Singapore Commercial Lease Requirements: Understanding CoC

Drafting a commercial and retail Tenancy Agreement (TA) in Singapore has evolved from a straightforward common law negotiation into a heavily regulated statutory exercise for retail properties, especially following the commencement of the Lease Agreements for Retail Premises Act 2023 on 1 February 2024.

Non-Retail / Industrial Leases

Offices, warehouses, and industrial blocks do not fall under the strict Code of Conduct (CoC) of the Lease Agreements for Retail Premises Act 2023. These leases are crafted largely via free negotiation. Key elements typically include:

• Net vs. Gross Leases: While some are Triple Net (NNN) where tenants bear all taxes, insurance, and maintenance, standard Singapore office leases are often "Gross," with the landlord covering general building insurance and property tax while charging a monthly "Service Charge" to cover common area upkeep.
• Subletting / Assignment: In non-retail or industrial leases, these are typically restricted without landlord consent, which may be withheld based on the contract terms.

Qualifying Retail Premises (QRP) Leases Under CoC

For shopping centres, F&B outlets, and retail storefronts falling under the QRP classification (term over 1 year), the Code of Conduct (CoC) explicitly mandates what clauses must or must not be present in the lease.

1. Pre-termination by Tenant

Historically, commercial landlords refused to allow a tenant to break a lease early without forfeiting the entire security deposit and paying the remaining rent for the unexpired term. Under the CoC, a retail lease must contain a clause allowing the tenant to terminate the lease early under specific "Exceptional Circumstances." While the tenant is not liable for rent for the unexpired term, the landlord is entitled to recover unamortised fit-out incentives and agency commissions (CoC Part 4). These circumstances include:

• If the principal franchisee loses their master franchise right (not due to a breach by the tenant) and is forced to close.

• If the individual tenant passes away or suffers mental incapacity, or if the tenant company undergoes winding up.

The CoC provides a structured exit mechanism rather than leaving a retailer trapped under an escalating liability.

2. Standardisation of Legal Costs

Lease preparation costs for QRPs are regulated under CoC Section 11. If the landlord's standard CoC-compliant template is used, the landlord bears the preparation costs. However, if the tenant requests amendments to the template, the tenant bears the legal costs associated with those specific amendments.

3. Exclusivity Clauses

Exclusivity clauses (which restrict tenants from opening nearby or landlords from leasing to competitors) are prohibited by default under CoC Section 1. Landlords and tenants may only include such clauses if they file a joint declaration of deviation with the Fair Tenancy Industry Committee (FTIC) prior to signing.

4. Rent-Free Fitting Out Period

Retail units require substantial renovation. The CoC mandates that landlords provide a rent-free fitting-out period that is commensurate with the scope of the works (CoC Section 10). There is no specific day range mandated by law; the duration must be fair relative to the renovation complexity before the base rent commences.

5. Assignment and Subletting

For retail leases (QRP), landlords are legally prohibited from unreasonably withholding consent for the assignment or subletting of the premises (CoC Sections 13 & 14).

Navigating these mandatory CoC insertions requires modern commercial landlords to abandon legacy templates and adopt dynamic lease administration systems to guarantee ongoing compliance across massive mixed-use portfolios.

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