Property investment is the hype but property nightmares are often shoved under the carpets. In this series of Property Nightmare Stories, PropertyGuru gets down on the ground to find out firsthand what can happen when a landlord does not provide tenancy agreement or plotting to do it through ‘DIY’.
Sandra is a landlord who rented her unit three months ago to a tenant without a tenancy agreement. She ponders if the tenancy is legitimate without a signed agreement between both sides.
She is planning to come up with an agreement and hoping her tenant would penned it down to paper. She plans to use an agreement template that can be found through the internet. She is trying to avoid any legal charges, which also include stamping charges.
Sandra is confident that the body of the agreement would be in accordance to its standard practice. Despite wanting to do things independently, she is still concern if the agreement would be invalid especially in unwanted and unforeseen circumstances.
We will deal with the issues in a few points below.
1. No written tenancy agreement in place
- A tenancy does not have to be in writing. The National Land Code states that a tenancy can be done orally. The act of the Landlord receiving Rent and the Tenant paying Rent on a monthly basis for the benefit of the Tenant staying at the Landlord’s premises would constitute a tenancy.
- Some landlords and tenants prefer to have this arrangement with no agreement in place. This is valid. The problem with this is when issues start to arise or the relationship turns sour. For instance, the Tenant has defaulted on payment or the Tenant has damaged the property through its acts or the Landlord refuses to return the Deposit upon expiration of the tenancy. With an agreement in writing, it is easier to identify the rights and responsibilities of both parties.
- When these problems arise, it is true that the Landlord and/or Tenant would still have a recourse in law. However, the process would be more cumbersome and takes a longer period when resolving any disputes, as it will probably be “my words against yours” kind of situation. With a written tenancy in place, the whole process would be made simpler as their rights, obligations and liabilities will be governed by the written agreement entered into. Having a written agreement would also prevent parties from easily breaching the agreement at the first place.
2. Signing a tenancy agreement half way through the term of the tenancy
- A tenancy can be on a week by week, month by month, year by year or on a periodic basis. In the absence of any agreed fixed tenancy period, the Court may likely rule that the tenancy to be a monthly tenancy.
- Signing a tenancy agreement half way through the term of the tenancy is possible. If Sandra’s tenant does not wish to sign the tenancy, Sandra can terminate the tenancy by giving at least one month notice to the tenant. In such event, she can renegotiate with the Tenant in respect of the future tenancy (rather than forcing the tenant into signing a tenancy with her) and if the tenant refuses to further rent the Property, Sarah may proceed to find a new tenant.
3. Preparing a tenancy agreement as a layman and its validity
- A tenancy agreement can be prepared by non-lawyers. It is valid.
- Having said that, a well-drafted tenancy agreement by lawyers, catered to the specific needs of both parties would offer better protection for both. Further, a lawyer may provide useful advisory and assist in conducting certain necessary searches prior to the preparation of the tenancy agreement.
- Tenancy agreements are not standard per se. For instance, some tenancies are of a fixed term (i.e. landlord and tenant cannot terminate the tenancy prior to its expiry and the defaulting party must compensate the other party in terms of the remaining unexpired term of the tenancy should the party wish to terminate the tenancy) or some tenancies have an early termination clause (i.e. landlord and tenant are allowed to terminate the tenancy prior to its expiry by giving a two months written notice to the other party).
4. Stamping of tenancy agreement
- A tenancy agreement that is not stamped is not void or unenforceable. However, the formality of the said tenancy agreement may be in question if the tenancy agreement is not duly stamped. An unstamped tenancy agreement may be inadmissible in Court as evidence if parties were to bring the tenancy disputes to Court.
To visit some of the other nightmares, look for the one you resonate with most:
- Property Nightmare Stories #1: Amanda and her MIA Tenant
- Property Nightmare Stories #2: A Swindler’s Set-Up
- Property Nightmare Stories #3: My Electricity Wasn’t Working So I Stole My Neighbour’s
- Property Nightmare Stories #4: You have 24 hours to get out of my house. April fool… ?
- Property Nightmare Stories #5: Private arrangement between tenants – Less hassle at the moment but more issues in the future?
- Property Nightmare Stories #6: My landlord wanted me to continue paying full rental even though the roof was leaking onto the living room
- Property Nightmare Stories #8: Why is your contract different from mine? Why do I have to pay you RM24,000 to move out?
This article was contributed by Alvin Teo (Advocate & Solicitor- Messrs Mak, Ng, Shao & Kee) and Nicole Ng (Advocate & Solicitor- Messrs Elizabeth Siew & Co). For more information or legal assistance, contact or email them at 07-3341922 (email@example.com) or 03-8075 0901 (firstname.lastname@example.org).