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For many SMEs, the security deposit on an office, shop or industrial unit is one of the largest sums the company has tied up. Two or three months’ rent is common. When the lease ends, the company expects that money back. Instead, the landlord sends a list of defects, a contractor’s quotation for “reinstatement”, and a statement that the whole deposit has been forfeited.
Reinstatement and deposit disputes are among the most common commercial tenancy fights in Singapore, and they usually turn on the wording of the tenancy agreement and on evidence. Recent decisions have also clarified that a landlord cannot simply keep a deposit because the tenant was in breach. This guide explains the position from the tenant company’s side, what the courts have said, and how to protect the deposit before you hand back the keys.
Short answer
A security deposit secures the tenant’s obligations; it is not the landlord’s to keep. Under the usual clauses, a landlord may deduct only losses it can prove, such as reasonable reinstatement costs. Singapore courts have refused to let landlords forfeit whole deposits without evidence of actual loss. Document the premises, follow the reinstatement clause and demand the balance in writing.
What a security deposit is, and what it is not
A security deposit is money paid by the tenant to secure performance of its obligations under the lease: paying rent, keeping the premises in repair, and reinstating them at the end. Most commercial tenancy agreements say the deposit is refundable, free of interest, within a fixed period after the lease ends, less any sums properly deducted.
Two common misunderstandings cause trouble on both sides:
- Using the deposit as last month’s rent. Many agreements expressly say the deposit cannot be set off against rent. A tenant that simply stops paying the final months’ rent is in breach, even if the deposit would cover it.
- Treating the deposit as automatically forfeited for any breach. Whether a landlord can keep the whole deposit depends on the wording of the clause and, as explained below, the courts will not readily read a clause that way.
The key case: Equation Recycling v Leading Bio-Energy (2026)
In Equation Recycling Pte Ltd v Leading Bio-Energy (S) Pte Ltd [2026] SGHC 126, decided on 15 June 2026, the High Court heard an appeal about a deposit paid under an agreement for the use of premises. The clause said the deposit was held for due performance, could not be offset against rent, was repayable within one month after reinstatement works were accepted, and that the owner could “forfeit and deduct from the deposit” if there was a breach.
The court held that, read in the context of the whole agreement, the clause did not give the owner a right to forfeit the entire deposit for any breach. It gave a right to forfeit and deduct only the actual losses caused by the tenant’s breaches, which is consistent with how security deposits are commonly understood. The owner was allowed to keep only the small sums it had proved. The court also disagreed with earlier statements suggesting a general principle that a tenant in breach is not entitled to a refund of its deposit.
For tenant companies, the practical message is clear: a landlord that wishes to keep money from the deposit must identify the breach and prove the loss.
Reinstatement: what the lease usually requires
A reinstatement clause typically requires the tenant, at the end of the term, to remove its fittings, partitions and signage and return the premises to their “original state and condition”, often “fair wear and tear excepted”. The details vary widely, so check:
- what the “original state” was, which is where handover photographs and the original handover checklist matter;
- whether the landlord can elect to keep some of the tenant’s fit-out instead of having it removed;
- whether reinstatement must be done by the landlord’s nominated contractor;
- whether works need the landlord’s or management corporation’s approval; and
- the deadline for completing works, usually before the lease expires.
Holding over while reinstating
A frequent dispute is whether a tenant that is still finishing reinstatement after the lease ends is “holding over”, and so liable for rent or double rent. In Lee Wah Bank Ltd v Afro-Asia Shipping Co (Pte) Ltd [1992] 1 SLR(R) 740, the Court of Appeal held that a covenant to yield up and reinstate the premises did not make reinstatement a condition of yielding up. The landlord could not refuse to accept the keys because reinstatement was incomplete; its remedy was to carry out the works itself and claim the cost.
That reasoning was applied in Golden Mango Pte Ltd v Sudip Bijay Dutta and another [2026] SGMC 94. The tenant company returned most keys at the end of the tenancy but kept an access card to carry out repairs requested by the landlords. The court found there was no holding over, because the tenant’s limited access did not stop the landlords from excluding it. The court also found that defects existed, but because the landlords produced no invoices or quotations to prove the cost of rectification, they were awarded only nominal damages of $50.
Common deductions, and how they are tested
| Landlord’s deduction | Questions the tenant should ask |
|---|---|
| Reinstatement works | Does the lease require removal of this item? Is the cost supported by invoices or quotations? Is it a fair price? |
| Repairs and redecoration | Is this damage, or fair wear and tear excepted by the lease? |
| Rent for the reinstatement period | Was the company actually in possession and control after the term, or had it yielded up? |
| Arrears of rent and service charges | Are the figures correct, and were any rent-free periods or rebates applied? |
| Forfeiture of the whole deposit | Does the clause clearly allow this, and what actual loss has the landlord proved? |
| Administrative or handling fees | Is there a contractual basis for the fee at all? |
If the lease ended early
Different issues arise when a company leaves before the term ends. The landlord may terminate for breach, such as rent arrears, and claim loss of future rent as well as reinstatement costs. A landlord re-entering for unpaid rent must follow the rules on forfeiture, which we cover in our guide to forfeiture of a commercial lease for rent arrears. If the company is trying to reduce its rent burden by bringing in another occupier, the lease’s subletting clause applies; see subletting office space in Singapore. Where a lease contains a fixed sum payable on early exit, the rules on liquidated damages and penalties may also be relevant.
