What is a Tenancy Agreement in Malaysia?

A guide for first-time renters of residential properties in Malaysia. 

tenancy-agreement-malaysia

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The property renting culture in Malaysia is alive and kicking, especially in key urban areas like Klang Valley and Johor Bahru. For individuals, renting just makes more sense when property prices still remain too high for many of us to afford. It’s no longer like the 1980s where you can buy a single-storey terrace house for only RM50,000.

I know, because that’s what my mum paid for her house more than two decades ago. Now, that same house will cost you upwards of RM350,000 – mind you, that’s a 27-year-old house we’re talking about. Forget about new houses. Those are way, way above most of our budgets.

Therefore, renting is often the first option for most millennials who cannot afford to pay RM2,300 a month in loan repayments. Not only is it cheaper, but there is the added advantage of being able to move around anytime we fancy.

Bear in mind though, renting is not a walk in the park. There is a lot that goes into finding a property that you like and then finalising a deal with your landlord. And if you’re a first-time renter, this can all seem very confusing. One of the most important tenets of renting is the Tenancy Agreement, which is a document that outlines the roles of both tenant and landlord.

What is a Tenancy Agreement?

Young couple receiving house key from real estate agent

© Getty images

A Tenancy Agreement is a legal contract between the tenant and the landlord. This agreement will cover all the important facets of renting – from who is responsible for maintenance to how and when payment is to be made.

Since the Tenancy Agreement is a legally binding document, it is recommended that you hire a lawyer to look through the agreement (your potential landlord might have their lawyers draft it for them, so you may encounter some unfamiliar legal jargon if they do). But of course, lawyers are expensive.

You can however, choose to negotiate the agreement on your own without a lawyer. That’s perfectly fine, many people choose to do it this way. So if this is the path you’re going with, make sure to go through the agreement with a fine-toothed comb. Again, it’s legally binding so you don’t want to end up signing something filled with one-sided clauses favouring your landlord. You should get another person to look through the agreement as well to make sure you don’t miss anything out.

Unfortunately, there’s still no regulation or law in Malaysia on what can or cannot be added to a Tenancy Agreement. It is a free-for-all situation. So remember, be careful and check every clause thoroughly before signing on the dotted line.

That said, Malaysian renters can soon look forward to having their rights better protected – it was recently announced that the Ministry of Housing and Local Government (KPKT) is planning to implement a Residential Tenancy Act in 2 years time.

What are the key terms in a Tenancy Agreement?

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The basic terms that should be included in a Tenancy Agreement are the details of the property, landlord, and tenant; duration of tenancy, rental and deposit amounts, landlord obligations, tenant obligations, inventory list of what comes with the property, renewal clause and termination clause.

Other general clauses that you will see in a Tenancy Agreement include things like whether you can sublet the property to a third party (falls under Tenant Obligations), or if you are allowed to make minor renovations or whether you are required to return the property to its original state before leaving.

Everything stipulated in a Tenancy Agreement should be negotiated with your landlord beforehand. The document itself is a finalised version of your negotiations.

MORE: What are the terms that should be in a Tenancy Agreement for a rental property?

What happens after signing a Tenancy Agreement?

Once signed, the Tenancy Agreement has to be stamped by the Malaysian Inland Revenue Authority (LHDN) to make it valid and legal in the eyes of the Malaysian court. This is an important step that cannot be skipped. If the Agreement is not stamped, it can be admissible (basically invalid) in Court for cases involving a dispute. You don’t want to be caught in that situation.

A Tenancy Agreement needs to be stamped within 30 days of being signed. Generally, the tenants will pay the stamp duty. So, you can either choose to do it yourself to make sure it gets done or if your landlord had offered to do it, make sure to follow up with them. It’s also a good idea to have original copies of the Agreement stamped for each party – one for you, one for your landlord, and one for the agent if you’ve used one.

Edited by Reena Kaur Bhatt

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