Lease, please

Top questions to ask before leasing office space

So you’ve decided it’s time to move out of the home studio and after weeks of searching, have finally found the perfect space. Before you pull the trigger, make sure you’ve checked your contractual corners and have your company covered. These are the questions you should have answers to.

What are the upfront costs?

Even small businesses should work with commercial brokers because their professional expertise is more often valuable than not, especially as they understand the hidden costs involved. If you don’t have the money to afford a commercial broker, look for tenant representatives who are commissioned by property owners instead. Upfront costs can include:
• Attorney fees
• Stamp duties
• Security deposits
• Commercial liability insurance
• Tenant improvements
• Phone/Internet set-up
• Furniture and equipment
• Restoration costs of the space you’re moving from (if applicable)
• Moving fees

How is the floor space measured?

Rent is benchmarked by floor space, but not all landlords measure this the same way. The key questions to ask are how much usable space are you getting, and how much of the rent goes towards common areas such as bathrooms and mechanical areas? Public areas should take up no more than 30% of your rent.

What is included in my monthly rent?

Contracts here typically use the term ‘Gross Rent,’ which is paid monthly. Gross Rent includes a base rent calculated by floor area (in sq. ft.) and GST of 7% if the landlord is GST-registered. Also included in Gross rent is service charges, calculated again by floor area, which should include maintenance fees, management fees, security, and repair.

But who pays for what, when?

Make sure to clarify this from the get go with your broker and landlord. What sort of condition will you receive the space in and how much are you allowed to make it your own? In Singapore, most landlords only cover external renovation and maintenance costs, with tenants footing their internal renovation fees. Make sure to check with your landlord to ensure your fitting-out works are allowed, and in your interest, negotiate a rent-free period of 2-3 weeks (depending on renovation estimates) for the work.

Be warned that most landlords require tenants to reinstate the space to its original state at the end of a lease term, so factor those costs into your budgeting too. Make sure to also check with your landlord and broker on who pays for the repair and maintenance of items like air-con, plumbing, water utilities etc, as well as minor construction jobs such as adding a new electrical outlet.

How long is the lease for?

Most leases in Singapore run for 2-3 years, or 5-6 years. More importantly, make sure you have the exact dates on when your lease will begin and when it ends. Unless the space is already in move-in condition, situations such as an old tenant delaying moving out or delayed construction or renovation plans can happen, and your agreement should clearly state what happens if the space is not ready by the move-in date. Note: you want to look for rent adjustments and avoid any clause which stipulates the landlord can offer an alternative space if your office isn’t ready on time.

Am I able to sublease?

Most commercial offices in Singapore do not allow subleasing of any sort, but subleasing can significantly bring down your overheads. It never hurts to ask.

How much will the rent increase by?

Most commercial leases in Singapore have the option to renew a lease at a pre-agreed upon rate (dependent on market conditions) in the initial lease.

Do I need insurance?

The short answer is: yes. Tenants in Singapore are required to have a public liability insurance policy at all times, as well as insure furniture, fixtures, and fittings against risk and damage. Be sure to ask what type and amount of insurance coverage is required by your lease. This insurance will become a fixed expense and should be factored in your budget.

What happens if the landlord goes broke?

Make sure your lease contains a standard recognition or non-disturbance clause, which ensures you won’t be evicted or have your rent raised through the roof should anything happen to the landlord.

What happens if I need to move or break contract?
Take time to understand the extent of the liability if your business has to move or fold and have provisions in place for an early exit. Are you comfortable with the notice period? Penalty fees? Default provisions?