'Diplomatic Clause' (interpretation?)

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JR8
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Post by JR8 » Sat, 31 May 2014 4:02 pm

As a tenant here if I had a choice of a 2 year lease with no break clause, or a 1 year lease with an option to extend for a further year (or years), I’d go for the latter. But that’s primarily as it’s my personal money on the line, and my future location is rather unpredictable. I accept that is less a consideration for those on company-lets, where such people might consider it ‘not my problem’.

Same reason as back home the standard TA is 12 months with a 6 month break clause. It’s a bit of a bugger, and fortunately a rare event, to have a tenant quit at six months. What with the move-in/out wear and tear (which can be the same whether after 6 months or 5 years), tenant referencing and admin (£), voids, and so on, at the bottom line a tenant quitting in under 12 months might wipe out a years potential net profit. It's added stress too, and IME something to be avoided at all costs.

I’ve tried letting on fixed 12Mo/TAs, i.e. without a break, but in a highly liquid market, you make the offering relatively less attractive.

I’ve also had tenants (in fact most) take a 12Mo TA, w/6Mo break, stay a year, and then subsequently ‘go Periodic’ [PST]. That is a tenure where they remain in situ with no new agreement, no additional paperwork required, the terms of the original TA automatically carry-over, and they and the landlord are simply subject to the original Notice periods (usually, the tenant must give 1 months, or, the landlord must give 2)*. If an agent wades in a that point they will likely want to issue some form of unnecessary Notice describing the matter, and stick you with a bill of perhaps a weeks rent.

It is interesting the number of tenants who in such circumstances stay and hence invisibly roll-over onto a PST, which gives them almost complete and perhaps enviable flexibility: And yet who don’t use it, and in fact rather paradoxically then stay for sometimes years. Go easy and modest on any annual rent increments, and year on year the tenants position gets harder for them to walk away from. It’s almost like now they’ve earned a right to a good thing, and ultimate flexibility, a rent simply adjusted annually with RPI inflation (which further depersonalises the matter, as it’s objective and stated at the outset) rather than adjusted to the current market conditions, they’re really reluctant to give it up, unless they have to. My loss (Opportunity Cost) in not raising rent to market for maybe three additional years is peanuts in comparison to a tenant quitting in the autumn and my subsequently getting a 6 month void until the market perks up again in the spring. I hope that doesn’t sound cynical, as it’s not intended to be. One key thing I've learned it that seeking a long-term mutually equitable, and beneficial, balance of interests beats planning on short term gain every single time. Perhaps you need to directly witness the tortoise beating the hare a few times, to really believe it (I did) :)

p.s. Tenants are often oblivious to a landlords frictional costs (‘oh is my quitting in October not good for you?’ lol). I don't blame them, if they've not been a landlord and through a few cycles, one can't expect them to understand anything of the landlord >< tenant financial dynamic.

* This applies in SG too, and indeed I have done it here. But agents might not be so happy (at all) with the arrangement, and perhaps even deny that it is possible, as they are not in line for fat renewal fees if you simply invisibly roll from a TA onto a PST.

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Post by Mi Amigo » Sat, 31 May 2014 5:51 pm

x9200 wrote:That's is not in line with a number of reports also from this board, how relatively easy is get a favorable ruling in SCT against the LLs while attempting* to recover money (i.e. from the deposits).
Or you mean specifically cases of the Dip. Clause where I would expect the LL is favored as this is (as mentioned by SMS) the spirit of this clause? This clause is a favor provided by the LL and favors are not to be abused.

*) recovering this money to the tenant's hands would be a different matter.
First of all, I don't see why anything in a legally binding agreement (in this case a TA) should be considered a 'favour' - either all parties agree to the conditions and sign, or they don't. Was I doing the landlord a 'favour' by paying my rent on time every month?

My comments were largely in relation to the Dip. Clause, although there are more general overtones that I'll touch on.

