Agent fee for rental renewal – Is it compulsory to pay?
One of the most common questions for landlords when it comes to renting out their property in Singapore is – Is it a must to pay the agent fee for rental renewal? This is hardly surprising to hear as there have been many cases of complaints online from landlords about rental agents. The most common complaint being that immediately after the tenancy agreement (TA) is signed and commissions are paid, not a squeak is heard of from the agent for the entire length of the tenancy. However come renewal time, the agent suddenly pops back to demand for a commission for the extension of the lease.
Why do I have to pay for the agent fee for rental renewal?
First things first, the decision to pay for the agent fee for rental renewal will depend on the contract that was signed at the beginning. For most landlords, they will have used a TA that was provided by the agent and you can bet that the renewal clause would have been inserted in. Here is an example of the renewal clause in a TA:
the Landlord shall on the written request of the Tenant made not less than two (2) calendar months before the expiration of the tenancy hereby created and if there shall not at the time of such request be any existing breach or non-observance of any of the agreements and stipulations on the part of the Tenant grant to the Tenant a tenancy of the said premises for a further term of one (1) year from the expiration of the tenancy hereby created at the prevailing market rent and upon the same terms and conditions. In the event that the Landlord should grant the Tenant an extension of the said term herein then the Landlord and 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.
If you are an experienced landlord, most of them will have their own TA done up and they will have made sure that this clause is removed. Bear in mind if you do this, do not expect any further help from your agent once the lease is signed.
So why would anyone keep the renewal clause in the TA?
One reason many landlords have been up in arms about having to pay the agent fee for rental renewal is because most agents are hands off throughout the length of the lease. Truthfully, agents are not required to manage the rental for the landlords. Many agents see the management of rental properties as tedious work and not worth their time as they are not being paid for it. In fact, most property agencies will classify this as a paid service that commission will be payable for.
Source: Propnex
However with that being said, there are also many good agents out there that will continue to help with the liaising with the tenant and any sourcing or repair work that needs to be done. Especially if they know that there will be the chance for repeat business or multiple rental contracts through referrals. So they help to do these things as a value add to the service that they provide. In that case these hardworking agents should be rewarded and it is fair to pay them the commission for the renewal. If you have such an agent currently on hand, it is always worth trying to preserve that working relationship as managing multiple properties is not an easy job and having a responsible party to manage that for you to prevent additional headaches can be worth it.
In any case, when dealing with any rental situations in the future, always read the agency agreement thoroughly. Be very clear about the terms and payments before you sign anything, and set the expectations right with your agent from the beginning and you can look forward to a more fuss free rental!
If you are a landlord you can read more on our rental stamp duty guide.
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