4. Create a solution - breach of tenancy agreement

April 3, 2009
Tips For first-time Singapore Tenants
Case Studies by asiahomes.com
Dr Sing Kong Yuen, Founder, Asia USA Realty (Singapore) asiahomes.com Pte Ltd
asiahomes.com

THE SUBLETTING OF AN HDB APARTMENT

The Tenant had breached the tenancy agreement by subletting. The Tenant's friends had told her that she had done nothing wrong as the HDB (Housing and Development Board) regulations permit 6 occupants for a 3-bedroom apartment. Therefore, her friends encouraged her to hold her ground. Such well meaning acquaintances who know nothing about the laws of real estate contract cause more harm than good to the first-time foreigner tenant whose culture of sub-letting may be a common practice at home.

The Tenant's Agent was Juliet working under my real estate agency. Juliet could not resolve the Tenant's problems during discussions with the Landlord's Agent who also phoned me to ask the Tenant to get rid of the Sub-Tenants in 3 days' time.

One agent to handle the problem. I had told Juliet that there should be one agent from the same company handling this problem to avoid conflicts and misunderstandings. Juliet wanted to help her as she could communicate with the Tenant in her same language. But she could not resolve the problem over this issue of illegal subletting. The Landlord's Agent managed to get the names of the Sub-Tenants from the Tenant's son. She said she would give them to the Landlord so as to "get approval" from the Housing Board Development (HDB) which regulates rentals of the HDB apartments in Singapore.

In retrospect, this was actually a clever way of collecting evidence of subletting if you see it from my angle. The Tenant's son had provided the evidence to the Landlord's Agent as he could speak some English and believed that giving the Landlord's Agent's the names of the Sub-Tenants would help to his mother to live with peace of mind.



"Look here, Juliet," I was getting impatient with several of Juliet's phone-calls to me regarding the intractable complaints of the Tenant. "If you insist on putting your fingers into the pie, be my guest. Go ahead and deal with the Tenant's problems yourself. Too much emotions and conflicting advices from two rental agents from the same company would not be useful to the Tenant. The Landlord's Agent also phoned me to arrange for the Landlord to meet the Tenant urgently. Please do not involve me if you want to be kind and helpful to your country-woman."

Housing Agents don't get paid for doing this after-sales service unlike in some countries like Australia. Time is what realtors has and he or she gets paid for closing a case. They don't earn a fixed salary and therefore time is money to any housing agent. Juliet stopped handling the case. To handle this situation, the following must be done:

What does the Landlord want? The Landlord wants the Tenant to adhere to the Rental Agreement which does not permit subletting. The Tenant had signed the Agreement listing herself and her son as Occupants. Therefore, if the Tenant does not get rid of the Sub-Tenants, the Landlord thinks of throwing her belongings outside the apartment and lock her out.

What does the Tenant Want? According to the Landlord, the Tenant felt that she was doing "nothing wrong" in subletting.

The Tenant's Offer to Resolve This Problem. "Why don't you just give her one month's notice and return her the one month's deposit at the end of one month?" I forwarded to the Landlord the Tenant's offer to resolve this problem. One month is needed for her to find another place.

"No," the Landlord said. "Unless the Tenant compensates me for the shortfall in the rental revenue for the remaining term of the lease." The worldwide economic recession has got worse in Singapore. It is unlikely that the Landlord will get a replacement Tenant who will pay the S$3,000 for this 3-bedroom HDB apartment.

The Landlord's concerns. "I do not wish to distress the child by evicting the mother and child from the apartment," the Landlord phoned me after Juliet had stopped handling the case. I had told the Landlord's Agent to get the Landlord to phone me direct since the Landlord's Agent could not resolve the problem after giving the Tenant's Offer to vacate the premises with one month's notice and return of the one month's deposit at the end of the rental.

The Landlord continued speaking over the phone, "I do not wish to be jailed for harboring illegal occupants." In Singapore, there is a law that jails any owner who is caught renting out to illegals. I felt sorry for one poor pastor who was jailed for this offence.

