Tenancy agreements are an essential aspect of rentals. A poorly written agreement could cause landlords or tenants to take on extra liabilities unnecessarily. Whether you are a landlord or tenant, look out for these clauses to protect your interests.

1. Security Deposit

• The typical amount is 1 month’s rent for a 1-year lease, and 2 month’s rent for a 2-year lease
• Security Deposits are typically taken as a form of guarantee that the Tenant will adhere with the Tenancy Agreement. It is non-deductible. To avoid any disputes, it is best to have the Tenancy Agreement define what the security deposit can or cannot be used for.

2. Rent and Utilities

Payment schedule:

• Take note of rental payment due dates and grace periods
• Late payment fees or interest may be imposed after the grace period

Utility Bill:

• Utility is typically covered fully by the tenant, unless stated otherwise.

3. Use & Maintenance of Premises

• This section should specify details on the wear and tear of the property
• Commonly, the responsibility lays on the landlord for maintenance of regular wear and tear
• For damage not due to fair wear and tear, responsibility is usually borne by the tenant
• This section may also state the maximum amount tenants have to pay for minor repairs (e.g., tenant is liable to pay up to $200 for repair, while the landlord will cover the remaining cost of repair)

4. Renewal

• Tenants may have the option to extend and renew their stay at the rental property when their initial lease is due to expire
• Prices should be reviewed; they could remain the same, adjusted to market rates or capped at a certain percentage of the current rental upon renewal

5. Diplomatic Clause

• Allows tenants to break their contract early with  notice, under certain conditions, and without penalty. 
• This clause may only be exercised after the minimum occupancy period is met (typically 12 months) 
• When this clause is included in the Tenancy Agreement, the landlord will usually request for a Reimbursement Clause to be included in the contract as well
• The Reimbursement Clause may require tenants to reimburse part of the agent’s commission, if the Diplomatic Clause is exercised

6. Tenant’s & Landlord’s Covenant

A covenant is a commitment made during the lease term by either party that is legally binding. Covenants are typically expressed in the tenancy agreement at the discretion of tenants and landlords, but there are also implied covenants covered by law. Here are a few examples of implied covenants.

Landlord’s Covenants:

• Quiet Enjoyment for tenants; landlords are not allowed to incessantly check on their tenants
• Repairs to external structures and damage by fair wear and tear
• The premises must be reasonably livable

Tenant’s Covenants:

• Payment of Rent 
• Payment of bills for utilities used
• To use the premises for designated purposes only
• Observance of Regulations

7. Other Common Details In A Tenancy Agreement

• Full name and address of both the landlord and tenant
• Address of rental property 
• Date of contract signing
• Tenancy period
• Any applicable fees (such as agent commission)
• Notices; formal communication requirements
• Inventory: List of items provided with the property and their condition

A well-drafted tenancy agreement ensures fairness and clarity for both tenants and landlords. By outlining obligations upfront, risks of disputes are reduced and your interests are protected.

Having doubts about your tenancy agreement? At LP Law Corporation, our lawyer can review, draft, and negotiate lease agreements to safeguard your rights. Contact us today to secure your rental with peace of mind.