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Infamous and notorious commission payment upon TA renewal.

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x9200
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Infamous and notorious commission payment upon TA renewal.

Postby x9200 » Mon, 08 Jun 2015 8:03 am

Most of the tenants/LLs know this clause already smuggled in by many agents to TAs and obliging the parties to pay once again some commission on the next TA renewal.

Somebody I know agreed to have it, now it surfaced again and it made me thinking if such clause in TA is worth anything.

My biggest question mark is how the agent can legally enforce any payment if (s)he is not a part of the agreement. If I am a tenant of the said agreement I can enforced it if the LL fails to pay, but the agents? How? Any real life evidence of such clauses successfully enforced?

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Re: Infamous and notorious commission payment upon TA renewal.

Postby Wd40 » Mon, 08 Jun 2015 8:44 am

In my experience, agents kind of make you sign a separate document that tells that you need to pay agent fee if you renew the lease.



In the past there used to be huge competition to get a unit to rent, so tenants would just sign this document, in the fear of losing the unit and also agents will tell you that it is very standard in Singapore so even if you look for another unit, you will have to sign it or lose that unit as well as time. This kind of forced the tenants to sign.



But now tables have turned and I think tenants have become smart enough and can straight away refuse to sign and also alter some of the unfair TA clauses.



In my personal experience, last year I had sign that document, but this year I knew the demand supply situation and told the landlord/agent that I wont pay it and then they worked it out among themselves and waived it off also reduced my rent by $50 :D

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Re: Infamous and notorious commission payment upon TA renewal.

Postby JR8 » Mon, 08 Jun 2015 10:48 am

Once again this has some cross-over into UK law. But without a national landlords, or indeed tenants association, I can't imagine the necessary test-case being brought to bring it into SGn law, at least not any time soon. The 'cross-over' comes simply from consideration of the various principles involved.

For a start, the agent was paid to find you a property for a fixed period of time, fine, that why you hired them. But if you choose to stay, and both LL and tenant are happy that the rent stays the same, what additional work is the agent they doing that justifies payment?

The agent might argue that you should renegotiate revised rent, via him, and that you have to enter into a new new Tenancy Agreement. If you agree to that then I can see they probably have grounds to charge you a fee. Though you could argue it should be more of a one-off admin fee than an ongoing %age of rent. After all, the agent is not having to take you around various properties, checking yours credentials, negotiating the terms of the TA, and so on, it's simplicity itself for them.

Indeed you can stay beyond your existing tenancy whereupon it automatically morphs from a fixed term contract in a rolling one. If you pay rent monthly, the then 'Periodic Statutory Tenancy' follows the same terms as the original TA, except that it becomes a rolling monthly contract.

Naturally many agents do not like the idea of PSTs at all, since it denies them the easiest of money; i.e. charging ongoing fees to an established tenant. So you can be sure they won't tell you about how it works. And in the absence of the resources in para.1 above I reckon most tenants perhaps don't know that such a thing exists.

But I can assure you it does. Example. I had one tenant (UK) who rented a place from me via my lovely honest letting agent. After one year he wanted to renew and the agent charged him an admin fee. That also gave me a chance to review/negotiate the rent too, so fair enough. From that point they stopped charging me their 'finders fee' of say 10% of rent charged monthly. That tenancy continued. By about year 3 I'd realised that the tenant was a gem, rent always on time, no trouble at all just the usual typical kind of repair needed now and again. Anyway, long story short, after around 3 years he mentioned he might be leaving but wasn't sure. So we had to consider the duration of his future tenancy, to try and give him flexibility/options. That would have been when I first came across PSTs. And that's what we did, he stayed on his existing (year 3) Tenancy Agreement, and just rolled month-to-month for about a further 7 years! I don't think I reviewed the rent again after that, (though I could have within the PST). If each year rents went up say 5% then his unchanged rent year by year became an increasing reason to stay. Plus his ability to leave pretty much any time he wished also kept him there, he had flexibility he wouldn't get if he moved elsewhere and entered into a new TA.

Now I know what you're thinking, 'ah but that in the UK' :) But having a fixed-term TA roll into a PST can happen here just the same, and I've done it.

It was at the last place we rented here. It was on a 2 year contract. It was nearing the end of that term and we already knew that we were leaving in a few months time, but didn't have a date. We were lucky there as our agent was a relative, and the LL was a retired and most charming 'D-10 lady'. So everyone understood and accepted why we wanted to 'go Periodic'. Checking my records I see that in the event, we stayed in that property for 2Yrs2Mos before departing Singapore.That was under the original TA, a new one was not drawn up, as the PST forms automatically. It's possible that a 'For the sake of good order' memo was drawn up, just to lay-out what we were doing, but I don't specifically recall that.

