Common Commercial Lease Terms and Fees
What are the Common Commercial Lease Terms and Fees
What are the common commercial lease terms and fees? Because the use of the terms in a commercial lease may differ. Therefore we wrote this guide for you. So you can have a better understanding of how things work here in Singapore.
Office rentals here are nearly always quoted using per square foot rate. However, there are times when rental are not calculated in this manner. Gross rent is usually quoted in cases like shophouses. And tenant here pays their rent every month.
The service charge is another common fee in a commercial lease. Usually, it covers the landlords’ costs on the maintenance and management of the common area. As well as the air conditioning units in the building. The service charge is between $0.50 to $1.20 per square foot. It is usually included in the gross rental. The exact figure will be specified in the lease but can change during the lease term.
Length of Lease
The lease agreement also explicitly stated the duration of the lease. It is very common here for lease to last between 2 to 3 years. However, a bigger organisation usually opt for 5 to 6 years lease. Because of the cost involved in relocating and renovating the premises. Likewise, F&B tenants also like to opt for a longer lease period. Not only due to the cost of renovation and also they need time to build a loyal customer base.
Rent Free / Fit-Out Period
The rent-free period or fit-out period is another common term in the lease agreement. The period offered is usually between 1 month to 3 months. While almost all office rent-free period is 1 month.
Occasionally bigger units that require more time with their renovation may ask for a longer period. Similarly, F&B units that need extensive renovation and fitting, may also ask for a longer period. In this case, the landlords can exercise their discretion on the time frame suitable.
Options to Renew
At the same time, the tenants can renew the lease for another agreed period with the option to renew clause. However, care should be taken in during the drafting of this rental clause. Firstly, the tenant should check whether the prevailing terms remains the same. At the same time, are the renew rental rates “at a rate to be agreed” or “at market rate at the time of renewal”.
Legal and Administration Fees
Another key point is legal and administrative fees. The tenant is normally responsible for such cost. This fee is incurred in connection with the preparation of the lease documentation. Each amount may vary from landlord to landlord but is usually a fair amount.
Utilities and Telecommunication
The tenant usually pays the utility bill for the premises. The utilities include telecommunication, electricity, water and gas. The tenant is also responsible for the opening account, deposit and connection charges. However, if the buildings have centralised aircon. Then the power supply for the air condition units are usually inclusive in the gross rent. In the case of a shared office, you may be asked to share the utility bills.
Tenants are only responsible for internal repairs (excluding structural items). The owners/management corporations’ is responsible for the repair and maintenance of the exterior and common area.
Normally provided by the landlords during normal office hours. Usually:
Weekdays: 8.00am to 5.30 – 6.00pm
Saturdays: 8.00am to 1.00pm
- After office hours air conditioning can often be provided on an hourly basis on giving sufficient notice. Costs range from $40 to $80 per hour depending on the size of the floor/area.
- Of course, another way is for you to fit your own air handling unit and tapping into the landlords’ chilled water supply. Costs are charged per ton of chilled water. You may also install your own split unit/condenser if the building allows.
- For regular out-of-hours use, tapping into the landlords’ water supply is the most cost-effective. If you don’t need the extra air condition very frequently, using freestanding/portable air conditioning units could be a better choice.
The number of car parking lots allocated to each tenant may vary from place to place. The number of lots is based on the total floor are leased. The average ratio is 1 lot per 1,000 to 2,000 sq ft. The costs of season parking in a commercial building may vary from $150 to $400 per month per lot. GST is not included. The office rental also don’t includes the car park charges.
Most of the tenancy agreement disallowed sub-letting. Special permission may be allowed with the landlord’s written consent.
All tenants are required to put the premises back into their original state at the termination of their lease. The reinstatement work normally takes 1-3 weeks for the average unit.
The reinstatement will cost on an average of $6psf to $18psf. In some situation, the incoming tenant or the landlord may request that you leave behind the fittings.
The incoming tenant is also responsible for the cost of the stamp duty fees payable on the lease documentation. The stamp duty is calculated in the following methods:
- For a 4 years lease or less: 0.4% of the total rent for the lease period
- For more than 4 years lease: 0.4% of 4 times the Average Annual Rent (AAR)
The tenant is expected to pay a security deposit to the landlord upon the signing of the Tenancy Agreement. The deposit is equivalent to 3 months to 6 months of the current rent. This security deposit is refundable without interest upon the expiry of the lease. In the event of any breach of contract, the landlord can deduct any fees, cost or expenses from the security deposit. However, The security deposit cannot be used to offset any rental.
The tenant is generally expected to maintain insurance for public liability and their properties. The insurance will safeguard them against any death, injury or damages claim arising from any activities during their lease period. It will also protect them from any losses or damages in an event like a fire.
Goods and Service Tax (GST)
Most rental usually attracts GST. This is not inclusive of the gross rent. The current GST rate is 7% is accurate at the time of writing.
We hope this guide has been useful to you. You can use www.shophouseoffice.com to find your next office or shop space. Our assistance will help you save your time and money.