Lease of your worries

We present expert help for all confused homeowners who are looking to sublet their property.

Tue, Nov 01, 2011
Home & Decor

By Stella Thng

Renting out your HDB flat or private property, or even a spare bedroom, can generate attractive passive income.

With the new hefty seller's stamp duty aimed at curbing speculators, some private property owners may also prefer to sublet instead of flipping their property to avoid a dent in their profits.

Propnex group district director Kelvin Fong and Marcia Lai, director of Faith Property Network, detail what you need to know before you draw up that lease agreement.

What do i need to take note of when subletting my HDB flat?

1. To rent out the whole flat, make sure you satisfy the condition of a three- or five-year Minimum Occupation Period (MOP).

For owners of a non-subsidised flat bought off the open market without a housing grant - if your application to purchase was dated before Aug 30, 2010, you need to live there for three years, or five years if your papers were received after this date.

Those who bought a flat directly from the HDB or enjoyed a housing grant from the CPF board must fulfil the MOP of five years.

2. Make sure foreign tenants have valid papers - Employment Pass, S Pass, Work Permit, Student Pass or Dependant Pass.

"Take note of the expiry date and make sure it is valid throughout your tenancy," says Kelvin.

Keep within the maximum number of tenants allowed to occupy your home. For example, four tenants are allowed in a one- and two-room flat, six persons in a three-room unit and nine in four-room and larger units.

3. Take note that you cannot rent out your flat to owners of Executive Condominium units who have not met their five-year MOP, or to those who own or rent out their own HDB flats.

The only exceptions are if the potential tenant is divorced or legally separated, or is eligible to sublet his or her own flat.

4. Finally, remember to get the HDB's approval before you rent out your unit.

Submit your application at www.hdb.gov.sg/MyHDBpage. It costs $20 and allows you to sublet your flat for three years. Your tenant must also pay stamp duty to the Inland Revenue Authority of Singapore.

The same MOP rules apply to Executive Condominium owners who have taken a grant or bought it directly from HDB.

How about if I just sublet the rooms?

You are allowed to rent out rooms if you own a three-room or larger flat. For three-room flats, you can sublet one room and for four-room units or bigger, two rooms.

Although you don't need to seek approval from the HDB, you are required to register your tenant's details within seven days of subletting a room.

The other rules regarding your tenant's property ownership status and valid papers for foreigners still apply.

"Do take note that your tenant must still pay stamp duty for room rental," says Kelvin.

What are the rules on letting a private property unit or room?

You don't have to seek approval from any government agency to sublet private property. but do ensure that the duration of your tenant's work permit is valid to avoid running afoul of immigration rules.

Again - make sure your tenant pays stamp duty.

An agent told me that as long as I "lock one bedroom door", I can sublet the rest of my HDB unit. Is there any truth to this?

"No. This is against HDB rules and they can confiscate your unit," warns Marcia.

The landlord has to physically live in the home if he is subletting his rooms, or fulfill the five-year MOP and other requirements if he opts to let the whole unit.

Homeowner Mrs Liang XL, 34, feared she'd lose her five-room HDB flat when she received a warning letter from the HDB for subletting it illegally.

"I'd thought that as long as I kept one room for my occasional use, it was okay to rent out the rest of the house! Fortunately, because I had fulfilled the MOP of five years, the HDB officer advised me to apply for approval and let me off with a stern warning."

What are the responsibilities of the landlord to the tenant during the period of tenancy, and vice versa?

The landlord should not disturb the tenant unnecessarily and cannot ask to collect rent before the due date, says Marcia.

Make sure all fees borne by the owner are duly paid.

"One tenant who rented an HDB unit was annoyed to come home to a court notice stuck on the gate," recalls Marcia. "It was issued by the Town Council - turns out the owner had not paid the conservancy fees for months."

"The tenant must also heed the tenancy agreement, including important terms like ensuring that only registered occupiers are allowed to stay on the premises," advises Kelvin. "They are not to sublet or sub-divide the unit to lease to others." If the landlord decides to sell off the apartment, the tenant must also allow pre-arranged viewings.

What happens if the tenant happens to damage my furnishings or electrical appliances?

The contract generally comes with a warranty period of one month.

All repair costs within the first month are borne by the owner. After this, the tenant has to bear the first $150 (or depending on the amount agreed by both parties) of repair costs, while the landlord takes care of the rest.

For appliances that cannot be fixed, the landlord has to replace it at his own cost.

If your unit comes with air-conditioning, the tenant must get it serviced every quarter, says Marcia.

"But if it is beyond repair and the tenant has receipts to prove that he has fulfilled the servicing requirements, he has the right to ask for a replacement."

My tenant wants me to repaint the walls at my cost, but this was not requested in our contract. Am I indeed liable?

No, says Kelvin. "Any request from the tenant must be accepted by the landlord in the contract. After it is signed, the landlord is not liable to pay for such requests. The tenant must also seek the landlord's approval if he wants to repaint the walls at his own cost, and must return the apartment to its original condition when he hands it back."

My tenant often pays her rent late. Can I impose an interest fee?

"Most contracts state that a 10 per cent interest fee per annum will be charged once the rent is overdue for more than 14 days," says Marcia.

In one extreme case, a tenant defaulted on his rent for three months despite receiving a Letter of Demand from the landlord's lawyer that required him to pay up within seven days.

On the eighth day, Marcia accompanied her client to the police station to make a report before evicting the tenant.

"Having a police report in hand protects the landlord in case the tenant creates trouble."

My tenant has asked to use his security deposit of one month to offset his final round of rent. Is this okay?

Some landlords who let out their room or unit without hiring an agent think there is no harm in doing so.

However, when your tenant hands over the room or unit, you should check against your inventory list and take note of damages or missing items. The security deposit is your safety net to cover the necessary repairs or replacements before you refund the rest.

I've signed a one-year contract with my tenant. What happens if one of us wants to back out halfway?

This hinges on how the tenancy agreement is worded.

"If you broke the contract and your tenant now has to rent a smiliar property at a higher cost, you must compensate the difference and for any expenses incurred when they shift to the new place," says Kelvin.

If your tenant bails out early, he must find you a replacement tenant for the remaining period of the lease.

If the new tenant is paying lower rent, your first tenant must cover the difference.

What about the agent's commission?

If this clause is provided for in the contract, the party that defaulted has to reimburse the pro-rated commission to the other side.

"Landlords can take these costs out of the security deposit," says Marcia.

What happens if your tenant has to terminate his contract because he loses his job in Singapore or is posted abroad?

This depends on whether you have agreed to a diplomatic clause in the contract and if he can show documented proof from his company.

If he gives sufficient notice as stated in the contract, he is free to leave without incurring any charges.

Be Informed: How to get top rental dollar for your property

• Ask your agent to prepare a market analysis report, taking into account the facilities, amenities, transportation, condition of your flat, the floor level and the view of the flat. This helps you set a reasonable and competitive asking amount.

• A fresh coat of paint, repairing spalling and cracks in the ceiling, fixing broken door handles or replacing cupboard hinges are all simple measures that can create a better impression for potential tenants. Grotty toilet seats can be changed at under $10. Even a minor detail such as oiling your sliding windows so they don't squeak can make a difference for fussy tenants.

• A fully furnished unit or room fetches better rent. If you intend to sublet your property over a long period, it makes more sense to buy affordable furniture rather than to rent it. Try HDB furniture stores or buy second-hand pieces from expats who are relocating.