--- Back home you don't pay Stamp Duty of TA's unless the annual rent is circa $10k/mo+. Here you have to pay it on much more mainstream lettings. When you start a TA here the SD is calculated and paid to IRAS. Quite how you pay SD on a PST when you don't know it's duration... hmmm, I don't know (or recall what we did).

-----
In your quoted case X9, the agent is probably going by the self-serving 'But this is just how it works here' approach. I mean what are they doing that merits payment? If rolled onto a PST they are doing precisely zero. Just because the TA says a tenant has to pay them commission forever doesn't make it legally enforcible.

It would be nice to see a tenant here roll onto a PST (that he's agreed directly with the LL), then to have the agent trying to nail the tenant for renewal fees. As I can't see the agent would have a case. Maybe one day it'll happen.

Some links to X-ref to [again, to consider the principles at play, rather than the specific statutes]:

From the main UK housing/homeless NGO:
http://england.shelter.org.uk/get_advic ... te_tenancy
'Renewing your private tenancy'.

And, although written in something of a youthful style, this might also be of interest:
http://www.propertyinvestmentproject.co ... newal-fee/
'This Is How I Helped My Friend Avoid Paying A Tenancy Renewal Fee'
'Do it or do not do it: You will regret both' - Kierkegaard

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Re: Infamous and notorious commission payment upon TA renewal.

Postby maneo » Mon, 08 Jun 2015 10:58 am

JR8 wrote:For a start, the agent was paid to find you a property for a fixed period of time, fine, that why you hired them. But if you choose to stay, and both LL and tenant are happy that the rent stays the same, what additional work is the agent they doing that justifies payment?

When there are issues during the tenancy responsible agents get things resolved.

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Re: Infamous and notorious commission payment upon TA renewal.

Postby x9200 » Mon, 08 Jun 2015 12:52 pm

Thank you for your responses. I think it is less related to what the agent actually does but indeed, if there is no agent's engagement of any sort it is hard to argue any de facto agreement was ever in place.

WD40 - I've seen such clauses also included in LOI but LOI is generally considered legally a memo so not enforcible neither. I've never seen it as a separated document (presumably agreement with the agent for finding/letting the property) .

My wife had such a clause long time ago in her company TA agreement. We waited for the agent to contact her for the renewal which supposed to be executed on writing request not later than 2 month before the expiration of the TA. The agent failed to contact her within that time and was politely explained that he failed. This was the end of the story and he did not even bring this subject up for discussion.

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Re: Infamous and notorious commission payment upon TA renewal.

Postby Sunny1123 » Thu, 11 Jun 2015 9:46 pm

I had that clause in my first TA. After I moved in, I always dealt with the landlord directly, and we had a fine working relationship.

Several months ahead of time, I suggested that we might negotiate a new TA directly, and the landlord agreed. Long after it was written, signed, and stamped, the original agent emailed asking if I was keen to renew. I thanked him and said I had already sorted my future housing needs. He didn't press for details, and I didn't hear from him again.

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Re: Infamous and notorious commission payment upon TA renewal.

Postby American » Sun, 12 Jul 2015 11:49 pm

This is useful info. I'm in the process of renewing. I've reviewed the TA and other documents signed with my agent and there is nothing written about an agency fee for renewal - lucky me. I think it's best to deal directly with the landlord's agent, and negotiate a new rent amount directly. I've heard of others that have renegotiated at a lower rate given the market; in fact the contract states that the renewal rent would be based on the prevailing market rates at the time. Will do research on market rates in my building/neighborhood with the hopes of bringing down the rent...

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Re: Infamous and notorious commission payment upon TA renewal.

Postby newbiebuyer » Mon, 04 Jan 2016 10:49 am

I have a similar but slightly different situation. I am going to rent a house. I don't have an agent representing me and I am dealing directly with the LL's agent. I am about the sign the TA which says that:
The tenant shall pay the agency renewal commission either
i) at the prevailing industrial rate plus GST; or
ii) S$________________________ plus GST at the prevailing rate for every one (1) year or less period of extension of lease. Total renewal commission payable S$ ____________________ inclusive of GST.


Right now, the agent is collecting the commission from LL because he is representing him. Is it normal to collect it from the tenant during renewal? I will later try to speak with LL and see if we can by pass the agent during renewal but I don't want to have the TA held against me at that point of time

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Re: Infamous and notorious commission payment upon TA renewal.

