RES exam question on Leasing of Private Property: Luxe Watch Pte Ltd holds a three-year mall lease signed in April 2025 to sell one Swiss…
Luxe Watch Pte Ltd holds a three-year mall lease signed in April 2025 to sell one Swiss brand. In 2026 the brand's owner ends the distributorship, although Luxe Watch has not breached it. Its salesperson checks the retail leasing Code. Which statements are correct? (i) On pre-terminating, Luxe Watch pays compensation of twelve months' gross rent on top of the security deposit. (ii) Loss of a distributorship without breach by the tenant is an exceptional condition allowing pre-termination. (iii) Since the lease ends early, therefore Luxe Watch need not reinstate the premises before handing them back. (iv) To pre-terminate, Luxe Watch gives at least three months' written notice to the landlord.
- A(ii) and (iv) only
- B(ii) only
- C(i), (ii) and (iv) only
- D(ii) and (iii) only
Show answer & explanation
Answer
B. (ii) only
Explanation
Answer: (ii) only. Loss of distributorship without the tenant's breach is an exceptional condition, but the compensation, reinstatement and notice terms are all misstated.(ii) True. Loss of distributorship or franchise rights not caused by the tenant's breach is one of the two exceptional conditions.Rule: A retail tenant must be allowed to pre-terminate on either of two exceptional conditions, one being loss of distributorship or franchise rights through no breach of its own. It gives six months' notice or rent in lieu, pays compensation equal to the security deposit, and still reinstates the premises.Source: Code of Conduct for Leasing of Retail Premises, third edition dated 1 November 2023, Part B paras 7, 7.2, 7.3 and 7.4, mandatory for qualifying leases signed from 1 February 2024 under the Lease Agreements for Retail Premises Act 2023 (ftic.org.sg, read 1 October 2026)
Why the other options are wrong
- (i) False. Compensation equals the security deposit, which the landlord may apply. It is not twelve months' gross rent on top.
- (iii) False. The lease does end early, yet that does not excuse reinstatement. The tenant must still reinstate and yield up the premises.
- (iv) False. The tenant gives at least 6 months' written notice, or pays 6 months' gross rent in lieu, not three months.
Study the concept behind this question: Commercial & Industrial Leasing (rent review, service charge, JTC)
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