Property Legal Brief: Tenant Sued Landlord For Return Of Security Deposit But Ordered To Pay Landlord Five Times More

By Lee Heng Eam, Assistant Vice President of PropNex Realty

Tables turned on the owners of an eatery who had sued the landlord to reclaim their security deposit but were instead ordered by the Court to pay the landlord a sum of $62,100.

In our 23 November 2022 article, “Landlord Sued Tenant for Outstanding Rent and Lost. What Gives?”, we shone the spotlight on a landlord who sued a tenant for rental default, and lost. This article deals with the reverse; tenant sued the landlord for the return of the security deposit, and lost (with a twist). The writer will not delve into the legal arguments raised, but will analyse the compensation awarded to the victor.

Brief facts

In Koh Kia Yeong and another vs Ang Sofeene [2023] SGMC 56, Koh and Sun Yanli (the “Tenant”), entered into a tenancy agreement with Ang (the “Landlord”) with a monthly rental of $4,800 for 36 months from 1 April 2021 to 31 March 2024 (the “1st TA”). A security deposit of $14,400 was paid to the Landlord. Fast forward to September 2021, the Tenant defaulted on the rental payment, and the TA was terminated on 25 October 2021. This is 6 months into the TA.

After the lease was terminated, the Tenant sent a lawyer’s letter to the Landlord’s lawyers requesting for the return of the security deposit (after deducting the rent for October 2021 and contractual interest) (the “Deposit”).

The Court Proceedings

In November 2021, the Tenant sued for the return of the Deposit but the Landlord took the position that she is not required to do so because she has a counterclaim against the Tenant for a larger sum.

The Landlord counterclaimed for:

(a) $36,000 being lost of monthly rental of $4,800 from October 2021 to 14 May 2022 (7.5 months);
[Note: A tenancy agreement for 2 years was entered into with another tenant Ya Qi Wellness Centre (“Ya Qi”) on 15 May 2022 at the monthly rental rate of $3,000 (the “2nd TA”).]

(b) $40,500 being $1,800 (the difference of the rental rate of the 1st and 2nd TA) multiplied by 22.5 months (being the period between 15 May 2022 (start of 2nd TA) to March 2024 (end of 1st TA);

(c) $1,500 being the commission paid to her salesperson;

(d) $50 being the composition fine which the Landlord paid to SCDF due to the Tenant’s fault; and

(e) $950 being the amount paid by the Landlord to remove the kitchen exhaust pipe and the Tenant’s signboard.

The decision

After considering the evidence, the Court held that the losses of the Landlord under (a) and (b) have been established. This is in line with the general principle in civil claims which require the losses to be a result of the repudiation/breach of agreement, and the claiming party will be awarded compensation for loss “actually” suffered.

The commission claim under (c) was not allowed because this “loss” did not flow from the Tenant’s repudiation. In addition, assuming the 1st TA was performed fully, the Landlord would still need to engage a real estate salesperson and pay a commission if she wished to engage one to look for a new tenant. What is interesting here is the Court’s position that the commission could still be claimed as a “reasonable expense” incurred by the Landlord when mitigating his damage.

For (d) the $50 SCDF fine, that claim was also not allowed because the fine did not arise from any act or omission of the Tenant.
The same goes for (e) the $950 removal costs because the items which required removal were there at the start of the 1st TA. In other words, the items were not installed by the Tenant and the Tenant therefore did not have any obligation under the TA or law to remove them.

The Court dismissed the Tenant’s claim and awarded compensation of $76,500 to the Landlord. The Landlord was also allowed to forfeit the security deposit of $14,400 and apply that to offset $76,500. After the offset, the Tenant was required to pay $62,100 to the Landlord.
In the interest of clarity, the security deposit was deducted based on clause 2(d) of the 1st TA which stated that the Landlord is entitled to forfeit “so much of the Security Deposit as shall become payable to the Landlord consequent upon any loss or damage suffered by the Landlord.”

Learning Points

There are a few learning points from this case, with prompt payment of rent being the obvious. The other point will be the importance of having an early termination agreement negotiated and agreed upon by all stakeholders to end a lease with finality. Such agreement can contain compensation amount to be paid (if any), reinstatement of the premises, move out date, and other terms to be complied by the parties to end the lease.
Allowing the tenant to look for replacement tenant to take over the lease is also a mechanic which can be considered. Clear terms must be set out and agreed by the landlord and the outgoing tenant before the search starts. Last but not least, always consider attempting out-of-court settlement when there is a dispute, because the ending one seek via the courts may come with a twist.

About the writer
Heng Eam serves as Assistant Vice President (AVP) to PropNex Limited since March 2021. A lawyer by training, he was called to the Malaysian Bar in 2005. From 2007, he practiced law in Singapore for several years before being called to the Singapore Bar in 2014. He then served as legal counsel for in another major real estate agency, from 2015 up till 2021. Besides his specialisation in litigation, he also provides legal counsel for corporate regulatory issues such as the Personal Data Protection Act (PDPA), as well as advises clients on employment, property, and landlord and tenant disputes.

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