Good Faith Deposit: How Singapore Landlords Protect Themselves

The good faith deposit—typically one month's rent—commits a prospective tenant to renting your property before the tenancy agreement is signed. Collect it immediately after a viewing when the tenant expresses serious interest, accept only bank transfer or PayNow (never cash or cheque), and check cleared before moving forward with negotiations or drafting documents. This deposit protects your time by filtering out non-serious applicants and provides financial recourse if the tenant backs out after you've taken the property off the market.

Key Takeaways

• Good faith deposit differs from security deposit: Collected during negotiation (not at move-in), protects against tenant backing out, typically applied toward first month's rent or security deposit
• One month's rent is the standard amount: Collecting less provides insufficient protection; collecting more is acceptable if mutually agreed
• Check cleared before proceeding is non-negotiable: Don't draft tenancy agreements, finalize terms, or invest time in verification until money clears your bank account
• Accept electronic payments only: Bank transfer, PayNow, or GIRO create instant records and immediate verification; cash and cheque signal serious problems
• Cheque plus urgent move-in equals default risk: Tenant hopes to move in before cheque bounces, leaving you with a defaulting tenant already in your property
• Deposit forfeiture terms must be clear: State upfront whether deposit is refundable and under what conditions to avoid disputes later

What Is Good Faith Deposit

The good faith deposit demonstrates a tenant's commitment to renting your property. It's collected after viewing but before signing the tenancy agreement—usually the same day the tenant decides to proceed.

Timeline clarification:

1. Tenant views property
2. Tenant expresses interest in renting
3. Good faith deposit collected ← You are here
4. Deposit clears your account (1-2 days for electronic transfer)
5. Detailed negotiations and document verification
6. Tenancy agreement drafted and signed
7. Security deposit collected (at move-in)
8. Tenancy begins

The good faith deposit protects the landlord during the period between tenant commitment and tenancy start. Once you accept a tenant's offer and collect their deposit, you typically remove the property from market listings. If that tenant backs out, you've lost other potential applicants who viewed the property during that period.

Good Faith Deposit vs Security Deposit

These serve different purposes at different stages:

| Aspect | Good Faith Deposit | Security Deposit | |--------|-------------------|------------------| | When collected | After viewing, before TA signed | At move-in, when TA is signed | | Purpose | Commits tenant during negotiation | Protects against damages/unpaid rent during tenancy | | Typical amount | One month's rent | One or two months' rent (depends on lease length) | | What it protects | Landlord's time and opportunity cost | Property condition and rental payments | | Applied toward | First month's rent or security deposit | Returned at tenancy end (minus damages) | | Refundable? | Depends on agreed terms | Yes, minus legitimate deductions |

Some landlords conflate these deposits. Keep them separate in your mind and in your agreements. The good faith deposit happens before commitment is formalized. The security deposit happens when commitment becomes legal obligation.

When to Collect Good Faith Deposit

Collect immediately when tenant expresses serious interest.

Right after viewing, if the tenant says "I want to rent this place," your response should be: "Great. I'll need a good faith deposit of [amount] to hold the property for you while we finalize the tenancy agreement. Bank transfer or PayNow works best."

Don't wait until:

• After they "think about it overnight" (they might find another property)
• After you've drafted the tenancy agreement (waste of your time if they back out)
• After you've negotiated detailed terms (waste of your time again)

The deposit comes first. Everything else comes after.

This sequence filters non-serious applicants immediately. Someone genuinely ready to rent will transfer the deposit on the spot using their phone. Someone "just looking" or testing multiple options will hesitate.

That hesitation is your answer. Move to the next applicant.

How Much to Collect

Standard practice: One month's rent

On a $2,500/month property, collect $2,500. On a $4,000/month property, collect $4,000.

Why one month specifically?

This amount represents meaningful financial commitment without being excessive. It's large enough that tenants won't casually forfeit it, yet reasonable enough that qualified tenants can pay it immediately.

Can you collect more?

Yes, if both parties agree. Some landlords charge 1.5 months or two months as good faith deposit, especially for high-value properties or tenants with weaker credentials.

Can you collect less?

Technically yes, but not recommended. Collecting half a month's rent ($1,250 on a $2,500 property) provides insufficient protection. If the tenant backs out, your lost opportunity cost from removing the property from market exceeds that amount.

Exception for lower-value properties:

On properties below $1,500/month, strict one-month deposits might deter qualified tenants. Consider case-by-case flexibility, but never go below half a month's rent.

Check Cleared Before Moving Forward

This is the single most important rule.

Don't draft the tenancy agreement until the deposit clears your bank account. Don't finalize rental terms. Don't complete document verification. Don't invest hours of your time.

