It’s an unspoken truth that most people only skim through the terms and conditions of an agreement. Many skips reading it altogether. However, taking the time to understand what you’re agreeing to in a tenancy agreement makes you an empowered tenant!
We must admit it; the average person will feel those tenancy agreements are full of legal jargon. Therefore, people will put their signature on it without fully understanding what they’re agreeing to. This will increase the probability of disputes in the future. You might even be entering an unfavourable deal.
Before you start looking for rental properties, first, you need to be aware of the most common terms and conditions to look out for in a tenancy agreement as well as the local law. Thereafter, when you have at least a basic grasp of what they mean, you are well on your way to being an empowered tenant!
1. Termination of the tenancy agreement
This clause is one of the most important clauses in a tenancy agreement as it will be the only exit for both parties. In addition to stating all the possible reasons and scenarios for the termination, the document should contain what the penalties are for each.
Most termination clauses will state that you will not be allowed to break the tenancy during the first year. Should you choose to end it before that, your security deposit will be forfeited. Some clauses may even state that you will be required to pay your landlord for the unexpired months of the tenancy. With proper notice, either party can terminate the agreement if the other doesn’t fulfil their obligations.
2. Tenancy period
The parties will have to agree on the period of the tenancy e.g. two years which at the end of the tenancy period, the tenancy agreement would be deemed expired.
3. Option to renew the tenancy agreement
Both the tenant and landlord will have to agree on the tenancy period. At the end of that period, the tenancy agreement would be deemed expired. However, the agreement usually also includes an option to renew the clause. This allows you to extend your lease for another term, subject to prior notice.
You should also be aware of something called an ‘escalation clause’. This is the landlord’s right to raise the rent in subsequent years, and is typically based on:
- A fixed amount
- Percentage (%) of the first year’s rent
- Based on the increase in living costs
4. Deposit and rental amount
Landlords usually require tenants to pay three types of deposits, which are earnest deposit, security deposit and utility deposit. Both parties must understand and agree on the monthly rental amount as well as the purpose of each deposit.
5. Mode of payment and the due date
The landlord must specify the latest date of the monthly payment and how he wished to be paid. It may be by cheque, cash or a direct transfer to the landlord’s account. The tenant, on the other hand, must be solely responsible to pay rent on time.
6. Subletting the unit and roommates
Subletting is when you, as a tenant, allow someone else to use the property, or part of it while collecting rent from them. This happens, although you are not the owner of the property and pay rent for it yourself. You will have to check your tenancy agreement to see if subletting is allowed. If it’s not permitted, your landlord can immediately terminate your lease if you’re caught subletting without their permission. You can also be subjected to an additional legal suit. You should also check your agreement on the terms and conditions regarding roommates. You don’t want to find yourself in a legal dispute because you failed to read the agreement properly!
7. Landlord insurance
Some landlords include a ‘landlord insurance’ which covers them against any potential damages that their property may suffer because of irresponsible tenants. Additionally, they will also be protected if a tenant suddenly disappears, or when their tenant suffers an injury due to an existing or previously unnoticed malfunction or damage on the property. There will usually also be mention of the repayment you’d have to make to the landlord in case you accidentally voided the insurance.
8. Obligations of landlord and tenant
The duties and obligations of both the tenant and landlord for the entire tenancy period are outlined in a tenancy agreement. Eg: pay bills and rent on time, keeping the house safe and undamaged, no subletting etc. Failure to adhere to compliance could result in legal action.
9. Diplomatic clause
This is a clause you normally find if you are an expatriate working in Malaysia. In essence, a diplomatic clause allows you to end a tenancy before the agreed period. This is triggered in the event you are relocated by your company or are no longer capable of working in a state/country.
With this clause, you will not need to pay the remaining monthly rent for the duration of the tenancy that is unoccupied. A diplomatic clause should specify the following:
- The notice period for termination of tenancy
- The compensation that the tenant must provide if the notice period isn’t met
The list of items that are provided by the landlord and handed over to the tenant. The items listed are expected to be returned in good working order at the end of the tenancy.
Don’t assume all tenancy agreements are the same!
As is the case with all contracts, a tenancy agreement is an agreement between the landlord and tenant. While there may be standard issues to cover, contracts are always negotiable. To ensure the document doesn’t leave out any important details, you can consult a lawyer to review the agreement and make any changes before signing.
Edited by Rebecca Hani Romeli
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