Legal Updates

A question that tenants may have is whether they can unilaterally terminate their lease if the landlord has breached the tenancy agreement. A recent High Court decision[1] has shown that one cannot “right a wrong with another wrong”.

The tenants had leased a 3-storey shophouse in the Little India area from the landlord to operate a restaurant on the first level and to house their staff on the second and third levels. Parties entered into 2 separate tenancy agreements, one for the restaurant on the ground floor and another for the staff quarters on floors two and three.

(Source: AI generated pic via https://designer.microsoft.com/)

In early 2019, the tenants, in preparation for alteration works on the first level of the shophouse, wrote to the Urban Redevelopment Authority (URA) to enquire about the shophouse’s approved use and found out that there was no mention of the third level in URA’s reply. Neither was the second level approved for residential use. Additionally, the first level was approved for use only as a shop. The most critical among these issues was that the third level was found to have been illegally constructed.

The tenants unilaterally ceased rent payment for both tenancy agreements in September and December 2019 respectively as parties were unable to work out the above-mentioned issues after corresponding with the landlord and the authorities, and they returned the keys to the shophouse in January 2020.

The dispute was brought to Court with parties accusing each other of breach of their tenancy agreements.

The Judge held that, among others:

• There was an implied term in the tenancy agreement governing the second and third levels that both were lawfully constructed, and the landlord had breached the implied term.
• However, the tenants had affirmed the second tenancy agreement by continuing to pay rent for 7 months after discovery of the illegal construction. Hence, the tenants’ failure to pay rent after September 2019 constituted a breach of contract on their part.
• The tenants were also liable to pay reinstatement costs, again provided for by both tenancy agreements, as they did not reinstate the premises when they yielded the property.

This case stands to demonstrate that tenants cannot unilaterally and prematurely terminate their tenancy agreement by reason of the landlord’s alleged breach.

Relatedly, it is useful to note that the Singapore Parliament in February 2024 passed a bill to mandate compliance with the Code of Conduct for Leasing of Retail Premises in Singapore[2] to facilitate lease negotiations and dispute resolution between tenants and landlords. With a focus on retail premises, the Code of Conduct does not include residential, office and industrial premises.

Contractual and negotiation issues pertaining to tenancy agreements are not always easy; what is instinctive may not be legal. At Ascentsia Law Corporation, we provide legal advice for claims arising from breach of commercial tenancy agreements, among others. Do feel free to drop us a call whenever in doubt.

Contacts

Kenny Khoo, Director

Yip Shee Yin, Director

Eugene P’ng, Associate

N.B. For presentation purposes, we have simplified and highlighted certain legal issues which are relevant to our subject matter. Please refer to the full grounds of decision for a more comprehensive coverage.

[1] https://www.singaporelawwatch.sg/Portals/0/Docs/Judgments/2024/[2024]%20SGHC%209.pdf

[2] https://www.businesstimes.com.sg/singapore/economy-policy/parliament-passes-bill-mandates-compliance-code-conduct-retail-leases