Wait for cleared deposit first.

Why this matters:

A tenant who issues a cheque instead of electronic transfer buys themselves three to five days before the cheque bounces. If they combine that cheque with an urgent move-in request ("I need to move in this weekend"), they're planning to occupy your property before the cheque clears.

By the time the bank notifies you of the bounced cheque, the tenant has already moved in. You now have a defaulting tenant occupying your property, and eviction proceedings take months.

A landlord in Singapore accepted a tenant's cheque for the good faith deposit along with a request to move in within three days. The landlord—eager to fill the vacancy—agreed. The tenant moved in. Four days later, the bank returned the bounced cheque. The tenant stopped responding to calls. Eviction took five months, cost $8,000 in legal fees and lost rent, and the tenant damaged the property before finally leaving.

Checking cleared prevents this scenario entirely.

The tenant pays by bank transfer. You verify the money in your account the next day. Only then do you proceed with negotiations and drafting. If they're a scammer, you discover it before they're in your property.

Acceptable Payment Methods

Accept these methods ONLY:

• Bank transfer (instant verification next business day)
• PayNow (instant verification same day)
• GIRO (for tenants with existing Singapore bank accounts)

These methods create automatic paper trails, deposit directly into your account, and clear within 24 hours.

Reject these methods ALWAYS:

• Cash
• Cheque
• "I'll pay later"
• Cryptocurrency
• Third-party payments from someone other than the tenant

Why Cash Payments Are Red Flags

Cash seems convenient—you receive physical money immediately. But cash creates three problems:

Problem 1: Frozen bank accounts

Legitimate tenants with regular employment have bank accounts. Electronic transfers take seconds on their phones. Why would someone insist on cash instead?

Answer: Their bank account was frozen or terminated. Banks freeze accounts when customers owe money or use accounts for illicit activities.

Problem 2: Money laundering concerns

Large cash transactions raise questions. Where did this cash come from? Why isn't it in a bank? If authorities investigate your tenant for money laundering, you become part of that investigation.

Problem 3: Precedent setting

Accepting cash for the good faith deposit sets expectations for ongoing rental payments. The tenant will expect you to accept cash every month. That means monthly meetings to collect physical cash, manual receipt writing, and constant trips to deposit money at the bank.

Exception: Genuinely new arrivals

Foreigners who arrived in Singapore within the past week and haven't opened local bank accounts yet might legitimately have only cash. In this case, accept cash temporarily with the explicit requirement that they open a bank account within two weeks and switch to electronic payments immediately.

Why Cheques Are Even Worse

Cheques are the payment method of choice for scammers.

The cheque scam works like this:

Day 1: Tenant issues cheque for good faith deposit Day 2-3: You proceed with tenancy agreement drafting and negotiations Day 4: Tenant moves in (urgent request) Day 5-7: Cheque goes through bank clearing process Day 8: Bank notifies you the cheque bounced

By Day 8, the tenant is already living in your property, has defaulted on the deposit, and likely has no intention of paying rent.

Even if the cheque clears successfully, do you want to collect rent via cheque every month? That means the tenant delivers a physical cheque, you deposit it at the bank, you wait for clearing, you discover bounced cheques after the fact, and you chase the tenant for replacement payment.

Electronic transfers eliminate all of this. Reject cheque payments for good faith deposits without exception.

For more on payment method red flags during the screening process, see our guide to red flags before signing the lease.

What Happens If Deposit Bounces

If you ignored the advice to check cleared and the deposit bounces:

Immediate actions:

1. Halt all progress on tenancy agreement
2. Contact tenant immediately—phone call, not message
3. Demand electronic payment replacement within 24 hours
4. Do not draft any documents or finalize terms until cleared

If tenant refuses or delays replacement: End negotiations immediately. This tenant has already demonstrated unreliability before the tenancy even starts. Imagine how they'll behave when rent is due.

If tenant provides excuses: "Banking error," "wrong account," "insufficient funds"—all of these indicate financial problems. A tenant with stable income and healthy bank accounts doesn't have cheques bounce.

Move to the next applicant.

Deposit Forfeiture vs Refund

Establish terms upfront before collecting deposit.

Typical arrangements:

Non-refundable if tenant backs out: If the tenant changes their mind after paying the deposit but before signing the tenancy agreement, they forfeit the deposit. You keep it as compensation for removing the property from market and losing other potential tenants.

Refundable if landlord backs out: If you decide not to proceed with this tenant (found someone better, changed your mind about renting), you refund the deposit in full. You can't keep their money if you're the one canceling.