I said, "There is a breach of tenancy agreement. Your agent had given you the names of the subtenants. Can you approve them as the HDB permits 2 tenants per room and the number of 6 occupants in this 3-bedroom HDB apartment? Six occupants are within HDB's rules and regulations for 3-bedroom apartments."

A letter in black and white. Before this direct phone call from the Landlord, I had asked the Landlord's Agent to get the Landlord to give me a letter in writing as to what he proposes to do in this breach of tenancy agreement. He would not write the letter and so he phoned me wanting to meet the Tenant in one evening immediately. He has lawyers on stand-by if I don't arrange a meeting.

The reason I wanted the Landlord to put his resolution to the problem in writing is that the tenant does not understand English. Talk is cheap. It is important that the Landlord's Agent does not serve as an interpreter during the proposed meeting as many comments can be mis-construed during interpretation.

It would not be a half-hour amicable chat as the Landlord's Agent told me when she asked me to arrange this meeting prior to the Landlord phoning me. To me, there seems to be only one demand from the Landlord. To get rid of the Sub-tenants or get evicted. As simple as that. The Tenant had offered to get the Rental Agreement amended to include the names of the Sub-Tenants or vacate the premises with one month's notice and return of the one month's deposit.

No room for negotiation. "No sub-letting is permitted," The Landlord spoke to me over the phone. "The apartment was rented due to the fact that the Occupants will be the mother and child. Otherwise, I could have leased it to other parties who had proposed more than 2 Occupants." The Landlord had preferred this Tenant over the others. I had emphasized the "no subletting" condition in the Tenancy Agreement to the Tenant during the signing with Juliet and the Tenant had apparently nodded her head in agreement. She liked the apartment and had paid a premium high rental unheard of in HDB apartments.

The Landlord's point of view. I understand the Landlord's concerns - too many occupants lead to greater wear and tear of the residence. So, the Tenant's Offer of including the names of the Sub-Tenants and to vacate the premises with one month's notice was rejected.

Where do we proceed from this situation? "I am not siding with the Tenant," I spoke to the Landlord over the phone. "There is a breach of tenancy agreement. The Tenant's uncle who is proficient in English will be coming to Singapore in 4 days' time."

"I cannot wait that long," the Landlord said over the phone. "I want to meet the Tenant this evening."

The problem is that the Tenant can't understand English very well. Her child who had just come to Singapore to study could speak English but not proficiently. Now, I feel that it is not morally right for the child of 12 years of age to be an English language interpreter for the mother during the proposed meeting with the Landlord. There will be misunderstandings and no resolutions to the Tenant's problems. I was also worried that the mind of the child cannot match an adult mind of the Landlord in the ways of the world. It is just unfair to the child or any interpreter to resolve this problem.

From my telephone conversation, what Mr Lee wanted was to get rid of the subtenants or get compensated for loss of rental income for the remaining term of the lease when the tenancy is terminated. There was no consideration that the economic recession had gripped Singapore firmly now. Otherwise, the Landlord would be confident of getting a replacement Tenant according to his specifications and at higher rentals.

Back to the present, how should I resolve this problem? I don't speak the foreign language. I don't want the Tenant's child or Juliet to be involved in interpretation as they would not be able to do it satisfactorily. A lot of time will be wasted. The Tenant would be very angry with Juliet for mis-communications. The Landlord was fixed in getting his ounce of flesh due to the breach of tenancy agreement.

How to resolve this problem? Is there a solution? There was one solution actually. There was the uncle who was proficient in English and coming to Singapore in 4 days' time. I asked the Landlord for his telephone number. I phoned the uncle in his country. I ensured that he phoned the Landlord by following up with a call. The uncle did phone the Landlord.

Well, the problem is resolved as far as I am concerned. I know that the subtenants are not illegals. 4 days will not be too long. This was a very a stressful case for the Landlord's Agent and Juliet as there was no negotiations. The meeting 4 days later will be the correct thing to do.

There is a limit to what housing agents can do after the signing of the Rental Agreement. The law of real estate contract binds both the Tenant and the Landlord when the terms and conditions of the lease are breached. The uncle came to Singapore and he met the Landlord directly.

