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https://www.edgeprop.sg/property-news/huttons-wins-commission-claim-court-rules-landlord-bears-risk-bad-tenant
Huttons wins commission claim, court rules landlord bears risk of bad tenant
By Fiona Lam
/ EdgeProp Singapore
Write to us at propertyeditor@edgeprop.sg
A Geylang property listed under Oh My Suites. Huttons had introduced the tenant, Abhi Engineering, to the landlord. The tenant soon defaulted on rent. (Image: Google Maps)
In a dispute arising from a bad tenant defaulting on rent, Singapore real estate agency Huttons Asia has claimed its commission from hotel owner and operator Oh My Suites. The court also dismissed the hotel firm’s attempt to recover its rental shortfall from the agency.
In a judgment dated Jan 23, District Judge Jonathan Ng ruled in favour of Huttons Asia, entering judgment for $28,080 — that is, the commission of $26,000 plus GST — against the defendant, Oh My Suites, which runs a hotel in Geylang. He dismissed the defendant’s counterclaim for the alleged breach of duties by Huttons.
While the landlord undoubtedly suffered losses because of the tenant, Abhi Engineering, defaulting on rent, the latter’s alleged inability to pay and the futility of seeking recourse against it “does not then entitle the defendant to go against the next available person it can lay its hands on”, Justice Ng said.
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He added that in this case, there is nothing that allows the landlord to pass the risk of a bad tenant on to the agency. “This risk was borne by the defendant, and it was borne by the defendant alone.”
How the tenancy and dispute came about
Huttons had introduced the tenant, Abhi Engineering, to Oh My Suites under an estate agency agreement inked in April 2023.
This estate agency agreement stated that if the landlord and tenant entered into a binding lease for one year, the landlord shall pay a commission of $26,000, or half a month’s rent.
The hotel operator and Abhi Engineering then signed a one-year tenancy agreement for the Geylang Hotel with a monthly rent of $52,000. That comprised 100 beds at $520 per bed per month.
However, the tenant soon defaulted on rent and the tenancy was terminated. Oh My Suites did not seek recourse against the tenant because the latter was “allegedly impecunious”, the judgment noted.
Oh My Suites had said Huttons was not entitled to receiving the commission on the basis of promissory estoppel, which is a legal doctrine that prevents a party from going back on a clear, unequivocal promise if the other party has already relied on that promise and it would be inequitable to renege on it.
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The hotel firm argued that before the estate agency agreement was signed, Huttons’ property agent, Geeta Arun, had verbally agreed in a phone call with Oh My Suites’ director, Lily Kong, that the commission would only be paid quarterly and if the tenant fulfilled its obligations. The court rejected this defence on multiple grounds.
For one thing, the alleged oral agreement between Arun and Kong about the commission appeared to run afoul of the parol evidence rule, which prevents parties from relying on oral evidence to change, add to, or contradict the clear terms of a written contract. By deferring payment of the commission and also making the payment conditional upon the tenant’s fulfilment of the lease terms, the alleged oral agreement is inconsistent with the commission clause in the signed estate agency agreement.
The judge also found that Oh My Suites failed to prove that the oral agreement between Arun and Kong existed. WhatsApp messages between the two individuals did not suggest, or even hint at, the existence of the alleged oral agreement, and were actually more consistent with Huttons’ position that there was no such agreement, Justice Ng noted.
Moreover, the hotel operator did not provide other evidence — such as records of quarterly payments from past dealings — that could have supported its case.
Landlord's attempt to recover rents fails
On the counterclaim, Oh My Suites was looking to recover from Huttons $60,440, which is the shortfall in rent owed by the tenant.
The landlord alleged that the agency had breached its duties to act with reasonable care and skill and in good faith, under the law of agency, the law of negligence and the estate agency agreement.
In its closing submissions, Oh My Suites said Huttons had breached its duties because the agency had essentially failed to ensure that the rent owed by Abhi Engineering was paid during the duration of the tenancy.
The court noted that the real estate agent’s duties ended when the tenancy agreement was signed. Huttons was “authorised and engaged for the primary purpose of introducing a tenant to the defendant”, and its duties did not extend to making sure rent was paid during the tenancy, according to the judgment. The landlord’s counterclaim was therefore dismissed.
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