8 Things you Must Know before Signing your Tenancy Agreement with Malls

So what are the important things to take note of when you sign the tenancy agreement?

1. Always set up a private limited company for each business space you lease, this is because you limit your legal liability to your company if things goes south. Most of our customers will set up an entirely new private limited company for each lease they sign.
   
   
2. Malls stipulate a minimum paid up capital of s$100,000 for all private limited company. Why do you think this is?
   
   The truth is, in the event you wind up your business and goes into liquidation, the mall will be able to legally pursue up to S$100,000 to cover any losses they incur. This is a safety net for malls if things turns sour. Thus, now you know why limiting your legal liability to your company is a very important measure in place.
   
   
3. You will be required to prepare multiple cheques to be made payable to several entities within the malls – These include: legal stamp duty, POS integration fee, security deposit, advance rental, etc. All these will be clearly written in the tenancy agreement for you to prepare accordingly.
   
   
4. There are customers who have asked us if they are not agreeable to the terms stipulated in the tenancy agreement, if they can have their lawyer talk to the mall legal team to come to a consensus.
   
   The answer is yes, you may do so. But in the end, you would most likely not, because any changes to the terms in the tenancy agreement is subjected to the mall’s legal team approval. And the mall reserves the right to charge you legal fees for the time taken to discuss in the changes. In most cases, tenants will end up signing the agreement as-is condition.
   
   
5. Personal Guarantee – in our opinion, never sign a personal guarantee for a leasing agreement. This is because you will be personally liable for your business failure. Meaning to say if your business goes into liquidation, the mall can sue you personally to recover their losses. Thus, it’s a no go for most of our customers.
   
   
6. Some customers asks what they can do if they do not have a paid up capital of S$100,000. Are they still able to rent?
   
   There’s a simple resolution to this. You can propose a 6 months security deposit rather than the stipulated 3 months deposit. Most of the time, malls will approve this. However, most customers still prefer to provide a paid up capital of S$100,000 because this sum of money can be used for their initial capital outlay.
   
   
7. A lot of customers have misconceptions between rent-free period and fitting out period of 4 weeks. There’s a huge difference between these two.
   
   Rent-free period of 4 weeks means that, if you are able to complete your works by 3 weeks, you will enjoy 1 week of free rent. Whereas fitting out period means that lease will commence when you finish your works. In the mall perspective, there’s no rent free at all. Thus, all our customers use the entire 4 weeks to finish all required works.
   
   
8. After signing the tenancy agreement, one of the most important variable is your contractor. Your contractor must be truly familiar with the fitting out guide specified by the mall. And all works will be mostly in the evenings. We have come across (and our contacts in malls have shared) cases where contractors do not know the process and were not able to finish the fitting works within the 4 weeks. This would be a living nightmare for you.

So these are the things to take note of when you sign the dotted line. There’s no turning back for the next 3 years. You will just have to focus on success, good luck!