"Housing agents are useless" Juliet said to me regarding this episode. There was a great interest of the friends of the Tenant to know which agency was handling her case. When there are problems, the housing agents are black-listed as in this case. Housing agents cannot resolve the Tenant's and Landlord's problems if both parties could not negotiate to get a win-win situation after a breach of the law of real estate. In this case, housing agents had spent a lot of time trying to get both parties to negotiate and earn nothing for their time spent in being helpful.

Some Singapore Landlords do not mind sub-letting but this need to be negotiated early prior to the signing of the Tenancy Agreement. The number of Occupants is of great importance to some Landlords as more residents wear and tear the apartment faster.

Once there is sub-letting breaching the Tenancy Agreement, the Landlord can evict the Tenant, forfeit the rental deposit and claim for the short-fall in the loss of rental income for the duration of the lease after eviction or premature termination of the lease. Obviously, if the Landlord gets a higher rent after getting rid of the incumbent Tenant, the ex-Tenant gets nothing from him or her. The only beneficiary in a breach of the Tenancy Agreement is the lawyer in the final analysis as both parties need to pay as much as a thousand dollars or more for services rendered.



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3. Belief, Passion, Drive & Perseverance

Oceanus Group Limited Singapore
AGM on Mar 27, 2009

Knowing what other successful industries or person do to succeed in this dog-eat-dog world can provide new ideas to my present small animal practice, real estate and travel agency practice. This is one reason I attended the AGM of Oceanus Group Limited. I am a very small shareholder. These are the only shares I own as I have stopped buying shares for the last decades as I believe most of the shares were speculative gambling.

Oceanus Group Limited's Annual Report 2008 had provided detailed information showing high growth in acquiring more farm land and in production. Profit After Income Tax had shot up to RMB 339 million for FY2008 compared to RMB 181 million for FY2007. Yet the share prices are today S$0.13 per share, with the lowest being S$0.10. The highest was over S$0.40 in 2008 while the issued share was S$0.20. The world-wide economic recession has adversely reduced share prices of blue chip companies by as much as 50% and therefore Oceanus' share price drop is not unexpected.

Should I sell the shares at a loss or should I hold on to them? Should I buy more shares now to average up when the world recession recovers and become more prosperous?



None of the estimated 300 shareholders at the AGM which started at 3 p.m, raised any questions or objected to the proposals. Before I could warm my seat, the AGM was over. My watch showed 3.07 pm. At the end of the AGM, there was the free buffet of some fried finger food. A few shareholders asked Dr Ng some questions privately. I stood nearby hoping to catch their concerns. The following was a pertinent question:



1. Thefts
Lady Shareholder: "Won't the Chinese workers steal abalone from the tanks?"
Dr Ng: "There are strict checks on the numbers farmed by each team at the end of the day. Auditors do their checks too. If the abalones die in the tank, shells must be produced."
Lady shareholder:"The workers can bring some shells from outside." I presumed she meant that the thief ate the abalones and bring back the shells.
Dr Ng: "Abalones are reared in cages. It will not be so easy to steal the cages as they are very heavy. Come and visit the farms to see yourself. Pay your airfare and accommodation and the company will bring you on a tour of the farms. With free meals provided to shareholders."

Another query from a male shareholder
Male shareholder: "Do you add extra ingredients to make the abalone grow faster and bigger?"
Dr Ng: "No. Abalones are fed sea weeds which are available from the sea."

2. Farm tours
Some shareholders had requested free hotel and airfare to visit the abalone farms in China. This suggestion was not reasonable and therefore denied.

In 2008, I did visit 3 farms at my own expense by paying my hotel and airfare. The tour of Oceanus farms took more than 5 hours to visit as the 3 farms are in the countryside of Xiamen, China and are large farms. Some of these farms are bigger than more than 100 football fields.

Sea water from the ocean is pumped into the abalone tanks after it is filtered through the sand. I note that the water in the tanks looks very clear. Sea weed is fed to the abalones. Abalones are reared in cages after the juveniles which are attached to ceramic plates have grown to a certain size. I think it is 6 months. It takes 5 years to get an abalone to grown past 100 mm in shell length and such old abalones are most valuable. Slow growing ones are checked and sold early as one or two year olds. Company executives travel regularly to check on the production inventory while the independent directors travel to do their due diligence as Oceanus acquires new farms.

