You might ask, “What is Letter of Intent (LOI)?” It’s not very common in oversea to sign a LOI before the Tenancy Agreement (TA). I understand that there’s no LOI at all in the rental procedure for a residential unit in your country.
But, in Singapore, it’s a common practice. Well, I, myself, don’t believe in LOI though (I always wonder why we don’t get straight into the TA), but there are four purposes in it.
The LOI is used to propose:
1) Your intention to rent the property
2) The monthly rental fee against which you intend to rent the property
3) Your intended lease duration
4) Your requirements and requests for repair, renovation, furniture, appliances etc. and whether the rental fee is inclusive of these costs
Your requirement could be a request for fresh coat of paint, a new sofa, additional beds or TV or whatever etc. And you should include a Diplomatic Clause to safeguard yourself in the event you are no longer employed, or transferred to other countries. You can terminate the lease by giving a 2-month notice period upon completion of 1 year. Of course at this point, you and the landlord should have by now more or less agreed, at least verbally, on the main items in the LOI. It is important that you ensure that everything you want is written in the LOI. Once it has been signed, it’s almost impossible to request anything additional.
Then you present the LOI along with the good faith deposit, which is a token deposit, usually one month’s rent and is non-refundable, to the landlord. So, it is important to be absolutely sure on your decision to rent a particular property to avoid forfeiting the good faith deposit. If LOI and good faith deposit is acceptable by the landlord, he/she will sign the LOI and return it to you and acknowledge receipt of the good faith deposit. This ensures that the landlord cannot rent the property to anyone else and that you have secured the unit. However, if the landlord does not wish to lease the property to you, he/she must return the cheque and LOI to you.
Always add an expiry date to the LOI, usually 7 days later. That way the landlord will have to return to you immediately upon expiry.
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