Recovering the deposit: the escalation path
- Ask for an itemised statement of deductions, with invoices, quotations and photographs.
- Respond point by point, attaching your own handover evidence and any contractor’s counter-quotation.
- Send a letter of demand for the undisputed balance, with a reasonable deadline.
- Consider mediation if the amount in dispute justifies it.
- Issue a claim in the right forum.
The Small Claims Tribunals hear disputes about leases of residential premises of up to two years, not commercial leases. A commercial deposit claim of up to $60,000 is heard in the Magistrate’s Court, and claims above $60,000 and up to $250,000 in the District Court, according to the State Courts’ published jurisdiction on the Singapore Courts website. Contract claims are generally subject to a six-year limitation period; see our guide to the limitation period for business debts.
What the company should do
At the start of the lease
- Have the board approve the lease by resolution, recording the rent, deposit, term and the authorised signatory.
- Record the condition of the premises at handover with dated photographs and a signed checklist.
- Make sure the tenancy agreement has been stamped with IRAS where stamp duty applies.
- Record the deposit correctly in the accounts as a refundable deposit (an asset), not an expense. For the GST position, see our note on refundable office deposits and GST.
Before the lease ends
- Diarise the expiry and notice dates and the reinstatement deadline.
- Ask the landlord in writing, early, to confirm the reinstatement scope and whether any fit-out can stay.
- Arrange a joint inspection and keep the minutes or email record.
- Return all keys and access cards against a signed acknowledgement.
Corporate housekeeping
- If the registered office address is changing, the board should resolve to change it and lodge the change with ACRA on Bizfile within 14 days, as required by section 143 of the Companies Act 1967 (available on Singapore Statutes Online).
- Minute any board decision to settle or to sue over the deposit.
- At year end, review whether the deposit remains recoverable. If part is disputed, the company’s accountant will need to consider whether an impairment is required in the financial statements.
Frequently asked questions
Can the landlord keep the whole deposit because we left early?
Only if the lease clearly allows it, and even then the clause will be read in context. In Equation Recycling, the High Court held that a forfeiture clause allowed the owner to deduct only actual losses it proved, not to keep the entire deposit for any breach.
The landlord refuses to take back the keys until reinstatement is finished. Are we holding over?
Not necessarily. The Court of Appeal in Lee Wah Bank held that a landlord could not refuse the keys on that ground, and that its remedy for incomplete reinstatement was to claim the cost of the works. The precise wording of your lease still matters.
Do we have to use the landlord’s contractor?
Only if the lease says so. If it does, the company can still ask for the quotation in advance and challenge charges that are unreasonable or outside the reinstatement scope.
Can we use the deposit to pay the last month’s rent?
Not if the lease prohibits set-off against rent, which many do. Withholding rent can put the company in breach and expose it to interest, costs and forfeiture.
Can we sue in the Small Claims Tribunals?
No, for a commercial lease. The Small Claims Tribunals’ tenancy jurisdiction covers leases of residential premises not exceeding two years. A commercial deposit claim goes to the Magistrate’s Court or District Court depending on the amount.
Need a lawyer?
This article is general information about Singapore law for companies, directors and shareholders. It is not legal advice, and it does not take account of your circumstances. Raffles Corporate Services Pte Ltd is a corporate service provider, not a law practice, and does not give legal advice.
If your landlord is withholding your company’s security deposit or claiming reinstatement costs you dispute, we can introduce you to an experienced Singapore law firm that handles commercial tenancy disputes. Tell us briefly what has happened and we will connect you.
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We can also take care of the corporate side for you: board and shareholder resolutions, register updates and ACRA filings.
Conclusion
A commercial security deposit is security, not a windfall for the landlord. Singapore courts have made clear that deductions must rest on the wording of the lease and on proof of actual loss, and that a landlord cannot use incomplete reinstatement as a reason to refuse possession and charge rent. The companies that recover their deposits are those that documented the premises at the start, managed the exit carefully and challenged unsupported deductions in writing. If your company is moving premises, a related problem may be staff changes; see our guide to retrenchment in Singapore, and if the board itself is changing, our guide to removing a director. For the board resolutions and ACRA filings that come with a move, speak to Raffles Corporate Services.
The Editorial Team, Raffles Corporate Services