It is common for Malaysians to purchase another property for investment purposes such as rent or sale. Instead of spending money to engage a lawyer in preparing a tenancy agreement, most landlords choose the FOC way by downloading the free templates from websites and signing without receiving legal advice. In such circumstances, it is risky for landlords as the agreement is not stamped and miscommunication for the clause. Hence, hiring a real estate lawyer in drafting tenancy agreements is highly recommended.
A sample case was a landlord, Hasni has received his key for his newly-completed condominium and found a potential tenant, Kyle, who was interested to rent the unit as soon as possible. In order to save time and money, Hasni and Kyle signed a tenancy agreement downloaded from google.
Five months later, Hasni received several calls from the condominium’s management requesting him to settle the outstanding water charges that amounted to RM500. Hasni visited him to remind Kyle to pay the utility bills. To the shock of his conscience, he discovered that his unit was being used as a childcare centre and the walls were filled with the children’s ‘artistic’ scribbles.
After vomiting two pails of blood, Hasni confronted Kyle, “How can you use my unit as a childcare centre?!?” Kyle responded with an innocent look, “What’s wrong with that? There is nothing in the agreement which states that I am not allowed to use your property to run a childcare business.”
Hasni yelled, “I don’t care! I want you to pay all the outstanding utility charges, restore the unit to its original condition and get out of my unit as soon as possible!” He then slams the door and leaves. He returned home and immediately checked the tenancy agreement, hoping to find some clauses to support his demand.
He was shocked when he realised that the agreement did not mention on how Kyle can use the unit. Hasni was even more depressed when he found that, according to the agreement, the landlord (meaning he, himself) is responsible for paying all utility charges and maintaining the good condition of the unit.
Items to be included
To prepare a complete tenancy agreement, the items below must included:
(1) Specify the purpose/use of the property
If landlords are renting out a residential property, make sure you state clearly in the tenancy agreement that the property can only be used for residential purposes.
Landlords should also insert a clause to restrict your tenant from subletting the property without their written approval, so that you can filter and manage the people who may be staying in their unit.
(2) Who pays the bills
It is common practice for the tenant to pay for the utility charges (i.e. water, electricity, sewerage charges) while the landlord will bear the management fees.
To avoid any confusion/dispute, it is prudent for landlord to state clearly that landlord tenant should promptly pay the utility charges within a certain period (usually 14 days) upon receiving the relevant bills.
(3) Maintenance of the property
The tenant is usually responsible for maintaining the fixtures and fittings of the property (subject to fair wear and tear), while the landlord will maintain the structure (i.e. walls, drains, roof) of the property in reasonable and tenantable condition.
You should list down the furniture, household appliances and all other items which you have provided in the property and ask the tenant to confirm the good condition of these items.
Make it clear in the tenancy agreement that the tenant is responsible for maintaining the good condition of these items (subject to fair wear and tear).
(4) Restore and return the property
Landlord should ensure that it is written in the agreement the tenant shall restore the property to its original good and tenantable condition and return the keys of the property to you upon the expiry/early termination of the agreement.
(5) Empower yourself with self-help remedy
Landlord can state in the agreement that if your tenant fails to perform his obligations within a reasonable period, you are entitled to carry out his obligations at his cost and expense.
As such, the landlord shall be entitled to fix the damages, restore the unit, pay the outstanding bills and deduct the same from security/utility deposits.
Besides, the landlord should take photos and record the original condition of your property and furniture before handing over your unit to the tenant. In the event of a dispute, you may use these photos as proof and justification in your favour.
Stamping of Tenancy Agreement
When the landlord and tenant have come to an agreement on the tenancy agreement, both parties need to sign it.
However, it is not a valid legal document (ie. admissible in court) until it is stamped by Lembaga Hasil Dalam Negeri Malaysia (LHDN) or Inland Revenue Board of Malaysia.
Landlords can bring the agreement to any LHDN office to get it stamped. There will be a charge for this, known as the stamp duty.
During your visit to the LHDN office, the landlord will also be asked to submit two application forms, namely PDS 1 and PDS 49(A). They can view these forms at the LHDN website.
Tenancy agreements, like any other legal document, are carefully worded by lawyers to make sure that there is minimal room for misinterpretation.
The next part of the document establishes some definitions, including the “landlord”, “tenant”, and “demised premises”. To make the paperwork easier, the first part of the agreement does not contain any actual details of the property, contact details, rental amounts, etc. It simply refers to a separate section known as the “Schedule” and the “Inventory”. All the actual information is entered in the Schedule.
Defining the duration of the tenancy, rental amount and deposits.
The next three clauses specify the tenancy start and end date, rental amounts as well as the security deposit and utility deposit. Again, all the actual deposit amounts are included in the “Schedule” section later on.
*credit to author at findmeprop