It will be easier for you to rent a Johor factory rather than buying one as it will be easier to shift out when they need to. But when it comes to renting a Johor factory, one of the most important things is the tenancy agreement. You will need to understand the terms and conditions in it.
You may be overwhelmed and confused with the terms and conditions of the tenancy agreement. There may be questions in your mind. What do all the terms mean? Will any deals will be unfavorable to you? What should you do if you don’t understand?
We will discuss common terms and conditions mentioned in the tenancy agreement in this article, which will help you understand more about what you are signing.
What Is A Tenancy Agreement?
Before we start discussing the terms and conditions of the tenancy agreement, let’s understand more about the tenancy agreement. A tenancy agreement is signed by the landlord and tenant. It is a legally binding contract. The tenancy agreement will state the responsibilities of the landlord and the tenant regarding the rental of the property that will be rented.
Normally, the landlords will draft the tenancy agreement, but it is best to get a lawyer to draft it. If it is not drafted by a lawyer, at least get one to review the tenancy agreement. This is to ensure that the terms and conditions stated in the agreement are fair for both parties.
Before signing the agreement, you and the landlord must agree on the terms and conditions. You will be bound by the terms in the agreement after you have signed it. So you will want to ensure you understand all the terms and conditions stated in the agreement.
Tenancy Agreement Terms & Conditions #1 – Termination
There can be many reasons for early termination of the lease. The most common reasons will be defaulting on rent, the tenant using the property for illegal purposes, or the need to close down your business due to financial problems.
If any additional conditions may result in early termination of your lease, the landlord will need to state these terms and conditions in the tenancy agreement.
When stating all possible reasons and scenarios, the landlord should also include the penalties for each reason if any events occur. Both parties can terminate the agreement if either party doesn’t fulfill their obligation, but you will need to do it with proper notice.
Tenancy Agreement Terms & Conditions #2 – Option To Renew
The period you rent the property will be stated in the tenancy agreement, generally within 2-5 years. This clause will allow you to extend the period for another term, subject to prior notice.
If this clause is included in your tenancy agreement, you will want to check if there is a clause called an ‘escalation clause.’ It means the landlord has the right to raise the rent in subsequent years. Typically, the rent will increase based on a fixed amount, a percentage of the first year’s rent, or an increase in the living cost.
It will also state that the landlord agrees to prioritize you before putting the property back on the market to search for other tenants or consider another tenant’s offer. The landlord will prepare a contract for the extension when you decide to renew or extend your lease. The terms and conditions should be the same as the standing one unless the landlord decides to have some changes as stated in the tenancy agreement.
Tenancy Agreement Terms & Conditions #3 – Good and Tenantable Repair and Condition
When you see this clause in the tenancy agreement, it is imposed on the tenant to keep the premise in good condition. It is often followed by a caveat – “fair wear and tear and acts beyond the control of Tenant excepted.” This is to limit the tenant’s liability to compensate the landlord for the damage that was not caused by reasonable usage or normal aging.
When this clause is included, the damage to the premise was not because of fair wear and tear, and the landlord can retain the security as compensation. The amount may depend on the damage. The landlord may also request the tenant to arrange to repair. But it would be unreasonable for the landlord to withhold the security deposit or ask to repaint the whole premise because of a few scratches caused by normal usage.
Tenancy Agreement Terms & Conditions #4 – Forbidding Alterations or Additions To Premise
Commonly, the landlord won’t allow any alterations or additions to the premise. This clause is usually included as one of the terms and conditions in the tenancy agreement. When you see this clause, you are not allowed to do any alterations or additions to the premise without your landlord’s consent. You can’t change the structural nature of the premise.
For example, you can’t remove any fixtures from the premise or pull down the premise. Additions such as setting up an additional office on the premise are prohibited unless you have the landlord’s consent.
Tenancy Agreement Terms & Conditions #5 – Insurance
Normally, the landlord will pay for the property insurance, but do you have any idea that some landlords will opt to take out what’s known as ‘landlord insurance?
This policy will cover them against some irresponsible tenants that may cause potential damage to their property, including the tenant disappearing suddenly, causing them to lose their rental income. They are also protected against liabilities, including tenant suffering and injury due to unnoticed damage to the property.
So when you are going through your tenancy agreement, you will want to check if there is any mention of this that will impact the insurance.
Above are some common terms and conditions in the tenancy agreement. Understanding all these terms and conditions will help you to understand what you can do and what you can’t. Make sure it is fair for you and your landlord, as you don’t want any trouble during the rental period.
I hope you all find this article helpful. Els Factory provides a one-stop solution for Johor factory and land seekers, including built-to-suit warehouse solutions, and offers a comprehensive list of for-sale and rental factories and land.
Els factory has served over 300+ Businesses, with 30 years of experience in Industrial Real Estate Consultancy. With our industrial knowledge and years of experiences in selling or renting factories in Johor, our professional team are providing professional advises and solutions for you.
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