Renting a flat in Singapore? Knowing the difference between a lease and license can save you from a lot of trouble.
Many Singaporeans are eager to rent out rooms or homes to make money off their flat. However, a common point of confusion arises about the lease. For example, did you know that not every resident or occupant of a rental property has a lease?
Here’s why you need to know the difference:
Lease versus License in Singapore
There are two kinds of occupants in a rented property. The first are the occupants with actual leases, and the others are just people who are given license.
When a lease is signed and accepted, the landlord transfers possession of the property to the tenant for a given time, and under certain conditions. For example, you are probably familiar with the term “leasehold”. Most Singaporean properties have a 99-year leasehold, during which the owner has possession of the property.
Having a lease grants certain rights to the tenant. For example, tenants have a right to eject and sue trespassers, and even the landlord cannot wander into the property without prior arrangement.
A license, however, does not grant any proprietary interest in the property. A license typically comes about as a private arrangement between the owner of the property, and someone who gets to stay there. For example, if you agree to let your visiting Canadian friend stay in your room, you’re giving that friend license and not a lease.
Another example would be when you check into a hotel. As a hotel guest, you do not have a lease; all you have is a license to use the room, based on your arrangement with the hotel owners or managers.
What’s the Practical Difference?
The main difference is that licenses can be revoked by anyone in possession of the property. This is not necessarily the landlord, it can be a tenant with a lease as well.
For example, say you, Bob, and Mary get together to rent an apartment (rent is much cheaper when split three ways). However, only Bob is the actual listed tenant, and has the actual lease. You and Mary just have a license – an arrangement with Bob to split the rent, in exchange for which Bob lets you stay in the apartment too.
(The original landlord is fine with this, and doesn’t care so long as the rent gets paid).
Eight months down the road, Bob gets a big raise. He decides he wants more space to himself, and can pay the rent without your help. Bob tells you and Mary to pack up and leave. Now what can you and Mary do about it?
The answer is, quite probably, nothing.
Bob has a lease, and you don’t. He has possession of the property, and he can revoke your license anytime he feels like it. There’s no point going to the original landlord either. As long as Bob pays the rent, he retains the lease and the landlord can’t force him to keep you on.
What This Means For Renters in Singapore
If you’re going to split a flat with friends, make sure you understand the implications of only one of you holding the lease (i.e. being the master tenant). The person with the lease can have you evicted.
If you have an agreement to split the rent, and they’ve taken money from you, you might be able to sue them. The outcome would depend on the written contract you have. But know that in the immediate sense, they can force you to leave “their” property.
Whenever possible, we suggest that you try to be the one holding the lease.
Likewise, if you rent an apartment via a website like Airbnb, take note that you are not leasing the property. You’re merely entering into an arrangement with the leaseholder, who may themselves be a tenant. Said leaseholder can change their mind and revoke your license, just as hotels can also revoke your license and kick you out.
Sure, you could kick up a fuss, leave negative reviews, and later on sue in court. You’ll probably even stand a good chance of winning, as there are written (digital) agreements involved. But it could be cold comfort in the immediate situation, if you’re without a roof in a foreign country.
Just to be safe, make sure you can pay for another hotel room if and when you need it.
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By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.