How to Resolve Commercial Lease Disputes in Singapore
The normal practice for businesses operating in Singapore is to lease a commercial space to conduct business. Inevitably, there will be situations where disputes arise.
This article will focus on addressing the common issues arising from a commercial leasing dispute in Singapore and how such disputes can be resolved between the tenant and landlord.
Common Types of Commercial Lease Disputes
1. Breach of lease agreement
A breach of the lease agreement arises whenever there is a failure to comply with a term of the lease agreement. The following are some of the most common examples.
Breach of utility and maintenance clause
In a commercial lease agreement, it is generally understood that the landlord will agree to ensure proper maintenance and cleanliness of the exterior of the premises and common areas. This should be stipulated in the lease agreement.
A breach by the landlord of such a term arises when:
- The common areas are not kept clean, which means that the environment is in an unhygienic state and not presentable to customers of the tenants;
- The common corridors where people and goods pass along are neither kept clear of obstruction nor in good condition, posing a fire and safety hazard; or
- There is a failure to ensure routine and adequate maintenance of the escalators or other safety equipment such as fire extinguishers, which may result in or exacerbate injuries in the course of day-to-day running of the businesses in the premises.
This list is not exhaustive but where there are causes for concern in the common areas, the tenants should quickly notify the landlord to rectify them. More importantly, it is the contractual duty of the landlord to do so and consequently, the fault will almost always lie with the landlord.
Breach of sub-lease clause
It is not uncommon for tenants that have leased a commercial space to then lease out a small portion of their commercial space to another business or several other businesses.
The landlord should include a term stipulating that its consent should be sought before the commercial space is sub-let in part or in whole.
Where there is evidence that the tenant had sub-let any portion of the commercial space to another business without the landlord’s consent, the landlord may decide to terminate the lease agreement and also make claims for compensation.
Another common breach of agreement is the illegal hiring of workers by tenants. This means hiring workers who do not have the proper documentation and permits, or who have been barred from entering and working in Singapore.
The landlord should include a term barring the tenant from illegally employing workers so as to protect himself from civil liabilities and criminal proceedings.
If the tenant illegally employs workers, it will count as a breach of the lease agreement. This will commonly result in the forfeiture of the tenant’s security deposit with the landlord and a termination of the lease agreement.
When is the termination of a commercial lease agreement valid?
In any commercial lease agreement, there will be a termination clause. Often, parties whose lease agreements have been terminated argue that the termination was invalid.
Where there is evidence to show that there was a breach of a term in the lease agreement, such as the tenant sub-letting the commercial space to another business without the consent of the landlord, the landlord’s termination of the lease agreement is valid.
However, where there is questionable or no evidence to show that the lease agreement had been breached, then a termination of the lease agreement would not be valid.
2. Increase in rental
Disputes with regard to rental increases arise when the tenant perceives the rental increases to be unreasonable or in excess of the market value.
Thus, any commercial lease agreement should explicitly state that any changes to the amount of rent payable to the landlord should reflect the market value. This means that the tenant and landlord may use the services of independent valuers or a bidding process to determine the new rental amount.
Do note that this article only covers common commercial leasing disputes in Singapore, and many other issues may arise as a result of these disputes. Separately, you may also wish to refer to our other article to find more out about private leasing disputes in Singapore.
How to Resolve a Commercial Lease Dispute in Singapore
1. Directly discuss the issue with your tenant/landlord to reach a solution
If you have a dispute with your tenant/landlord, you should make best efforts to resolve the dispute by engaging in an open and frank discussion with them. At the same time, you should retain copies of any relevant correspondence or documentation which may serve as evidence.
However, should the dispute remain unresolved or either party is disinterested in pursuing discussion, you may wish to either seek mediation or file a claim at the courts.
2. Seek mediation
You have the option of pursuing mediation at the Singapore Mediation Centre under the Small Case Commercial Mediation Scheme, which provides the first 2 hours of mediation free of charge.
Mediation is useful as a neutral third-party, known as the mediator, will be appointed to facilitate negotiations between the tenant and landlord to resolve the issue amicably.
However, mediation may be unlikely to succeed should either party be uncooperative or even disagree to participate in mediation. In such a case, parties may wish to consider filing a claim at the courts.
3. File a claim at the courts
Commercial lease disputes cannot be heard in the Small Claims Tribunals, even if the claim amount is relatively low.
Instead, claims for commercial lease disputes need to be filed in the Magistrate’s Court for claims of less than $60,000 and in the District Court for claims above $60,000 but up to $250,000.
Hiring a Lawyer to Help Resolve Your Commercial Lease Dispute
Whilst it is not legally necessary to engage a lawyer in order to resolve a commercial lease dispute in Singapore, certain kinds of intractable disputes will be very difficult to resolve without the credible threat of legal action that engaging a lawyer poses.
In addition, a lawyer can advise you on the merits of your claim and whether it is worth pursuing at all, and if so, how best to recover your claim. This can prove to be invaluable.
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