Tenancy Agreement In Malaysia: Contract Preparation
In Malaysia, the prevailing practice of renting properties has been riddled with confusion and complications, especially regarding tenancy agreements. Issues such as racism and other influencing factors have further exacerbated the situation. However, the scenario is expected to undergo a transformation in the first quarter of 2022, as the Ministry of Housing and Local Government (KPKT) intends to introduce the Residential Tenancy Act (RTA) in Parliament, aiming to address these concerns and bring clarity and fairness to the tenancy process.
Without further ado, let's dive deep into tenancy agreement in Malaysia, and what are the things you should know about it.
Tenant Rights
The relationship between a tenant and a landlord is unique, requiring mutual agreement and effective collaboration to address rental concerns promptly. However, agreeing with the landlord doesn't mean tenants must always comply without knowing their rights. Before renting a property in Malaysia, there are essential aspects to be aware of:
1.) The landlord cannot evict a tenant without a valid reason, even if they own the property. The tenancy agreement is legally binding, and eviction can only occur if the tenant violates the agreement or engages in criminal activity on the premises.
2.) Maintenance fees and sinking funds are the landlord's responsibility, and they cannot impose these costs on the tenant if the tenancy agreement states otherwise.
3.) Rent increases must follow a formula, and the landlord cannot raise the rent abruptly without proper procedures in place. Tenants have the right to challenge unreasonable rent increases.
4.) The landlord must respect the tenant's privacy and cannot enter the property without prior notice or during unauthorized times.
5.) Oral agreements are not sufficient for a legitimate tenancy. Tenants should always have a written tenancy agreement to protect their rights and understand the terms and conditions.
Knowing tenant rights is crucial before renting in Malaysia to avoid potential conflicts and ensure a fair and lawful tenancy agreement.
Who Prepares The Tenancy Agreement ?
To ensure a comprehensive tenancy agreement, landlords are advised to seek the assistance of an attorney in drafting the contract. Similarly, potential tenants can consult their own lawyer to thoroughly review the agreement, suggest modifications, and reach a mutually agreed final version. However, it is important to note that hiring an attorney for this purpose can be expensive, leading many Malaysian landlords to opt for self-drafted tenancy agreements and asking potential tenants to accept them.
Presently, Malaysia lacks federal regulations that govern the extent and limitations of a tenancy agreement. Consequently, both landlords and potential tenants have the freedom to include various terms and conditions, potentially favoring one party over the other.
Costs Of Preparing The Tenancy Agreement ?
Once the tenancy agreement is drafted in Malaysia, there are certain costs involved, assuming a lawyer is hired for the contract preparation:
A.) Legal Fee
The legal fee is typically shared between the tenant and the landlord, rather than being entirely borne by the tenant. The legal fee structure is as follows:
For tenancy agreements with a duration of 3 years and below:
- 25% of the monthly rent for the first RM 10,000 rental
- 20% of the monthly rent for the next RM 90,000 rental
- Negotiable for rental amounts exceeding RM 100,000
For tenancy agreements with a duration of above 3 years:
- 50% of the monthly rent for the first RM 10,000 rental
- 20% of the monthly rent for the next RM 90,000 rental
- Negotiable for rental amounts exceeding RM 100,000
B.) Stamp Duty
Both parties involved in the agreement require a witness to sign the document, but it only becomes legally binding and admissible in court after being stamped by the Malaysia Inland Revenue Authority (LHDN). The responsibility for paying the stamp duty lies with the tenant, not the landlord. The stamp duty fees are determined based on the rental amount:
For rental amounts exceeding RM 2,400, the fee is calculated at RM 1 for every RM 250 above RM 2,400 rental.
- Less than 1 year: RM 1
- Between 1-3 years: RM 2
- More than 3 years: RM 3
- No stamp duty for annual rental below RM 2,400
C.) Administrative Fee
The administrative fee is a one-time charge based on the monthly rental amount and is paid by the tenant to the landlord.
Final Verdict
The information provided here is intended for general informational purposes only. Newproject1U makes no representations or warranties regarding the accuracy, completeness, or fitness for any particular purpose of the information to the fullest extent permitted by law.
That being said, seeking advice from a lawyer or a registered estate agent is highly recommended for any tenancy-related issues.
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