My experience in trying to enforce the Dip. Clause was disappointing. The background was that we had initially had a two-year TA; then we mutually agreed to extend (note emphasis) this TA for a further two years, by means of a simple one-page document which stated that all terms in the original TA (other than the end date) would remain unchanged.

At that time I had no inkling that we would need to leave before the additional two years were over, but as it turned out my employment was terminated less than a year after signing the extension to the TA. I then contacted the landlord's agent and advised them of my changed situation. I told them that unfortunately I needed to exercise the Dip. Clause in the TA, which stated that in these circumstances two month's notice could be given after 12 months from the start of the tenancy (again please note the emphasis). The landlord's agent rejected this and stated that the 12-month period for the Dip. Clause should start from the date of the TA extension. I disagreed and took advice from a reputed* firm of solicitors (not cheap, but I thought it would be worthwhile). To my surprise (and in contradiction with what was actually written in black and white in the documents), they gave the view, based apparently on customary practice in Singapore, that the extension to the TA would be viewed as a new tenancy in this respect.

So, faced with this situation, we met up with the agent and negotiated a compromise, whereby they would try to find an alternative tenant and, depending on how long this would take, we would forfeit either part or all of our deposit (two months rent in total). Given the legal opinion I had received earlier, this seemed reasonable to me and I asked the agent to keep us informed as to their progress in finding a new tenant.

Sadly the landlord (with or without the complicity of the agent) reneged on this agreement. Despite the agent telling me from time to time how difficult it was to find new tenants (apparently the landlord had stipulated no Indians or PRCs), we then found a letter from SP Services in the mailbox addressed to a an unknown person at our address. I called SP Services, who told me that this person was taking over the unit. When I confronted the agent they claimed to have no knowledge and later also told me that they had been stitched up by the landlord as regards commission. I found that hard to believe, but the key point for me was that in the end all our deposit ended up being lost.

So in the end, the landlord came out ahead. But what to do? The problem with rental deposits in Singapore is that landlords keep them and often seem to regard them as 'their' money, which you have to persuade them to return. If there were a deposit protection scheme in place (as the UK has), there would be a better chance of deposits being handled fairly IMO. But that would disadvantage the landlords, wouldn't it?

Apologies for the long post, but I thought it might help others in similar situations in the future.

*Couldn't resist using that word :twisted:
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Post by x9200 » Sat, 31 May 2014 10:15 pm

@Mi AMigo, one question, had the LL paid any commission for this contract extension?

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Post by taxico » Sat, 31 May 2014 10:50 pm

while i know most landlords in singapore have a bad habit of hanging onto the deposit, i will only go as far as to say there may be differing standards of cleanliness and what constitutes fair wear and tear.

okay, i also know of ex-tenants that have the ability to hide damage very well...

there is no recourse for the landlord once the deposit has been returned.
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Post by Mi Amigo » Tue, 03 Jun 2014 4:28 pm

x9200 wrote:@Mi AMigo, one question, had the LL paid any commission for this contract extension?
Not sure; the landlord's agent used to like telling us that they weren't making any money from our tenancy, but I reached the point where I didn't really believe much that they told me. Certainly under the deal we negotiated (which I mentioned above, and which I believe was subsequently reneged on), their commission for a new tenancy was to have have been compensated, at a rate depending on the timing and duration of a new tenancy.

As it turned out, I believe the landlord ended up with a new tenancy (presumably a two year one) quite quickly after we left, with part of our deposit effectively covering any agent's commission, plus an overlap period of a month or so, where they were effectively getting paid twice (rent from the new tenant plus the balance from our deposit). Getting at least half of our deposit back would have helped us with our moving costs, but having already spent a significant amount of money on the earlier legal advice I didn't have any confidence that I would ever see any of our deposit again.

