Leases Getting Shorter As Rentals Go Up

Source: The Straits Times, 12 June 2007

When technician Paul Tan wanted to renew the lease for his three-room flat in Tampines, not only did his landlord increase his monthly rental by $100, he also shortened his contract to a one-year term.

The usual three-year option, which tenants used to get, is a thing of the past, the 50-year-old was told. ‘Of course I was disappointed. It’s such a huge hassle to relocate,’ Mr Tan said.

But many whose leases are coming up for renewal are, like Mr Tan, finding out that a one-year lease is becoming the norm in this hot rental property market. This is especially so in the residential market, said Mr Gringo Low, a senior realty adviser at Knight Frank Property Network.

‘Property prices are continually rising and landlords want to ink the best deals. Short-term leases are the way to go for landlords to stay competitive and to constantly update rents.’

Mrs J. Lee is one such landlord. The 56-year-old housewife has decided to shorten the lease period for her 1,000 sq ft two-bedroom apartment in River Valley Road. She used to offer a four-year lease but is currently looking for someone who will accept a one-year deal for $2,000 more a month, after she furnished the apartment.

She said: ‘The rental market is moving forward and I want to make the most out of it.’

Expatriate Guru Vishwanath, who has been renting an apartment at Braddell View for the past four years, is unhappy about the trend.

The 37-year-old programme manager said: ‘There is no logic behind this. It’s unfair of landlords to increase rental rates and shorten leases even if the property market is booming. Each day, I am plagued by worry that my landlord will shorten my lease when it ends in December.’

Retail outlets are also not spared.

Capitol Optical had its lease for all 20 stores in malls like Plaza Singapura, Rivervale Mall and Hougang Mall cut to three years, from the usual 3+3 deal (three years plus the option of renewing for another three).

Mr Steven Goh, from the secretariat of the Association of Shopping Centres (Singapore), said: ‘Demand is high for retail space at good shopping centres. Landlords would rather have options open and not tie themselves down with long leases.’

A spokesman for CapitaLand Retail, which owns and manages 15 shopping malls, said it has tenants on both lease structures (three years and 3+3) to ensure vibrancy in the malls.

Ms Stephanie Ho, general manager of Asia Malls, which manages shopping centres such as Century Square, Liang Court and Hougang Mall said the terms of lease offered to each tenant depend on the type of terms and the type of trade.

Office space, though, is not affected. Major developers in the Central Business District are not following this trend and are staying with standard lease terms of about two to three years.

Property agents expect this trend to last until the integrated resorts open, starting 2009.

As for Mr Tan, he has decided not to renew his lease. ‘The lease is too short for me and I have to worry constantly about not having a roof over my head 12 months later,’ he said with a sigh.