Sarah, in the healthcare business has offered to rent a commercial unit at below market rental rate for a tenancy of 3+3 years with a 3 months rental free period.
Initially, the Landlord, Mohammad was reluctant to accept the offer due to the low rental but at the same time, he would like to rent out his unit as soon as possible due to market condition. It is a four-storey commercial unit.
Mohammad then proceeded to accept the letter of offer as Sarah has given the booking cheque.
When the terms of the tenancy were being finalised, some terms were not agreed by the parties and there were delays on Sarah’s side which delayed the signing of the tenancy agreement. At the same time Mohammad has obtained another offer from another tenant, Bernard with a higher rental rate.
After the delay of signing of tenancy agreement, Mohammad decided not to proceed with the first offer from Sarah. Sarah is aggrieved as the booking fee is forfeited and she is unable to rent the unit.
Solution
In this scenario, a tenancy agreement is not in place yet. This situation will be dependent on the booking form/letter of offer which differs from agency to agency.
As booking forms differ from each agency, generally speaking, the procedure is as follows.
- A prospective tenant (after viewing the property) would offer to the landlord to rent the property with details of the tenancy; i.e. rent, tenure, advance rental, security deposit, utility deposit, stamp duty etc.
- The landlord would have to accept the offer within a certain number of days. This is dependent on the agency’s booking form/letter of offer.
- Upon accepting the offer, both parties shall execute the tenancy agreement within a certain number of days or before a certain date. Again, this is dependent on the agency’s booking form/letter of offer.
- As time is of the essence in this type of transaction, failure to execute the tenancy agreement on the part of the tenant within the stipulated time period would result in the deposit paid being forfeited whereas failure to execute the tenancy agreement on the part of the landlord would result in the deposit being refunded to the tenant. The deal would be called off.
It is incumbent upon Sarah to keep track on the time provided for the execution of the tenancy agreement. Therefore, in the event that Sarah is unable to execute the tenancy agreement in time (due to her own fault), her deposit will be forfeited unless she can show that the landlord wilfully delayed and she was in a position of willing, ready and able to execute the tenancy agreement.
This article was contributed by Alvin Teo (Advocate & Solicitor- Messrs Mak, Ng, Shao & Kee) and Nicole Ng (Advocate & Solicitor- Messrs Elizabeth Siew & Co). For more information or legal assistance, contact or email them at 07-3341922 (alvinteo@mnsklaw.com) or 03-8075 0901 (nicole.ng@esc.legal).
