The question of where to live has different answers for everyone. Some people want to buy an affordable home on the outskirts of town, while others are on the hunt for an awesome condo to rent in downtown KL. In meeting those needs, more and more Malaysians are deciding to rent property rather than buy, whether for economic or individual reasons.
Affordable homes have been a big part of the conversation in Malaysia over the last decade. As house prices have risen, so too has the pressure on the nation’s rental market.
The question of rental practice, and tenancy agreements in Malaysia, can sometimes seem a little confusing though. So in order to clear up the complications of rental practice, we’ve created a comprehensive guide to tenant rights and the role of a rental agreement in Malaysia.
What Are Your Rights As A Tenant?
Tenant rights in Malaysia are something of a complicated picture. While there’s currently no specific legislation covering rental agreements, a study is underway to introduce a much-anticipated Residential Tenancy Act in the next few years.
This act is not only designed to protect tenants but to ensure a fair market for landlords too.
As things currently stand, there’s no single regulatory framework or mandatory contractual obligation for a specific tenancy agreement.
You can meet Ali on the street and agree to move into his apartment, creating an oral agreement for tenancy. Of course, you’d be mad not to check the house first!
So what laws impact the rights and responsibilities of tenants and landlords? Here’s a quick list:
- Contracts Act 1950 – is the legislation which would cover conflicts in the tenancy agreement
- Civil Law Act 1956 – is the legislation which would cover payment disputes
- Distress Act 1951 – is the legislation covering matters of eviction
- Specific Relief Act 1950 – prohibits a landlord from evicting the tenant or making the property inaccessible to tenants without a court order
- Common Law/Case Law – is an overarching framework which would cover rental disputes
One crucial piece of legislation to note is the definition of a tenancy itself. Under the National Land Code, any rental under three years is defined as a ‘tenancy’, and does not require registration.
Any lease for a period longer than three years is technically defined as a ‘lease’, and would require registration.
So with all these complications, how best to protect yourself? Well, a tenancy agreement is a good place to start.
Here are more details of the tenancy agreement, and a tenancy agreement sample below:
This kind of rental contract lays out the terms and conditions agreed upon by the landlord and tenant at the start of a rental period.
It’s an important document to ensure that both parties understand their responsibilities, and both parties have their rights protected.
While the sample rental agreement above offers a general template, the nuts and bolts of an agreement are down to you and the landlord.
That can include standard clauses such as rental cost and rental period, but also cover oddly specific things such as whether your goldfish is allowed to stay, or even if you’re allowed to decorate your bedroom.
It’s common for landlords or letting agencies to offer an existing tenancy agreement template, but don’t be afraid to ask for additional clauses if you really want to make sure things you’ve discussed are set down in stone.
Make sure you check the property thoroughly before signing the agreement too – often you’re accepting the property as it currently is, meaning if you miss out on a broken air-cond now, you might be charged for it later.
Now, here are some of the things you should look for in a rental agreement:
- Monthly rental fee
- Duration of the rental agreement
- Penalties for late payments
- Terms and conditions around changes to the rental cost
- Terms and conditions around duty of care
- How costs are attributed to repairs
- Terms and conditions on the return of deposit(s)
- Terms and conditions on subletting/additional tenants
- Utility bill and property tax obligations
- Special clauses (pets, smoking, access to amenities)
You should have a lawyer look over any house rental agreement if you’re uncertain of your rights or responsibilities. That could come with costs now, but it might cost you a whole lot more later if you don’t check. Having the agreement legally stamped is also important. You can find out more about those costs below!Check out properties for rent
Early Termination Of Tenancy Agreement In Malaysia
This is a question that gets asked a lot, so it’s worth highlighting clearly.
Under current contract law in Malaysia, if you sign a two-year rental agreement, and then choose to cancel after one year, you may be liable for the 12 months of outstanding rent.
Since the original tenancy agreement covered a two-year period, then contractually you are obliged to fulfil that obligation! Sucks? Sure does.
There’s also a situation where a change of ownership may cause issues. If a rental agreement is registered as a lease, then in the event a property is sold, the new owner is automatically tied to that agreement.
If the property is rented for less than three years, and the owner claims no knowledge of the rental agreement, the buyer may have the right to remove the tenant.
Such problems can be smoothed over if the original owner sets out terms as part of the Sale and Purchase Agreement to allow the tenancy to run its course.Check out properties for rent
What Your Landlord Should Expect Of You
Don’t forget – landlords have their own rights too!
