Market Practises & Common Terminology
Market practices and common terminology refer to the standard norms, procedures, and frequently used terms in commercial leasing. Understanding these helps tenants interpret lease conditions, evaluate costs accurately, and engage confidently in discussions and negotiations.
Rental & Service Charge
Rent: Quoted as a gross figure (S$ psf/month), covering base rent and service charge. Paid monthly, plus GST. ( Goods Service Tax )
Service Charge: Covers air-conditioning, maintenance, and security. Typically S$1.00 – $1.30 psf/month.
Subject to periodical review and changes
Option to Renew
Usually for 2-3 years, with rent review to prevailing market rates.
Lease Commencement Date
The date when rent payments officially begin.Typically rental payments are made monthly.
Rent Free Period
An agreed period within the lease term where no rent is required to be paid.
This normally happens during the fitting out period.
Legal Fees
Tenant typically bears the landlord’s legal fees for preparing the lease.
Renovation Deposit for Fitting out
Payable to Landlord before fitting out takes place. Amount is around S$10,000 or S$1 psf, refundable after fit-out, to cover potential damage to common areas.
Letter Of Intent
A non-binding document outlining the agreed key commercial terms & conditions.
It sets as a good reference for the terms to be further prescribed in Letter Of Offer / Lease Agreement which are legal binding.
Lease Agreement ( LA )
A non-binding document outlining the agreed key commercial terms & conditions.
It sets as a good reference for the terms to be further prescribed in Letter Of Offer / Lease Agreement which are legal binding.
Lease Period
Lease Period: Standard is 2-3 years. Leases of 7+ years must be registered.
Possession Date
Agreed date between all parties for tenant to take possession of the unit. It can be anytime from 2 weeks to 3 months before the actual lease start date.
Fitting out Period
The time between possession and lease commencement for renovation. Rent & Service Charges are often waived, but there could be exceptions.
Security Deposit
3-6 months’ gross rent, refundable at the end of the lease without any interest
The actual amount payable largely depends on the amount of paid up capital of the enbtity of the Tenant in ACRA.
Typically the standard requirement for the Tenant is to have at least 6 months worth of rent in the paid up capital to qualify for a 3 months security deposit.
Stamp Duty
A tax payable for execution of legal documentation in Singapore. Payable by the tenant to IRAS. For a standard 3-year lease, it’s 0.4% of the total rent. Pls see actual stamp duty calculator here
Reinstatement
Tenant must restore the office to its original, bare condition at their own cost at the lease expiry , although there maybe exceptions.
Letter of Offer ( LOO )
Upon agreement of the key commercial terms of the LOI, both parties will enter into a legal binding Letter Of Offer with the same agreed terms and conditions.
Payment of the advance rental , security deposit , legal fees and stamp duty typically take place at this stage.
Rental & Service Charge
Rent: Quoted as a gross figure (S$ psf/month), covering base rent and service charge. Paid monthly, plus GST. ( Goods Service Tax )
Service Charge: Covers air-conditioning, maintenance, and security. Typically S$1.00 – $1.30 psf/month.
Subject to periodical review and changes
Lease Period
Lease Period: Standard is 2-3 years. Leases of 7+ years must be registered.
Option to Renew
Usually for 2-3 years, with rent review to prevailing market rates.
Possession Date
Agreed date between all parties for tenant to take possession of the unit.
It can be anytime from 2 weeks to 3 months before the actual lease start date.
Lease Commencement Date
The date when rent payments officially begin.
Typically rental payments are made monthly.
Fitting out Period
The time between possession and lease commencement for renovation. Rent & Service Charges are often waived, but there could be exceptions.
Rent Free Period
An agreed period within the lease term where no rent is required to be paid.
This normally happens during the fitting out period.
Security Deposit
3-6 months’ gross rent, refundable at the end of the lease without any interest
The actual amount payable largely depends on the amount of paid up capital of the enbtity of the Tenant in ACRA.
Typically the standard requirement for the Tenant is to have at least 6 months worth of rent in the paid up capital to qualify for a 3 months security deposit.
Legal Fees
Tenant typically bears the landlord’s legal fees for preparing the lease.
Stamp Duty
A tax payable for execution of legal documentation in Singapore. Payable by the tenant to IRAS. For a standard 3-year lease, it’s 0.4% of the total rent.
Pls see actual stamp duty calculator here
Renovation Deposit for Fitting out
Payable to Landlord before fitting out takes place. Amount is around S$10,000 or S$1 psf, refundable after fit-out, to cover potential damage to common areas.
Reinstatement
Tenant must restore the office to its original, bare condition at their own cost at the lease expiry , although there maybe exceptions.
Letter Of Intent
A non-binding document outlining the agreed key commercial terms & conditions.
It sets as a good reference for the terms to be further prescribed in Letter Of Offer / Lease Agreement which are legal binding.
Letter of Offer ( LOO )
Upon agreement of the key commercial terms of the LOI, both parties will enter into a legal binding Letter Of Offer with the same agreed terms and conditions.
Payment of the advance rental , security deposit , legal fees and stamp duty typically take place at this stage.
Lease Agreement ( LA )
Lease Agreement is a legal binding document , that not only states the key commercial terms of the rental , as well as more details such as covenants , warranties etc.