Demystifying The 3 Types Of Rental Deposits

PropertyGuru Editorial Team
Demystifying The 3 Types Of Rental Deposits
Getting your first job secured and moving into a whole new place is quite nerve-wracking.
But with the help of the leading real estate website like PropertyGuru, you can find the perfect apartments to rent which fits all your criteria.
Right after that comes the complicating tenancy agreement. Tenancy contracts in Malaysia are usually set for a period of one year that requires several deposits to be paid along with it.
But these can be negotiated with the landlords since the rent control has been lifted.
There are several types of deposits you’re required to pay when getting a rental house.
You might be baffled for a little with the various kinds of deposits, but fear not, this article will answer your doubts!

1. Earnest Deposit

This deposit is paid when the tenant is interested in a particular property but is not able to move-in at that time.
This deposit is used to reserve the property and is more commonly paid when purchasing a property instead of renting.
It is advisable to discuss the terms of this deposit with the landlord before making the payment, as sometimes the deposit is returned or used as the security deposit.

2. Security Deposit

This deposit is supposed to cover all damages caused to the rented property by the tenant, as well as the furniture that are provided at the rented property.
This security deposit is to help the landlord cover-up his rental in search of a new tenant. At times, this deposit may be forfeited if the contract comes to an end before the actual end-date.
Usually, this deposit is returned fully to the tenant at the end of the tenancy agreement, given no damages are done to the unit with no pending rental payments.
Repairs are quite common in any household. Hence, if there are urgent and major repairs that need to be done, it is the landlord’s responsibility to get it fixed for the tenant.
For those who opt to fix it by themselves, it is wise to take a picture of the repairs (before and after), as well as save the receipt of the repaired or changed items.
Ensure that the landlord is informed of this so that you can get a refund on the repair works.

3. Utility Deposit

The utilities such as electricity and water are calculated as part of the rental payment. Landlords usually collect this deposit or request the tenants to handle these payments by themselves.
Landlords use this deposit to pay for the pending utility bills when tenants fail to do so.
This deposit is usually returned in full at the end of the tenancy agreement given no pending payments on the utility fees.

How Does The Process Work?

Upon agreeing to the terms and conditions of the rental, tenants are usually required to pay the Earnest deposit, which covers one month’s rental and also considered as a booking deposit.
The landlord usually will not rent out the unit to other prospective tenants upon receiving this deposit.
Meanwhile, the tenant would be required to pay a security deposit upon signing the tenancy contract. This usually amounts to two months’ rent and a half a months’ utility deposit.
This tenancy agreement should be stamped by the Inland Revenue Department (IRD), whereby the tenant usually pays the stamp duty.
The tenancy agreement should be signed within seven days, from the day the earnest deposit is paid.
The foreigners who live in Malaysia should pay attention to the diplomatic clause in their tenancy agreement.
This clause will be helpful when the contract has to be terminated much earlier than the actual date.
Foreign tenants are required to produce proof supporting their reasons for moving out of Malaysia.
The landlord must be given a written notice of two to three months before the termination of the agreement.
Before vacating the rented property, it is also safer that you get your landlord to walk through the place with you, and get them to sign a simple agreement that you have left the place in a fair condition.
Tenants mostly assume that nice landlords do not hold the deposits back. It’s after all, your money, and you have the right to protect your deposit.
Disclaimer: The information is provided for general information only. PropertyGuru International (Malaysia) Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

Frequently Asked Questions (FAQ's): Types Of Rental Deposits

Tenant will be required to pay i) an earnest deposit, ii) a security deposit, and iii) a utility deposit. Each one serves a different purpose, and the amount is set by the owner.

When tenants agree to the terms and conditions of the rental, they are usually required to pay the Earnest deposit (i.e. booking deposit), which covers one month's rent. Then, upon signing the tenancy agreement, a security deposit of two months' rent and half a month's utility deposit is required.

The tenant is also responsible for paying the stamp duty fees when the tenancy agreement is stamped by the Inland Revenue Department (IRD)

First, review the tenancy agreement for the section on deposit return, and then calmly discuss the issue with the owner. If the problem persists and the owner fails to return the deposit, you may wish to consider legal action.