7. Before signing the formal tenancy agreement or lease, a tenant may sometimes be asked by a landlord to sign a document called "agreement for lease" or "provisional tenancy agreement". What are the consequences of signing this document?
An intending landlord and an intending tenant may enter into an agreement for lease prior to the execution of the lease/tenancy agreement itself. By signing this agreement, the intending landlord agrees to give, and the intending tenant agrees to take, a lease in the future.
The agreement for lease/provisional tenancy agreement is a contract. It must, therefore, satisfy the requirements of a contract. There must be offer from one party, acceptance from the other party, consideration, intention to create legal relations and so forth. The terms of the agreement must be sufficiently certain, including:
- the name of the parties;
- the name and address of the premises;
- the commencement date of the lease;
- duration of the lease;
- the rent and its payable date(s);
- other considerations such as deposit, obligation to repair, restrictive covenant, termination and handover conditions.
An agreement for lease/provisional tenancy agreement is legally binding upon the parties to the agreement. If such an agreement is signed and one party subsequently refuses to sign the formal lease or tenancy agreement, the other party can apply to the court for an order of specific performance. That is, to apply for a court order to compel the defaulting party to fulfil the obligations as stipulated on the agreement.
Instead of signing an agreement for lease/provisional tenancy agreement, another possible scenario is that the tenant may be required to sign a document titled "offer to lease". This document will then be signed (i.e. accepted) by the landlord. In practice, the consequences of signing an offer to lease are similar to that of signing an agreement for lease.