Basic Leasing Terminology Guide
Sometimes leasing terms and jargons can seem like a foreign language to us. To avoid confusion, we’ve compiled standard leasing terms that you might come across whenever you’re renewing your lease or starting a new one after relocating.
- Base Rent
A term refers to the minimum rent due under the terms of a lease. The lease might or might not require the tenant to pay additional rent based on a percentage or participation requirement. In most cases, the base rent is only monthly rent charge.
- Build-out/Leasehold Improvements/Tenant Improvements
The renovation to the office or building to make it usable for the tenant.
- Common Area Maintenance (CAM)/ Management Fee
This is the costs for areas in a building which are not directly leased but for common responsibility, such as hallways, restrooms, stairways, and walkways.
- Fully Serviced Lease
A lease in which the rental payment comprises other services, such as utilities or maintenance. The landlord pays these fees and passes them on to the tenants in the lease.
- Gross Rent
The gross rent includes base rent and service charges. Both are calculated as: $ x per sqft/month.
The amount of money tenant has to pay for the landlord for certain services on top of a rent for the actual space leased in fully serviced leases.
- Gross Square Foot
The total square footage of the building or office being leased. This number normally includes common space.
Heating, Ventilation and Air Conditioning.
- Lease Period/ Lease Term
Usually 2 to 3 years. Any lease longer than 7 years has to be registered with Singapore Land Authority.
- Letter of Intent (LOI)
A non-legally binding document which describes the main terms and conditions to be agreed on by both the tenant and Landlord.
- Letter of Offer (LOO)
After the LOI is agreed upon by both parties, the Landlord will issue the Letter of Offer (LOO) and a copy of Tenancy Agreement, which specifies all terms and conditions. Both documents are legally binding upon acceptance. Once the details are agreed between both parties, Tenant will sign the LOO and pay a booking fee equivalent to one month rental (subjected to prevailing GST).
- Lease Agreement/ Tenancy Agreement
After the LOO is signed, the landlord’s legal counsel will present the tenant with the Tenancy Agreement outlining the Terms and Conditions applicable to both parties (as stated in the LOO).
- Load Factor
The addition of a percent of the common area expenses to monthly rent is known as the “load factor.”
- Net Lease
A lease which includes the square footage costs, CAM costs, and other ownership expenses, including utilities, repairs, insurance, and property taxes.
- Double Net Lease
A lease in which taxes and insurance expenses are comprised in the lease payment. Landlord pay maintenance costs.
- Triple Net Lease
A lease which includes all taxes, insurance, and maintenance costs in the monthly payment.
- Option To Renew
An option for tenants to lease the unit for a longer time at a rent to be reviewed according to that point of time’s market rent.
When tenants leave their current office space, they are required to restore the office premises back into the original state at their own costs.
- Renovation Deposit
Tenant has to place a renovation deposit with the Landlord to cover
any damages created by the renovation. The deposit will be refunded upon clearing the inspection of renovation works by the Landlord.
- Rent- free Fitting-out Period
This is the period whereby tenant usually don’t need to pay for the rental fee to renovate their new premises. In most cases, this period will last between one to three months.
- Rent Review Clause
Usually for lease periods of 4 years or longer. The tenancy agreement will contain a provision for a rent review in which the revised rent will be the current market rental rate.
- Rentable Square Feet
Rentable square feet is typically calculated by adding the Usable Square Feet and some percentage of the common area within the building.
For example, if a building has two tenants with Tenant A occupying 200 sqft and Tenant B occupying 800 sqft then Tenant A may be accountable for 20% of the charges for the common area.
- Rental Cap
The maximum amount by which your rent can increase when you renew your lease. It isn’t always possible to negotiate caps into lease agreements, but good brokers will try to have them included in order to make more certain your maximum rental liability for more than just the initial term.
- Security Deposit
A deposit of 1 to 6 months of rental that is paid upon signing the Letter of offer. It is refundable (without interest) at the end of the lease.
- Service Charge
The payment of management services provided by the landlord in the common area such as air-conditioning expenses, maintenance and security during the work hours.
- Stamp Duty
The tenant is responsible for the cost of the stamp duty fees payable on the lease documentation. As an estimated guide, the amount payable on a standard 3 year lease would be approximately 10% of the monthly rental.
A lease agreement between a tenant (sublessor) who already holds a lease to a property and another party (sublessee) who wants to use part or all of the tenant’s space. In a sublease, the tenant assigns certain rights that they already hold, to the sublessee.
Under a sublease, the sublessor reserves the rights and liabilities of the original lease and continues to pay rent to the landlord as before; while the sublessees pay rent directly to the sublessor.
A sublessor cannot legally assign rights to a sublessee if the sublessor’s lease agreement terms do not allow for subleasing.
An office or building that is ready to occupy. In most circumstances, this is a commitment by the landlord to bear the cost of any build-out.
- Usable Square Feet/ Net Square Feet
The square footage that is rented to be used exclusively by the tenant including private (tenant-only) restrooms, closets, storage, and any other areas used only by the tenant.