As I previously mentioned, my conclusion from all this was that the system as it runs in real life favours landlords over tenants. I also decided that I would never again trust a landlord or agent in Singapore to keep their word and honour an agreement entered into in good faith, with the intention of ensuring the fairest outcome for all concerned.
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Post by Mi Amigo » Tue, 03 Jun 2014 4:56 pm

taxico wrote:while i know most landlords in singapore have a bad habit of hanging onto the deposit, i will only go as far as to say there may be differing standards of cleanliness and what constitutes fair wear and tear.

okay, i also know of ex-tenants that have the ability to hide damage very well...

there is no recourse for the landlord once the deposit has been returned.
Taxico, I agree 100% with your comments regarding cleanliness, wear and tear, and general behaviour of tenants. The deposit should not be returned until any damage, etc. that should reasonably be rectified by the tenant has been taken into account. But one of the problems in Singapore is the vague and arbitrary way that deposits are handled. We have always returned rented units to the landlords in as good, or better condition that when we took them on. By 'better' I don't mean we made 'improvements' (something that JR8 touched on some time ago), but simply returned the unit in higher level of cleanliness, with paintwork touched up / walls repainted, etc. Despite this, we have often had problems in getting the landlord to return the deposit in a timely manner. IMO the deposit protection scheme in the UK, coupled with independent check-in / check-out inspections by qualified inventory clerks, while perhaps not perfect is fairer and safer for all concerned.

We are also landlords and have experienced a 'bad tenant' who didn't pay rent for months and eventually had to be evicted, with us then having to spend a large amount of money putting the property back into a state where it could be re-let. In that situation, there was a process we had to go to in order to get hold of the deposit (from the deposit protection scheme) - and quite rightly so. It was not 'our' money by default. Sadly it only covered a fraction of our losses, but that's all part of the lottery of being a landlord I suppose.

IMO at the end of the day, 'reasonableness' and 'fairness' criteria should apply, but there doesn't seem to be much of that around these days in Singapore.
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Post by JR8 » Tue, 03 Jun 2014 5:26 pm

Question to lawyer:
‘The Diplomatic Clause in our tenancy agreement, to which ABC and I are joint signatories reads:
> 'Provided that the tenant has occupied the premises for a minimum period of Twelve (12) months, the tenant may exercise the diplomatic clause by giving the Landlord Two (2) calendar months notice in writing of the Tenant's intention to terminate the tenancy or Two (2) months rent in lieu of notice if the occupier of the premises and employee of the tenant shall be required by the Tenant to leave Singapore permanently on a job transfer or if the said occupier's employment with the said Tenant is terminated for any reason whatsoever. Provided always that the said written notice shall be accompanied by documentary evidence providing the event relied upon by the tenant in the said written notice.’

///>>> So, are we free to give two months notice after having been in occupation for 12 months (as applies), say if ABC quit, and we intended to leave? If not, what requirement are we not meeting?’

----------------------------------------------

SMS Opines:
‘The kicker is that you must have written confirmation that your wife has been transferred out of the country other documentary proof of same from the employer. So assuming your wife is the main tenant and the employer gives her said necessary documentation it shouldn't be a problem. Her termination wouldn't hold any water as she's local so she couldn't quit and exercise the option I wouldn't think, and as your are self employed, I don't think that will fly either.’
---
[and subsequently...]
---
‘You need to understand the spirit of the Dip Clause as it is enforced in Singapore. It matters naught whether the lease is held by the company or by the tenant, the tenant must produce documentary proof that the tenant/employee as been either transferred, or released from employment and is being sent home. As you are self employed here or not (not sure of your legal standing and I don't want to know) you cannot, of yourself, exercise the Dip Clause, therefore only your wife can and as she is a Singaporean, the only way that would be possible is if she has been transferred by her employer to another country and documentary proof of same would be required by the LL to effect the clause.

