Subletting your apartment, either partially or the entire unit, is a good way to generate passive income. However, before you become a landlord, be sure that you understand all the rules and regulations of subletting and your eligibility.
If you wish to sublet your entire HDB flat, you need to be a Singapore Citizen. In addition, you must fulfil your Minimum Occupancy Period (MOP). Regardless of whether your flat is a BTO flat or a resale flat, the MOP is 5 years. For resale flat purchased before 30 August 2010, you are looking at a shorter MOP of 3 years.
If you wish to sublet your bedrooms, you may do so without prior approval from HDB. Do note that only rooms from HDB flats which are 3-room or larger are eligible to be rented out.
Rules Regarding Your Sub-tenants
Maximum Number of Sub-tenants
Be sure to keep to the maximum number of sub-tenants allowed, based on the type of flat that you own.
For one and two-room flats, there can be a maximum of four sub-tenants.
For flats that are three-rooms or more, you can have a maximum of six tenants for a three-room flat, or up to nine sub-tenants for four-room and above.
All sublets need to fall between the minimum lease period of 3 months and the maximum lease period of 36 months if you are renting to Malaysians. Before subletting your apartment, you will need to ensure that your sub-tenants are legally residing in Singapore.
Non-citizen Quota in the Neighbourhood
Sub-tenants must also meet the non-citizen quota. The non-citizen quota states that only 8% of a neighbourhood’s residents can be non-citizens; and only 11% of the occupants in a block can be non-citizens (with Malaysians being exempted from this rule). You need to check the current non-citizen quota for your block or neighbourhood before committing to any tenancy.
No co-owners or co-tenants
Sub-tenants are not allowed to be tenants or owners of other HDB flats. This is with the exception that they are divorced or legally separated, or they are owners who are eligible to sublet their whole flat.
In addition to this, sub-tenants are also not allowed to be owners of Executive Condominium (EC) units unless their 5 year MOP has been met.
Property Taxes Borne by Landlord
Where property tax is concerned, you will be taxed at a lower owner-occupier tax rates if you are sub-letting your rooms out whilst still staying in the same apartment. Ensure that you get your sub-tenant or agent to pay and stamp the tenancy agreement as “partially rent” instead of “wholly rent” so that your owner-occupier tax rate will not be withdrawn and remain at 4%.
If you are subletting out the entire apartment, you will be taxed at a higher rate at 10% of your home’s Annual Value (AV). AVs are calculated according to IRAS’ assessment of the recent rental rates for various HDB flats. In addition to property tax, landlords are also liable to pay the additional income tax based on the total amount of rental income they receive with some expenses being deductible.
What To Look Out For In Tenants
Ideally, you should check your sub-tenants on their jobs, backgrounds, references and their willingness to commit to a long term lease of 2 to 3years. You will want to lay down the ground or house rules clearly and explicitly in order to avoid any form of miscommunication and unpleasant surprises further down the lease period.
Based on the guidelines provided, may your subletting experience be smooth and pleasant.