Ending a Short Tenancy Early: Do You Have to Pay the Remaining Rental?
A tenancy is a form of lease agreement. In essence, a lease—whether long-term or short-term—grants a land-based interest that provides the right of exclusive possession over a property, typically in exchange for rent over a specified period. Simply put, exclusive possession allows tenants to exclude all others from the premises, including the landlord.
Understanding Tenancy Agreements
Many people don’t realize that buying HDB flats in Singapore essentially means entering into long-term tenancy agreements with the government. While HDB flats are affordable public housing options in Singapore, they still require significant financial resources. Additionally, HDB flats are only available to Singaporeans and permanent residents (PRs), leaving rental properties as a common housing solution for foreigners.
Increasingly, young adults seeking the convenience of independent living or sharing with friends are turning to short-term residential tenancies. These tenancies are usually short-term, lasting from one month to three years.
However, not all tenancies work out, and terminating a rental agreement early can be tricky depending on the tenancy agreement's terms.
Early Termination Clauses in Tenancy Agreements
When the tenancy agreement includes a termination clause, allowing either party to terminate the contract with notice (often one month), the situation is more straightforward and less problematic. Many rental agreements include such provisions, making it easier for tenants to leave without financial penalties.
Issues with Short Fixed-Term Tenancies
Problems arise when the tenancy agreement is a fixed-term lease with no provision for early termination. For example, a one-year tenancy with monthly rental payments may prohibit either party from ending the lease early without breaching the contract. Breaching the agreement typically incurs financial penalties.
In modern legal contexts, no one can be literally forced to remain in a contract. The decision to breach a rental agreement is often a practical one based on whether the tenant can bear the financial consequences. So, what should tenants expect if they decide to terminate their lease early?
Financial Consequences of Premature Termination
One immediate consequence is the forfeiture of the security deposit. If the tenant fails to return the premises in the condition required by the agreement, they may be liable for additional costs. This is separate from other penalties outlined in the tenancy agreement.
Often, landlords demand payment equivalent to the remaining rental for the full term of the lease. However, such demands may not always be justifiable.
Mitigating Financial Losses
New Tenants: In Singapore, it’s usually not difficult to find new tenants.
Lower Rent: If a new tenant pays less rent, the landlord's true loss is the difference in rental for the remaining period.
Same or Higher Rent: If a new tenant pays the same or higher rent, the landlord does not incur a loss.
Duty to Mitigate: Legally, a landlord is expected to mitigate damages by taking reasonable steps to re-let the property. Advertising costs and other related expenses incurred in securing a new tenant are typically payable by the outgoing tenant.
Negotiating or Finding a Replacement Tenant
In many cases, tenants may try to negotiate with the landlord. However, this is often challenging, as landlords may be unwilling to compromise. Another viable option is for the tenant to find a replacement tenant who is willing to pay equal or more rent. Landlords should not unreasonably refuse such replacements, as it mitigates their loss.
Conclusion
Prematurely terminating a tenancy agreement can have financial consequences, but these can often be negotiated or mitigated. Tenants should consider their options carefully, including seeking legal advice or finding a replacement tenant, to avoid unnecessary penalties.