----------------------------------
FAQ says:
Q: What is a diplomatic clause?
A: diplomatic clause in a typical Tenancy Agreement will look like:

Notwithstanding anything herein contained, if at any time after the expiration of TWELVE (12) months from the date of the commencement of this tenancy, the immediate occupant of the said premises, YOUR NAME shall be transferred out of the Republic of Singapore permanently by his firm, ceased to be employed the company or if for any cause whatsoever he shall be ordered to leave the Republic of Singapore, then and in such a case, it shall be lawful for the Tenant to determine this tenancy by giving not less thanTWO ( 2 ) months' advance notice (this is in addition to the TWELVE (12) months aforesaid) in writing to the Landlord or by paying TWO ( 2 ) months' rent in lieu of such notice. Documentary evidence of such transfer, cessation or order shall be required and such notice shall be deemed to have commenced on such date as the Landlord shall have actually received such evidence.

This clause is to safe guard you if in the event you are no longer employed, you can terminate the lease after 12 months by giving 2 months notice. Thereafter, the security deposit will be refunded to you.

----------------------------------------
Lawyer opines:

‘Hi JR8... my lawyer friend says that the clause only applies if you are posted out of the country for work and can provide proof of the same.
----------------------------------------

That's a summary of my findings so far.

Though I still have some observations, based upon the above.
- If you're SGn, a Dip Clause cannot be exercised, unless the SGns employer, transfers the household outside of SG.
- If you're self-employed you can't exercise the Dip Clause. Full stop.
- When you rent a place for two years (and remain in that property or not), if you stay in SG you are on the hook for two years rent, whether you like the place and/or wish to move, or have moved.
- Cessation of employment and leaving the country look like it could be a Ground to terminate, but again, not if a tenant/joint tenant is SGn.

So to summarise further. If you rent a place for two years, and stay in SG for two years+, you're on the hook for 2 years rent. When people go and spend 10 minutes viewing an apartment that is probably something they should consider most carefully.

...

Meanwhile looks like I get to consider a couple more dive trips, over and above the 'last few pre-departure trips' I was already lining up ... but what to do? I can't sit around all day making ice cream :)

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Post by x9200 » Tue, 03 Jun 2014 8:35 pm

Mi Amigo wrote:
x9200 wrote:@Mi AMigo, one question, had the LL paid any commission for this contract extension?
Not sure; the landlord's agent used to like telling us that they weren't making any money from our tenancy, but I reached the point where I didn't really believe much that they told me. Certainly under the deal we negotiated (which I mentioned above, and which I believe was subsequently reneged on), their commission for a new tenancy was to have have been compensated, at a rate depending on the timing and duration of a new tenancy.
I believe this may be important as of whether the agreement should be considered as an extension or a new one. What matters is what it really is, not how it is called. If the LL paid (or supposed to pay) the commission with my admittedly amateur judgement it could look as a new contract - it implies some recovery time for the LL to absorb the commission from the rent.

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Post by sundaymorningstaple » Tue, 03 Jun 2014 8:51 pm

Different language, but final interpretation is what I said, for all intents and purposes. :-|
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Post by Mi Amigo » Tue, 03 Jun 2014 9:30 pm

x9200 wrote:I believe this may be important as of whether the agreement should be considered as an extension or a new one. What matters is what it really is, not how it is called. If the LL paid (or supposed to pay) the commission with my admittedly amateur judgement it could look as a new contract - it implies some recovery time for the LL to absorb the commission from the rent.
I take your point (and as I say, I don't know whether or not the agent received any commission at the time of the extension), but all I would say is that the black and white wording of the original TA and extension clearly states that what we had in place was an extension of an existing TA, with all other terms unchanged. However, pressing that point from a legal standpoint would have cost me a fortune, with no certainty as to the outcome.

It's all academic as I got royally screwed by the landlord and/or his agent in the end anyway. If I'd been unscrupulous I could have not paid my last month's rent and then just buggered off (thus effectively getting back half of my deposit). But I was trying to do the decent thing, as I always do. As my father-in-law used to say when someone owed him money but never paid up, "Perhaps he'll end up having to spend it on medical bills one day." Karma works that way sometimes.
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