11 Jan 2023
22 Jun 2022
Tenants and landlords often require much more than just a Tenancy Agreement to fully protect themselves during unexpected circumstances.
Find out below what documents you need and why you should have them in your arsenal.
When faced with termination events, a rent review, unpaid rent, the involvement of a guarantor, a landlord’s need to enter leased premises and the addition of tenants, landlords and tenants undoubtedly would wish to comprehensively protect their rights, interests and financial expectations.
Unfortunately, merely drafting up and entering into a Tenancy Agreement may be insufficient, given the myriad of potential unexpected circumstances that may arise. Check out DocPro’s template for a domestic Tenancy Agreement or a commercial Tenancy Agreement.
A landlord may require a tenant to have a guarantor before letting a property. In this case, a tenant’s guarantor may issue a Guarantee towards the landlord stipulating the guarantor’s obligations and undertakings.
The tenant’s guarantor, who is usually a parent, relative or employer of the tenant, gives a guarantee to the landlord for the tenant’s obligations stipulated in the Tenancy Agreement between the landlord and tenant. Contingent upon the details and scope of the Guarantee, if the tenant fails to perform or observe obligations in the tenancy agreement, the guarantor may be obliged to perform or satisfy the tenant’s obligations, commitments or undertakings on the tenant’s behalf. For instance, if provided in the Guarantee, should the tenant fail to make timely rental payments, the guarantor will be obliged to pay on the tenant’s behalf.
The Guarantee usually states the name of the guarantor and outlines the relationship between the tenant and guarantor. It usually commences when the tenancy begins, and expires along with the tenancy.
A landlord may find the use of a guarantor especially important when prospective tenants are students or young adults yet to have a stable income. Also, when both parties in the tenancy are companies, the landlord may require a natural person to act as a guarantor on behalf of the corporate tenant to ensure due performance of all obligations under the Tenancy Agreement. Consequently, using a Guarantee to clearly stipulate a guarantor’s obligations and undertakings is essential in protecting a landlord’s financial expectations.
Rental verification confirms that a tenant is, in fact, renting the premises as his or her primary residence. Landlords may often wish to have confirmation of a prospective tenant’s rental history and current rental situation and may use a rental verification procedure. In addition, a tenant may even use a rental verification form as proof of address for other applications.
A Rental Verification Form provides confirmation that a tenant is renting the premises for residential purposes. It aims to provide proof for the tenant to show that they are renting the property as their primary residence and can be a source of address proof.
The Form usually provides the tenant’s full name, the complete address of the rented premises and the start date of the tenancy. Also, the monthly rental fee and due date of the rent will often be outlined, as well as the names of all household occupants of the premises. The Form should be signed by both the landlord and tenant.
The Form provides a landlord with a good overview of a prospective tenant’s rental history and present rental situation. This can act as additional credential for the tenant’s application and enhance the authenticity of a rental application.
The amount of rent payable may fluctuate in line with economic upturns and downturns. Landlords and tenants may conduct a rent review. This means that both parties may evaluate the present Tenancy Agreement and agree on a new rent, which is often based on the current market rent and the current value of the property.
After the rent review has been conducted, the tenant and landlord may place the details of their new agreement into writing, in the form of a Rent Review Memorandum.
A Rent Review Memorandum will record the new rent that has been agreed upon by both parties. It contains important details such as the date on which the rent review was requested and the date on which the new rent will be effective. The Memorandum will also stipulate that the rent review procedure was conducted in accordance with the terms and conditions of the Tenancy Agreement, and that the new rent may also be subject to future review.
In a constantly fluctuating economic environment, having a written acknowledgment of the new rent ensures that there are no misunderstandings and protects the financial expectations of both parties, especially if they have entered into a complex negotiation process before the agreement.
A signed Tenancy Agreement between a tenant and landlord will stipulate the permitted tenants within the leased premises. Circumstances change all the time. If there is an addition to the number of tenants, an amendment to the Tenancy Agreement may be required to reflect this change.
The landlord, current tenant and additional tenant may be required to execute an Amendment to Tenancy Agreement. This Amendment clearly confirms the alteration of the Tenancy Agreement according to the terms and conditions in the Amendment. It also stipulates the obligations of the additional tenant under the Tenancy Agreement. A witness may be required during the amendment process to validate the agreement.
Additional tenants are expected to be jointly and severally responsible and liable for all obligations under the Tenancy Agreement. For instance, an additional tenant is liable for the timely payment of his or her proportion of the rental payment. Executing an Amendment provides legal certainty that the additional tenant will be subject to the same terms and conditions as the current tenant.
In fulfilling his or her obligations contained in the Tenancy Agreement, a landlord may require access to the leased premises during the tenancy period. For instance, a landlord may require access to carry out essential repairs on the property from time to time.
Before attempting to access the premises, the landlord should give advance notice to the tenant and may issue a Notice to Enter Premises.
A landlord should provide advance notice and specify the exact date and time that he or she intends on accessing the leased premise, as well as the reason for doing so.
Landlords are often required to give reasonable advance notice to a tenant before accessing rental property for any purpose. This is often provided for in local legislation. For example, in Hong Kong, according to section 24 of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7), if a landlord wishes to enter the rented property to effect necessary repairs, he or she must deliver to the tenant 14 days’ notice in writing of an intention to do so. Hence, in such circumstances, it is imperative that a landlord abides by the law and serves a proper and adequate Notice to Enter Premises to the tenant.
Many tenants are facing difficulties in meeting their due dates for rental payments because of challenges related to the COVID-19 pandemic. For example, various small and mid-sized enterprises in Hong Kong faced financial obstacles amidst tough social-distancing measures during the city’s fifth wave and struggled to meet their rental due dates.