4. Innovative Retail Idea. There are many interesting factors ensuring the success of Oceanus in being a premier high quality affordable abalone for the middle class in China and all over the world. Its recent joint-venture with the famous Ah Yat abalone restaurant to set up an abalone food outlet in Shanghai, China had been very successful with large crowds. This retail concept of bringing affordable high quality Japanese abalones to the masses may lead to "McDonald's-like" chains and franchises all over China and the world. If this takes off, Oceanus will be rolling in the money and laughing its way to the bank.

5. Belief, Passion, Drive & Perseverance. The success of Oceanus depends on the belief, passion, drive and perseverance of the Executive Chairman who is a veterinarian by qualification. He has the four factors.

There is the one more factor - the experiences of doing businesses during the last 20 years in China. Dr Ng has this business management background in working for multi-national corporations in marketing and sales. One important factor to consider is that the company has zero debt as at December 31, 2008 while other companies are failing due to high debts.

Making Oceanus profitable in 2008 means that he has applied the knowledge of global business by integrating production, processing, retailing and starting abalone burger cafe restaurants (said to be targeted to be 100 cafes in China) to create new customers and sell his increased production directly abalones at affordable prices. The burger is now sold in one cafe in Shanghai and one website reported that it sell at around S$18.00 per burger containing one 2-year-old abalone. At the AGM, I was told by one officer that there were large demands for this burger. Abalone is traditionally affordable for the top 1% of the population in China as it is very expensive.

Dr Ng has the veterinary training which is now very useful as the training gave him the theories of animal diseases, prevention, treatment, quarantine and husbandry.

An example is the insurance of the abalone against disease for Oceanus. Many abalone farms in China, Taiwan, Australia and other countries have shut down production due to the spread of viral diseases and become bankrupted. As Dr Ng is a veterinarian by training, he understands the importance of using sea sand to filter the water reaching the abalone tanks daily against water pollution. Using sand which is available in the sea is much cheaper, thereby reducing overheads and increasing profits in the long term.

If Oceanus can sell abalone set at the anticipated 40 yuan, more than 1% of the population and the middle class in China will consume this highly priced shellfish which now sells at high priced restaurants at 300 yuan.

This means the extra production of abalones can be sold to meet the demand if the retail joint venture opens up 100 cafe restaurants. Stock analysts have expressed concerns about over production and the possible lack of consumers during this recession. Oceanus has had aggressively acquired more farms and increase tank and abalone production in 2008. Many abalone farmers have difficulty finding buyers in the past as their sales prices are high due to high production costs.


IDEAS ARISING FROM THIS AGM ATTENDANCE
1. Farm Tours. This is an opportunity for my travel agency to specialise in abalone farm tours for Oceanus. After all, niche marketing is more sustainable and profitable as a business than mass tourism with its rampant under-pricing. Expanding this concept, tomato farm tours can be set up for Lake Inle travel in Myanmar to educate young children living in urbanised Singapore about where their food comes from. It is surprising that some Singapore children think that their food comes from the supermarket.

2. Newsletters to shareholders. I was surprised that Dr Ng mentioned that newsletters may be a means to communicate with shareholders the progress of the company. Not all shareholders bother to go to Oceanus website to read the reports. In any case, I had not been able to access the website today, Saturday Mar 28 at 7am as the server appeared to be down.

Printed newsletters are good for shareholders and enhance investor relationships. Many companies and non-profits have given up on sending printed newsletters to members to save money and to save on trees. This idea may be relevant to my small animal practice to provide new information on small animal health and promotions of health care to my clients and retain them by posting to clients printed newsletters. Holding a newsletter to read is much more effective for the average busy pet owner than having to access the website for news.

In conclusion, should I sell my shares at a loss? No. One analyst recommends $0.19/share to buy in 2009. The market is down. Should I buy more shares to average up when the market recovers? If only I can afford them.