Paper 2 · Leasing
Commercial & Industrial Leasing (rent review, service charge, JTC)
Must-know for the exam
- Commercial, retail and industrial leases differ from residential tenancies through longer terms, business-focused clauses and rent that can move with the tenant's trade.
- Turnover (percentage) rent, common in retail malls, is a fixed base rent plus a percentage of gross sales, not one or the other.
- A rent review is a periodic upward adjustment, e.g. every 2–3 years, to market rent or by a fixed percentage or index.
- A rent-free or fit-out period is a window at the start of the lease during which the tenant fits out the unit without paying rent.
- The service charge is the tenant's share of maintaining common areas (cleaning, security, air-con, management) and is separate from rent when comparing occupancy costs.
- Permitted use restricts the trade the tenant may carry on, and a change of use needs the landlord's consent.
- Reinstatement requires the tenant to strip out the fit-out and return the premises to original condition at lease end, often secured by a reinstatement deposit.
- The security deposit for commercial leases is commonly around 3 months' rent; assignment and subletting generally require the landlord's written consent.
- Industrial land and space are largely leased through JTC, usually on 30- or 60-year leases.
- JTC controls assignment and subletting (subletting is capped and needs approval), imposes anchor-tenant and usage conditions, and restricts speculative flipping.
Commercial, retail and industrial leases are a different animal from a residential tenancy — longer terms, business-focused clauses, and rent that can move with the tenant's trade. The RES exam tests the terms that don't appear in a simple residential lease.
How the rent is structured
- Base rent — a fixed monthly rent (often quoted per square foot).
- Turnover (percentage) rent — common in retail malls: the tenant pays a base rent PLUS a percentage of gross sales, so the landlord shares in the tenant's success.
- Rent review — a periodic upward adjustment (e.g. every 2–3 years) to market rent, or by a fixed percentage/index. Longer commercial leases build this in.
- Rent-free / fit-out period — the landlord grants a rent-free window at the start for the tenant to fit out the unit.
The other key clauses
- Service charge — the tenant's share of maintaining the building's common areas (cleaning, security, air-con, management). It is separate from rent.
- Permitted use — restricts the trade the tenant may carry on; a change of use needs the landlord's consent.
- Reinstatement — at lease end the tenant must return the premises to their original condition (strip out the fit-out), often secured by a reinstatement deposit.
- Security deposit — commonly around 3 months' rent for commercial leases.
- Assignment & subletting — generally require the landlord's written consent.
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Practise exam-style questions on Leasing — with instant answers and explanations.
Practise Leasing questions →Exam-style questions on this topic
- RES exam question on Leasing of Private Property: An investor considering an HDB shop unit reviews how HDB commercial property differs…
- RES exam question on Leasing of Private Property: A landlord of a Green Mark office building offers a prospective tenant a 'green lease'
- RES exam question on Leasing of Private Property: Tan holds a 5-year retail lease at a mall and in year 3 wishes to assign the lease…
- RES exam question on Leasing of Private Property: Mr Tan holds a 5-year commercial lease with exactly 3 years remaining
- RES exam question on Leasing of Private Property: Mary rents her condo to an expatriate tenant on a 2-year lease with a 12-month minimum…
Common questions
- What is turnover rent in a retail lease?
- Turnover (percentage) rent means the tenant pays a base rent plus a percentage of their gross sales, so the landlord shares in the tenant's turnover. It's common in shopping malls.
- Can an industrial tenant freely sublet JTC space?
- No — JTC controls subletting of industrial space: it is capped and requires approval, along with conditions on use and assignment. Industrial tenants have less freedom than private commercial tenants.
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