Fair Tenancy Framework: Total Leasing Cost

Business Leasing Guide: Section 1.5 Total Leasing Cost

Description:

In general, besides rent, there are other leasing costs to be considered. For example, the landlord’s legal fees for the lease agreement and the landlord’s professional consultants’ vetting charges for fitting out works, among others.

Guide:

Both parties should agree upfront on all costs to be borne by the tenant.

Where such cost cannot be pre-determined, an estimate and/or maximum cap on such cost could be provided by the landlord to enable the tenant to budget accordingly.

Please use Table A for reference.

What Frequently Happens in Practice:

There is a worrying trend that in addition to Legal Fees, Stamp Duty and Utilities, tenants have to pay what appears to be landlord’s business expenses incurred, that is, costs incurred in the ordinary course of business. An increasingly common fee charged is Administrative Fee, which is the fee charged to handle the administrative matters related to the signing and renewal of a lease. Another is a Design Vetting Fee, not paid to external consultants, but paid by tenants to defray the cost of the landlord’s design team looking through a tenant’s fit out submissions. To what end is a landlord allowed to pass on the ordinary costs of running a leasing business to the tenant?

Almost without exception, the current practice across the industry is that Legal Fees, Stamp Duty and Utilities are 100% borne by the tenant.

SG TUFF Recommendation:

When a tenant is required to bear 100% of the legal fees and 100% of the stamp duty, it sends across a very powerful message: the terms of the tenancy agreement are going to be unconscionably harsh or one-sided, and that it is perfectly acceptable.

We recommend we reinforce the spirit of fairness and reciprocity by changing the conditions of business leasing. It should be made mandatory that both landlord and tenant should each share equally the legal fees and the stamp duty.

A landlord should also be prohibited from passing on their business expenses in the form of administrative fee and design vetting fees to the tenant.

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