Postby Sunny1123 » Mon, 04 Jan 2016 11:10 am

newbiebuyer wrote:Is it normal to collect it from the tenant during renewal?

Yes, it is normal.

newbiebuyer wrote:I will later try to speak with LL and see if we can by pass the agent during renewal but I don't want to have the TA held against me at that point of time

Why not insist on removing the clause before you sign to avoid any chance of that happening later? You can tell the agent that if you engage him/her for help with a renewal, then you will negotiate his/her fee at that time. In the current market, the agent and LL are probably not willing to lose a commission and tenant now over the issue.

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Re: Infamous and notorious commission payment upon TA renewal.

Postby x9200 » Mon, 04 Jan 2016 11:11 am

newbiebuyer wrote:I have a similar but slightly different situation. I am going to rent a house. I don't have an agent representing me and I am dealing directly with the LL's agent. I am about the sign the TA which says that:
The tenant shall pay the agency renewal commission either
i) at the prevailing industrial rate plus GST; or
ii) S$________________________ plus GST at the prevailing rate for every one (1) year or less period of extension of lease. Total renewal commission payable S$ ____________________ inclusive of GST.


Right now, the agent is collecting the commission from LL because he is representing him. Is it normal to collect it from the tenant during renewal? I will later try to speak with LL and see if we can by pass the agent during renewal but I don't want to have the TA held against me at that point of time

Nobody can force you to agree to pay any commission on the renewal and doing it, if you don't use any agent would be just absurd. I had an agent and did not agree to have such clause included. Agents may say, it's standard (meaning, everybody happily agrees to have it with no questions asked), but this is just a BS. You are free to agree or disagree for just about anything that goes to the agreement.

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Re: Infamous and notorious commission payment upon TA renewal.

Postby nakatago » Mon, 04 Jan 2016 11:26 am

x9200 wrote:Agents may say, it's standard (meaning, everybody happily agrees to have it with no questions asked)


Counter argument for "it's standard:" Slavery used to be standard as well.

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Re: Infamous and notorious commission payment upon TA renewal.

Postby newbiebuyer » Mon, 04 Jan 2016 12:17 pm

Thanks Sunny1123, x9200 for the quick response!!

x9200 wrote:I had an agent and did not agree to have such clause included.


I am trying to push back with the agent now. What's the ideal clause to have for renewal?

1. Is it just an option to renew without mentioning anything about agent commission?

OR

2. Is it an option to renew and mentioning agent commission (if any) to be paid by tenant without specifying the amount ?

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Re: Infamous and notorious commission payment upon TA renewal.

Postby Sunny1123 » Mon, 04 Jan 2016 12:33 pm

newbiebuyer wrote:I am trying to push back with the agent now. What's the ideal clause to have for renewal?

I think renewal options are pretty one-sided in practice, as the LL can just demand an above-market rate to get you out. Personally, I'd be fine including a clause about paying the agent a renewal commission on the condition that I (not the landlord) choose to engage the agent in the renewal process, but the ideal clause for you is whatever terms you're most comfortable with.

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Re: Infamous and notorious commission payment upon TA renewal.

Postby x9200 » Mon, 04 Jan 2016 1:04 pm

newbiebuyer wrote:Thanks Sunny1123, x9200 for the quick response!!

x9200 wrote:I had an agent and did not agree to have such clause included.


I am trying to push back with the agent now. What's the ideal clause to have for renewal?

1. Is it just an option to renew without mentioning anything about agent commission?

OR

2. Is it an option to renew and mentioning agent commission (if any) to be paid by tenant without specifying the amount ?


As mentioned earlier, it's whatever you want it to be. All depends on the parties. With my previous TA, the commission upon renewal was only to be paid by the LL and it had its justification because the LL lived overseas so he reckoned out some agent's help might be needed.
The current one, nothing is mentioned in the TA on the commission, but I know the LL has a separate agreement with his agent also paying him a fee that is not really linked to the rent.

The option to renew is a separate clause and doesn't need to be linked to any commission related clauses. Actually this option is also not needed at all and makes very limited sense to be included, especially for a residential lease.

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Re: Infamous and notorious commission payment upon TA renewal.

Postby JR8 » Mon, 04 Jan 2016 4:33 pm

The landlord's agent, demands the tenant also pays him commission. Absurd as X9 says. So if it came to a dispute, who would the agent represent, since both sides are paying him?

Do you have a contract, or letter of engagement, formally signing-up this agent to work for you? As a starting point; what are you supposed to be paying them for?
'Do it or do not do it: You will regret both' - Kierkegaard


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