Many of those rights will be set out in the rental agreement itself, but a common understanding of a tenant’s duty of care and respect for property can be summarised fairly simply with the following expectations:
- Timely payment of a rental fee
- Expectation you will exit the property at the end of the tenancy
- Duty of care to maintain the property to a decent standard
- Obligation not to renovate/alter the property
- Expectation you will pay all relevant bills
- Understanding of returning the property in the condition you received it
Your Obligations As A Tenant
We sometimes think of our obligations (while we’re tenants) as simply financial one. It’s true though, that the landlord is going to come looking for you if you don’t pay your monthly rent!
You also have obligations to ensure you maintain that property at a good standard and care for it during your tenancy. Those responsibilities can include:
- Payment of relevant deposits at the start of the tenancy
- Payment of rent on time as agreed
- Duty to notify the landlord of any necessary repairs
- Duty to keep the property clean and safe
- Commitment to not break relevant laws or statutes
- Payment of utility bills
- Permission for any new tenants/sublet in the property
Rental Fee And Costs
There’s that little matter of deposits or booking fees to consider when signing up for a rental property.
The rent might be RM1,000 a month, but chances are you will need a more substantial deposit upfront.
This is typically in the form of a security deposit, committing an amount that goes towards any repairs in the event you cause damage to the property.
This is often set at the equivalent cost of 2 months rental. So if your rent is RM1,000, the deposit would be RM2,000. The earnest deposit is another element of the rental market worth noting.
This is often priced at an amount equivalent to the first month’s rent and is considered a holding fee to note your intent for a property and ensure the landlord doesn’t rent it out elsewhere.
This should be paid to a reputable agent, who acts as a responsible (and NEUTRAL) third-party holding this fee.
Make very certain you understand the terms and conditions around the earnest deposit, what it counts towards, and what happens once the full agreement is complete.
A utility deposit may also be taken, which would provide payment security against any unpaid utility bills at the time the rental agreement ends.
Stamping fees and administrative charges may also be required, and relate to legal review and stamping of the rental contract agreement. This means a lawyer has reviewed and certified the tenancy agreement.
It’s worth discussing where this obligation for these fees will sit, since in some cases a landlord would shift those to a tenant rather than pay themselves.
Often the legal fees are paid by the landlord, and the stamping duty by the tenant.
2023 Rental Legal Fees
|Monthly Rent||Scale Legal Fee|
|RM10,000 or less||30% of the monthly rent (subject to a minimum of RM500)|
|Exceeding RM10,000||A minimum of 15% of the monthly rent but shall not exceed 25% of the monthly rent|
Stamping fee (calculated for every RM250 in excess of RM2,400 annual rent)
Up to 1 year
1 – 3 years
> 3 years
What Happens In A Tenancy Dispute
Good communication is the first step to preventing any disputes! Be honest and open with your landlord or landlord’s letting agent.
That means if accidents happen or things break down, you should tell them. Likewise, it’s important your landlord keeps you informed of any problems.
If they’re sending around a repairman to upgrade or fix something in the house, they should tell you in advance, and not just assume you’re happy that some random plumber turns up without warning.
These are basic examples, but paint a picture of the importance of good communication.
Discussion should always be the first step in any dispute. It may be that a verbal agreement can fix a problem far better than any legal action.
Many such disputes will already be covered by the terms and conditions of a good tenancy agreement.
Common Legal Problems For Renters
The most common legal problem for renters is the question of early termination of the contract outlined above.
Let’s stress again – if you terminate a rental contract agreement early, you may be liable for the full rental payments due for the remaining term of the contract.
Early termination by the landlord is another common problem. Your tenancy agreement should cover this situation also.
It is unlawful for a landlord to evict a tenant randomly, without a court order, as covered in the Specific Relief Act 1950.
This legal cover also includes your landlord making the property inaccessible by changing the locks.
If, however, you fail to pay your rent on time or damage the property, there is likely to be a clause of termination as a result.
The landlord can serve you with a payment notice, and then seek eviction if you fail to pay. This process is a lengthy and often costly one for the landlord.
Tenant Do’s and Don’ts
With all the considerations you need to make as a tenant, let’s explore a quick reference list of Do’s and Don’ts to help you through.
Check a property thoroughly before renting
Agree to a verbal contract
Check and sign a tenancy agreement
Miss rental payments
Discuss terms of return of the deposit
Sublet part/all of the property
Pay rent on time
Ignore repairs or problems
Maintain property at a good standard
Damage the property
Report any faults or repairs
Breach your rental agreement
Pay utility bills on time
Renovate or alter the property
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.