Everything You Should Know About Tenancy Agreement in Malaysia

Whether you are landlords or tenants, you must have a well-written tenancy agreement. Here’s everything you need to know about tenancy agreement:

What is a Tenancy Agreement?

A tenancy agreement is a legal covenant between a landlord and a tenant. During the tenancy period, each party which includes tenants and landlords- have their duties and obligations. It also provides a detailed description of the property being rented out. This includes its furniture, fixtures, and other amenities.

Landlords are advised to hire a lawyer to draft the tenancy agreement in order to make sure the document does not leave out any important details. Before signing, potential tenants can consult their lawyer to review the agreement and make any changes.

Terms and conditions that should be included in the Tenancy Agreement

A basic tenancy agreement should include the following:

1. Details of property and purpose

2. Duration of the tenancy agreement

3. Rental amount

4. Deposit amount

5. Things that provided by the landlord (furniture, utilities, etc)

6. Landlord's obligation

7. Tenant's obligation

8. House rules, prohibitions, and limitations

9. How to resolve disputes

10. Special conditions or clauses

Each term and conditions need to be specified clearly in a tenancy agreement. Therefore, the details have to be stated clearly to prevent misunderstanding and disagreement.

How many deposits are there in a Rental Agreement?

Usually, tenants need to pay 4 types of deposits, including:

Earnest Deposit - a booking deposit where the landlord does not lease the property to anyone and it can be utilised as rental payment for the first month of occupancy when the tenancy begins. For example, rental per month is RM550, earnest deposit of RM550 will be collected.

Utility Deposit - this is used to pay any outstanding utility bills (such as electricity and water bill) that have not been paid at the end of the tenancy period. Usually half month’s rent will be collected. For example, rental per month is RM550, and a security deposit of RM275 will be collected.

Security Deposit - in case the tenants violate the terms of the tenancy, security deposit is used to protect the landlord. Normally, 2 month’s rent will be collected. For example, rental per month is RM550, and a security deposit of RM1,100 will be collected. It can be used to pay for repairs, key replacement, cleaning work and if the tenant leaves before the contract ends, the deposit ill be forfeited. However, if the tenant fulfils the contract and there are no issues throughout the tenancy, the entire amount is refunded when the tenancy ends.

Access Card Deposit - this deposit only applies to houses that require an access card to enter. This would be gated and guarded houses, apartments, or condominiums. In case the tenant loses the access card, the landlord needs to apply for replacement. Normally, RM50 will be collected.

How to Calculate the Legal Fees and Stamping Fees ?

Legal fees including the stamping fees for the agreement are typically paid by the tenant. The following are the standard legal fees:

• 25% of monthly rent for the first RM10,000 of rental;

• 20% of monthly rent for the next RM90,000 of rental; and

• a negotiable proportion for rental more than RM100,000.

Tenancy agreements are only binding after being stamped by the Lembaga Hasil Dalam Negeri (LHDN) Office. The following are the standard stamp duty fees:

• less than 1 year - RM1 is charged for every RM250 of annual rental above RM2,400

• between 1 to 3 years - RM2 is charged for every RM250 of annual rental above RM2,400.

• over 3 years - RM4 for every RM250 of the annual rental above RM2,400. The stamp duty is free if the annual rental is below RM2,400.

*If annual rent is less than RM2,400, no need to pay stamp duty.

The stamping fees shall be calculated as follows:

• RM550 x 12 months – RM2,400 = (RM4,200/250) x RM2 = RM33.60, for one original copy.

• RM10 needs to be added for one duplicate copy.

• Please note that the tenant will normally keep the original stamped copy.

• Landlord will keep the original agreement with a stamping value of RM33.60 while a duplicate copy will be kept by the landlord.

A well-written tenancy agreement will help to protect your right as a landlord or a tenant and also, to avoid future disputes between both parties. With this ultimate guide, get ready to become a landlord and as a tenant, be alert when you rent a house somewhere else!

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