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29 December, 2018

Rights as a Renter in Malaysia

You are not wrong if you possess a mindset of renting is much easier than buying a property. There are few basics things first-timers need to equip themselves with before they start searching for rental property. Now that new year is around the corner, it is the perfect time for brand-new starts. On top of the list is finally getting a place of your own, maybe in Cheras or Petaling Jaya. Here’s a guide for beginner to rent a property.

Renters have their own rights when renting a property whether it is for residency or working purpose. However, till this date, parliament has yet to pass any comprehensive law covering landlord and tenant. So far, the only property-related act that was discussed and even abolished was the Control of Rent Act 1966 which applied to rent-controlled premises or “pre-war” buildings; those colonial buildings built before World War 2. As constructing some form of landlord-tenant legislation will be in bits, here’s a list of laws that is frequently used in the real estate industry:

1. Contract Act 1950
2. Civil Law Act 1956
3. Distress Act 1951
4. Specific Relief Act 1950
5. Common Law/Case Law

Tenancy Agreement
What is a tenancy agreement? It is simply a contract which spells out clearly all the terms and conditions regarding the rental of a certain property. It is signed by the landlord and client after round of negotiations. Once the paper is signed, both are bound by what is stipulated in the agreement and are expected to honour those terms. Short-term agreement usually not more than three years, according to Act 56 of the National Land Code 1965.

There are some landlords that may draft their own tenancy agreements but best practice necessitates that a lawyer is the best person to do so, or in the case you are dealing with a moonshine version of it. However, at the end of the day, you still have to ensure it is revise or review by professional. The ultimate goal is to ensure both parties are protected during the tenancy period.

Do take note that when hiring lawyers, the legal fees involved for drafting tenancy agreement is usually absorbed by the landlord and it is more of common practice as there are no provisions for this. That means if tenants want to vet the tenancy agreement, the onus is on them to hire their own lawyer.

Costs involved
Though the legal fees to draft the agreement are typically paid by the landlord, the stamp duty is borne by tenant.

Legal fees for tenancy agreement period for three years and below. These refer to annual rent.
First RM10,000 - 25% of monthly rent
Next RM90,000 - 20% of monthly rent
More than RM100,000 - negotiable

Stamp duty:
Rental for every RM 250 in excess of RM2,400 rental
Less than 1 year: RM1
Between 1-3 years: RM2
More than 3 years: RM3
Annual rental below RM2,400: no stamp duty

So, if you are renting a property for RM2,000/month and have signed on for a 1-year lease, the amount of Stamp Duty you have to pay is:
[RM24,000 (annual rent) - RM2,400 / RM250] = RM86.40

Tenancy Agreement details
Other than the legal fees and stamp duty, there are other clauses under the tenancy agreement that you should pay attention to. Missing out on one these important clauses can result in dispute or additional costs on your end. You can use this checklist if you are a first- timer or on the lookout for a new unit. Just remember that the time is always on your side.

1. Monthly rental
Since the abolishment of the Control of Rent Act 1966, homeowners and potential tenants can negotiate rental rates freely. Usually, landlords will state the range they are looking for, and it is up to the tenants whether to comply or not to comply. To ensure you are paying a fair rental, shop around and compare the rental of similar units within the same area and negotiate accordingly.

Once both parties have agreed on the amount, your tenancy agreement should have set a date when the rent should be paid monthly. While most of the time it happens at the end of the month, with a grace period of an additional seven days. This is also not set in stone as you could negotiate a date both you and your landlord can agree on, should you need to pay at a slightly later date every month.

2. Security deposit
This acts as an ‘insurance’ of sorts for the landlord in case a tenant inflicts damages his or her property. This encompasses any furniture provided during the tenancy period. It also protects the landlord in the event the tenant fails to pay his rent. To protect yourself, always check the tenancy agreement thoroughly and iron out all the details before you pay any deposit. If you pay the deposit, even a certain percentage of it first, and then realised that you can’t live with some of the clauses set out in the agreement, your deposit can be forfeited.

3. Landlord and tenant details
When you include the full name, I/C passport number and address of both parties are available and accurate in the tenancy agreement, ensure that it is accurate as it will be serve as a reference should any problem arise with the tenancy.

4. Commencement and end date
Ensure that the keys given to your unit is the date the tenancy commences and also the date you move out is the end date. In the agreement, also include the notice period tenants should serve before moving out or if they want to renew the tenancy agreement.

5. Special requirements
Hash out every single point with your landlord and negotiate the pain points, even if the landlord drops the default “standard agreement” line. Doing this avoids costly legal problems in the future and avoid conflicts.

6. Payment mode
Payment method has to be specified in the agreement. Some landlords prefer to collect rental in cash at the unit while some prefer to have banked into their account. In these technological era, most landlords are fine with online transfers for hassle-free and trackable.

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