, if think that there is a need for renovation they can undergo the process but in accordance to the terms and conditions in the agreement. However, you can also negotiate for a rent-free period with the landlord which might be from 2 weeks to 3 months which is dependent on the floor area and space covered during renovation.
The renovation can be of different types. However, the cost for standard fitting works mainly depends on the floor space, technical requirements with respect to different businesses, layout complexity, interior renovation or architects. For renovations, it can be roughly within S$40 to above S$100 p.s.f. However, any kind of modification or fitting work to the existing ones or any other kind of alternations should be done only after the approval of the landlord and the tenant is held responsible for bringing the premises to its original state when the lease term ends.
Renting Office – Tenancy Agreement Process
Leasing is a common task and there are several steps involved in signing and negotiating on the lease agreement in Singapore.
Letter Of Intent
As soon as you find the best place for your office, you need to initiate the lease negotiation. You can either ask your real estate agent or submit the letter of intent yourself to the representative of the landlord. The LOI or Letter of Intent comprises of some basic information regarding the lease terms that you might wish to include and your seriousness about renting that space. You need to be patient when negotiating with the landlord as it might go for a while and then both of you might arrive to an agreement.
Letter of Offer
When the landlord receives the Letter of Intent, he performs a company check that includes the paid-up capital of the company so as to make sure that he will receive his rent on time. After performing the check, if the space owner is satisfied with the application of the company, both the parties discuss the basic lease terms and a Letter of Offer is issues by the landlord in addition to a copy of the Tenancy agreement document. The tenant will be required to return a signed copy of Letter of Offer along with non-refundable fees. After the Letter of Offer is signed and non-refundable deposits are made, the premise is secured and the tenancy agreement can be signed.
Once you sign the Letter of Offer, the landlord will hand you a tenancy agreement that you need to sign. It is a simple document in Singapore but you can take legal assistance in order to understand it at your cost. You can ask the legal solicitor to go through the document.
After signing the lease agreement, the tenant is required to pay a stamp duty to the IRAS (Internal Revenue Authority of Singapore). The stamp duty for lease involves a fixed rental fee for the rental period which is based on gross rent and is payable within 14 days of signing the lease agreement if the task is carried out in Singapore. If the agreement is signed outside the country, the period for submitting the stamp duty is 30 days.
The tenants get the right to take the possession of the property after signing the lease agreement and submitting the security deposit. After completing the formalities you are free to get in. if you think there is a need for fitting-out work, you can go ahead but only after getting the approval of the landlord. Apart from getting the alternations and modifications done, you will also need to hire the right authorities for getting connections like utilities, internet, telephone etc. Hiring an agency for office cleaning is also a consideration.