Applied toward rent if tenancy proceeds: If both parties proceed to sign the tenancy agreement, the good faith deposit applies toward first month's rent or security deposit. The tenant doesn't pay double—their deposit gets credited.

Document these terms in writing when collecting the deposit.

Send a message or email: "Confirming receipt of $2,500 good faith deposit for [property address]. Deposit will be applied toward first month's rent if tenancy proceeds, or forfeited if you back out before signing. If I decide not to proceed, deposit refunded in full."

This prevents disputes later about whether the deposit was refundable.

Red Flags Related to Deposits

Watch for these warning signs:

Tenant haggles on deposit amount: "Can I just pay $1,000 instead of $2,500?" suggests limited funds. If they can't afford the deposit, can they afford monthly rent?

Tenant delays payment: "I'll transfer tomorrow" or "I need to check with my spouse first" means they're still considering other options. Serious tenants pay immediately.

Tenant asks for receipt before paying: Legitimate question, but handle it correctly. Provide receipt after payment, not before. "I'll issue a receipt once the deposit clears my account."

Tenant wants to pay in installments: "Can I pay half now, half next week?" indicates cash flow problems. Hard pass.

Tenant asks if deposit is negotiable: The amount might be negotiable for very high-value properties. But questioning whether to pay a deposit at all signals someone who isn't ready to commit.

For comprehensive red flag identification during viewings, see our guide to early warning signs of bad tenants.

Protecting Yourself Beyond the Deposit

The deposit filters non-serious applicants and provides financial recourse. But it's just one part of screening tenants on your own.

Complete screening includes:

After deposit clears:

1. Verify all documents (NRIC, work pass, payslips, employment letter)
2. Use government portals (MOM for work passes, ICA for student passes)
3. Interview tenant with structured questions
4. Check Tenant Griffin database for problem tenant history
5. Assess intention behind renting (why are they looking?)
6. Review behavioral red flags from viewing

For the complete process of screening tenants without an agent, see our comprehensive DIY screening guide for Singapore landlords.

Frequently Asked Questions

Is good faith deposit legally required in Singapore?

No. Singapore law doesn't mandate good faith deposits for residential tenancies. However, it's standard market practice and strongly recommended to protect your time and opportunity cost when you remove the property from listings after accepting a tenant's offer.

Can I keep the good faith deposit if the tenant backs out?

Yes, if you established non-refundable terms upfront when collecting the deposit. The tenant committed to renting your property, you removed it from the market based on that commitment, and you lost other potential tenants during that period. The deposit compensates you for that loss.

What if the tenant says they can't transfer deposit until they go home to use their computer?

This is a delaying tactic. Everyone has banking apps on their phones in 2026. Electronic transfers take 30 seconds. If someone claims they need to go home to access a computer, they're either stalling to consider other options or they don't actually have the funds available. Tell them the property remains available to other interested parties until you receive the deposit.

Should I provide a receipt for the good faith deposit?

Yes, always. Provide a written receipt after the deposit clears your account. The receipt should state: amount received, date, property address, tenant name, and how the deposit will be applied (toward first month's rent, security deposit, or forfeited if tenant backs out). This protects both parties.

Can the good faith deposit be higher than one month's rent?

Yes, if both parties agree. For high-value properties ($8,000+ monthly rent) or tenants with weaker credentials (new to Singapore, self-employed with irregular income), landlords sometimes request 1.5 or 2 months' rent as good faith deposit. Ensure mutual agreement before collecting.

What happens to the good faith deposit if I decide not to rent to the tenant?

You must refund it in full immediately. If you collected the deposit, conducted verification, and decided the tenant doesn't meet your criteria, that's your decision—not theirs. Return their money within 24-48 hours. Keeping deposits when you're the one backing out creates legal liability.

How long should I wait for the deposit to clear before proceeding?

Bank transfers and PayNow typically clear within one business day. Wait until you can verify the money in your account—usually the next business day. Don't start negotiations or document drafting until you have confirmed cleared funds.

Is it normal for tenants to negotiate good faith deposit terms?

Some negotiation is normal—primarily around refundability conditions. Negotiating the amount is less common. Questioning whether to pay a deposit at all is abnormal and signals a non-serious applicant. Legitimate tenants understand deposits are standard practice.

The good faith deposit serves as the first filtering mechanism when screening tenants yourself. Collect it immediately when interest is expressed, verify it cleared before investing time, and never accept cash or cheque payments. Combined with systematic document verification and behavioral assessment, deposits protect landlords from wasted time and financial loss.

For understanding the full cost structure when screening tenants on your own versus using agents, see our guide to tenant screening costs in Singapore.