When the due date of the tenant’s rental payment as stipulated in the Tenancy Agreement has passed, and the landlord has not yet received the tenant’s rental payment, the landlord may serve a Notice for Unpaid Rent to the tenant. DocPro offers versions of the Notice as an initial reminder and a second reminder to the tenant.
A landlord’s Notice for Unpaid Rent to a tenant serves as a reminder regarding the overdue rental payment. The notice may contain warnings to terminate the Tenancy Agreement if rental payments are not received by a stipulated date.
A failure to pay rent may constitute a material breach of a Tenancy Agreement. A Notice for Unpaid Rent may remind tenants of their rental obligations and provide them with an opportunity to comply with the Tenancy Agreement, while simultaneously protecting the interests of landlords with regards to their income stream and financial expectations.
There are three broad scenarios whereby a Tenancy Agreement may be terminated:
A termination clause allows the tenant and landlord to terminate the tenancy before the expiration date of the tenancy. It usually stipulates that a tenant must provide advance notice to the landlord in order to terminate the Tenancy Agreement early, and outlines the form of such notice. Before landlords and tenants enter into a Tenancy Agreement, they should make sure they properly understand the essential clauses of a residential Tenancy Agreement.r
A breach of the Tenancy Agreement by the landlord or tenant allows the other to terminate the Agreement. For instance, a landlord not compliant with his or her obligations to undertake a major or essential repair as stipulated in the Tenancy Agreement; or a tenant subletting, conducting illegal activities within the leased premises or failing to pay rent would also breach the Agreement.
A landlord and tenant may mutually agree to terminate the Tenancy Agreement on conditions different from the ones contained in the termination clause. A tenant’s employment relocation to a different jurisdiction or loss of employment are commonly cited reasons for a mutual agreement of termination.
The situations warranting early termination are wide and varying. Tenants and landlords should ensure that they are well-equipped to follow the proper procedures of early termination with the correct documents which include:
1. Notice of Termination / Notice of Early Termination
2. Deed of Surrender
3. Notice to Quit
Landlords and tenants may use a Notice of Termination or Notice of Early Termination when seeking to notify the other of the intention to early terminate their Tenancy Agreement in the aforementioned scenarios.
In the Notice, the tenant or landlord should specify the reason for early termination. If the tenant or landlord wishes to early terminate based on a breach of a specific clause in the Tenancy Agreement, this should also be clearly referred to in the Notice. The Notice usually provides that the tenant will vacate the leased premises and return his or her keys to the landlord on the date of termination, and will request the tenant to pay outstanding rent, as well as payments for water, electricity and utilities until the date of termination, with outstanding amounts deducted from the tenant’s security deposit. It will also provide that after the date of termination, the landlord and tenant shall no longer have any outstanding claims against one another.
Serving proper and adequate notice with a Notice of Termination or Notice of Early Termination is crucial. Tenants and landlords are not permitted to unilaterally terminate the Tenancy Agreement if there is a termination clause, in order to protect legal certainty and both parties’ expectations. In fact, wrongful termination of a Tenancy Agreement may render the tenant or landlord liable for damages.
It is also important for tenants and landlords to ensure that any notice for early termination served is compliant with the conditions of the termination clause in the tenancy agreement, otherwise, a notice of early termination may be deemed invalid.
If a Tenancy Agreement does not contain a termination clause, or if a landlord and tenant mutually agree to terminate the Tenancy Agreement on conditions different from the termination clause, a landlord and tenant may execute a Deed of Surrender. With a Deed of Surrender, a tenant and landlord voluntarily consent to terminate a tenancy before the expiration date of the tenancy.
A Deed of Surrender is a formal document providing confirmation of the termination of the Tenancy Agreement. It reverts the right of occupancy of the leased premises back to the landlord and is an early surrender of the premises. The Deed of Surrender must be agreed by both the tenant and landlord.
A Deed of Surrender is especially important when there is no existing termination clause in the tenancy agreement. It can provide legal certainty as to the rights and obligations of the tenant and landlord after the termination of the Tenancy Agreement, record other arrangements that the landlord and tenant may have entered into, and confirm the formal release of both from future claims against each other in relation to their obligations in the tenancy agreement.
In various jurisdictions such as the United Kingdom, Tenancy Agreements often operate on a rolling basis. These tenancies are also known as periodic tenancies. This means the tenancy does not have a fixed term and is renewed periodically and indefinitely. A periodic tenancy may be terminated by a Notice to Quit served by either the tenant or landlord.
The Notice to Quit is often served in advance. Notice must usually be equal to the length of the period of the tenancy itself, meaning a tenant or landlord who is part of a monthly Tenancy Agreement, for example, should provide the notice to quit one month in advance.
The Notice to Quit mainly focuses on bringing the automatic periodic renewal of the tenancy to an end. It is important for both landlords and tenants to take note of the agreed stipulated period of notice in the Tenancy Agreement, usually appearing in the termination clause or as a notice clause. The agreed upon period of notice for serving a Notice to Quit, which is a type of termination, could differ from the usual practice.
While a Tenancy Agreement is undoubtedly the backbone of any rental relationship between a landlord and a tenant, many additional documents may be executed over the lifetime of the relationship to ensure holistic legal protection of the interests of both parties. It is crucial that parties know what these documents are and how to use them to their advantage.
Please note that this is a general summary of the position under common law and does not constitute legal advice. As the laws of each jurisdiction may be different, you may wish to consult your lawyer.
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