PropNex Picks

November 23, 2022

Landlord Sued Tenant for Outstanding Rent and Lost. What Gives?

By Lee Heng Eam


Before you read further, the Court’s recent decision in Leow Ban Hong v Eng Wei Guang, Brendon Joshua1 (the “Case”) is specific to the facts AND NOT: (1) a licence for tenants to default on rental payments; and (2) a message to landlords to forget about claiming for rental and other remedies. Read further to understand the forces at play and the Dos and Don’ts when faced with non-payment of rent.

Brief facts
The landlord (LL) and the tenant (TT) in the Case entered into a tenancy agreement (TA) dated 4 January 2022 with a monthly rental of $3,000 to be paid on the 4th of every month.

The TT failed to pay the rent for 4 April 2022 to 3 May 2022 on 4 April 2022, and the LL’s lawyer issued a notice dated 13 April 2022 to exercise the LL’s right to terminate the TA which also demanded the TT to move out by 28 April 2022 (the “1st Notice”).

On 25 April 2022, the TT’s cousin proposed to the LL’s salesperson for a sum of $6,300 to be paid to the LL to account for the rental from 4 April 2022 to 3 June 2022 and the LL’s legal fee of $300, in exchange of the LL’s rescission of the 1st Notice.

The LL’s salesperson responded that she would talk to the LL and hopefully the LL accepts the proposal.

On 26 April 2022, the LL’s salesperson sent the LL’s bank account to the TT’s cousin. $3,300 was paid on 27 April 2022, and $3,000 was paid on 28 April 2022.

On 29 April 2022, the LL’s lawyer sent a letter to the TT (“2nd Notice”) stating that the LL “has not rescinded the termination of the Tenancy Agreement” but agreed to extend the move out date to 28 May 2022, with the option to extend to 28 June 2022 if another $3,000 was paid on or before 28 May 2022.

The parties continued to communicate thereafter but the TT failed to make any further payment.

The Legal Proceedings
The LL filed an Originating Application2  (“OA”) on 16 June 2022 and sought the following orders:
(a) an order for possession of the Premises;
(b) double rent of $6,000 per month from 2 June 2022 to the date vacant possession is delivered;
(c) contractual interest at 10% p.a. “on the rent unpaid”;
(d) costs; and
(e) an assessment of damages on the sums due from the Defendant to the Claimant.

The success or failure of the OA hinges on this question: did the LL validly exercised his rights to forfeit the tenancy.

The OA was heard on 9 September 2022, and the Court concluded that the LL failed to validly exercise his right to forfeit, when his lawyer failed to issue a “formal demand” for rental payment.

The mandatory requirement of “formal demand”
In order for there to be a valid forfeiture, a “formal demand” rental payment must be made, unless the requirement is dispensed with in the tenancy agreement by this phrase, “whether or not formal demand has been made” (the "Proviso"). If “formal demand” is required, it must also be made on the day the rent fell due, and no later.

The TA in the Case does not have the Proviso, and hence a formal demand for payment must be made. The 1st Notice terminated the lease and demanded for the TT to move out, but did not contain any demand for rental payment. As such, there was no “formal demand” and the LL therefore failed to validly exercise his right to forfeit the lease.

For completeness, even if the 1st Notice fulfilled the “formal demand” requirement, it was not sent on the exact day the rent fell due i.e. 4 April 2022 in this case.

Waiver of right to forfeit
Another question arising from the facts is whether the acceptance of the $6,300 by the LL amounted to a waiver of the LL’s right to forfeit under the tenancy agreement. The Court did not decide on this question, as it was unnecessary to do so because the right to forfeit was not validly exercised in the first place and hence could not be waived. However, it was opined that whether the acceptance of rental payment amounted to a waiver would depend on whether the payment was tendered and accepted as “rent”.

The Dos
The Case is a timely reminder for all to take action after having full knowledge of the law and legal requirements when faced with rental default issues. The failure to issue the “formal demand” caused the LL dearly (LL likely to have to pay costs to the TT, in addition to his lawyer’s fees).

So, always ensure that the Proviso (or words or phrases to that effect) is included in the tenancy agreement. This will do away the requirement for a “formal demand”, and remove one (crucial) step for landlords to take when faced with defaulting tenants.

If there is no Proviso, remember to (1) issue a “formal demand” which contains a demand for the outstanding rental payment and (2) to issue it on the date of default and not any later.

After the “formal demand” is made, re-entry can then be effected after the “grace period”3  through self-help or via the court through a writ of possession. Landlords can also file a claim in the Small Claims Tribunal which has the power to issue an order for vacant possession4.

Last but not lease, landlords should always ensure that they understand the tenancy agreements before signing, and that their real estate salesperson explained the same to them.

Conclusion
Needless to say, the Don’ts are the exact opposite of the Dos.

PropNex has explainer videos on transaction related documents such as the 8 Prescribed Estate Agency Forms, Offer to Purchase, Option to Purchase and also the Law Society of Singapore’s Conditions of Sale 2020. Videos on Letter of Intent and Tenancy Agreements are in the pipeline.

The videos are available to all, and consumers can watch at their convenience before signing any such documents.


1 [2022] SGDC 224
2 An Originating Application is a court process to determine disputes where the material facts are not in dispute.
3 Can be found at the rental default clause of a tenancy agreement, and it is normally 7 days after the rent becomes due and payable.
4 Further information can be found in this link: https://www.judiciary.gov.sg/civil/understand-outcomes-small-claim.

Sign up as PropNex Friends and stay updated with the latest property insights and industry trends.

More PropNex Picks

Upcoming Events


PWS Masterclass
VIEW EVENT DETAIL
Exit Strategy As A Key Consideration For Property Investors
VIEW EVENT DETAIL