You will be able to read a diplomatic clause and work out when and at what cost you could end a lease early.
Ravi's employer had told him there was a chance he'd be moved to the regional office in Bangalore within the next two years. Nothing was decided. But when he read the tenancy agreement for the Clementi flat, he realised the question he needed answered was simple and expensive: if the transfer came through in month 14 of a 24-month lease, what would happen to the rest of the lease?
The answer depends almost entirely on one clause. Without it, leaving early can cost months of rent. With it, leaving early has a set procedure and a much smaller, known cost. This lesson shows you how to read it.
A diplomatic clause lets a tenant end a lease early in certain situations, usually tied to their job or immigration status. The usual triggers are being transferred or posted out of Singapore by an employer, or losing the right to stay and work in Singapore, for example if a work pass is cancelled or not renewed. Some clauses cover other situations, such as losing your job. Read the exact wording, because only the situations it names will count.
Despite the name, you don't need to be a diplomat. The clause is common in leases taken by people working in Singapore on passes, and it's worth asking for even if you're local and might be posted abroad.
A diplomatic clause rarely lets you leave at any time. It usually applies only after a minimum period of the lease has passed. Before that point, it can't be used, even if you're transferred. A common arrangement in a two-year lease is that the clause becomes usable only after the first year, with a further notice period on top. Your agreement sets its own terms, so read the figures in yours.
It also needs written notice to the landlord, for a stated period. And it often requires proof: a letter from your employer confirming the transfer, or documents showing your work pass has ended.
Put those together and you can work out the earliest date you could actually leave. Ravi's agreement, used as an example, said the clause could be exercised after the first 12 months, with two months' written notice and a letter from his employer. So the earliest he could give notice was the end of month 12, and the earliest he could move out was the end of month 14. If the transfer were announced in month 6, he'd still be committed until month 14.
When a landlord pays commission to an agent for a two-year lease, ending the lease early means the landlord paid for a tenancy that didn't last. Many diplomatic clauses deal with this by requiring the tenant to repay a share of the commission, usually in proportion to the unexpired part of the lease.
Here's how that worked for Ravi, with example figures. The landlord paid his agent one month's rent, S$4,200, for the 24-month lease. If Ravi left at the end of month 14, ten months of the lease would be unexpired. His share to repay would be S$4,200 times 10 divided by 24, which is S$1,750.
Check the exact formula in your agreement. Some use the unexpired months, some a fixed share, and some don't include this term at all.
If there's no diplomatic clause, a lease is a commitment for its full term. Leaving early is breaking the agreement, and the cost depends on what the agreement says and what the landlord decides to do.
At the least, you're likely to lose your deposit. The landlord may also claim the rent for the remaining term, or the rent lost until a new tenant is found, along with costs such as re-letting. For Ravi, with ten months left at S$4,200, the rent alone for the rest of the term would be S$42,000, against S$1,750 under the clause. A landlord may agree to settle for less, for instance if you find a replacement tenant, but that's up to the landlord.
So if there's any real chance you'll need to leave Singapore during a lease, the diplomatic clause is one of the most valuable lines in the agreement. If it's missing, ask for it before signing. If it's there, check that its triggers cover your actual situation.
Ravi set out the clause in four parts. When it could be used: after 12 months. What notice it needed: two months, in writing. What proof was required: a letter from his employer confirming the transfer. What it would cost: a pro rata share of the commission, S$1,750 if he left at month 14.
He also noticed that the clause covered a transfer by his employer but not losing his job, which on an Employment Pass would also end his pass. He decided to ask for non-renewal or cancellation of his work pass to be added as a trigger, as one of the changes you'll see him and Meera propose in lesson 7.4, Review a tenancy agreement with a checklist.
Your own agreement, or one you're about to sign, may have a clause like this or none at all. Read it with the same four parts in mind.
For one tenancy agreement, write down when the diplomatic clause can be used, the notice needed, the proof required and any commission repayment.
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