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LAW & REALTY: Tenancy Agreement

I found an interesting article from Malaysian Bar website.
So, i think some of you might be interested to read it.

LAW & REALTY: Tenancy Agreement

Contributed by Nicole Tan Lee Koon
The Sun, Friday, 03 August 2007 08:31am


A TENANCY agreement is defined as a contract signed by landlord and tenant which states all the terms and conditions of rent of a property. Tenancy is similar to a lease except that it is created for a term not exceeding three years. Unlike a lease, it cannot be registered.

Deposits

Tenants usually pay a security deposit of two months’ gross rental and another month’s rent as utility (water and electricity) deposit. Rent is usually paid one month in advance. Therefore, if the rental is RM500, the amount payable upon execution of the tenancy agreement is RM2,000.

The rights of landlords and tenants

The landlord and tenant are bound by the terms of the tenancy agreement. Their rights are provided for in the said agreement. The principle of freedom to contract ensures a win-win situation for both parties provided that there is a consensus ad idem (“meeting of minds”). Therefore, it is not true that there is only one standard tenancy agreement. An astute person would ensure that the terms are not one sided. The practice in Malaysia is that the legal fees for the tenancy agreement are borne by the tenant. However, there is no hard and fast rule. The fees can be borne by a landlord providing that the lawyer is acting for the landlord and the tenant is unrepresented.

Tenancy agreements usually last a year to three years. Renewal with a possible rent adjustment must be mutually agreed upon. The usual practice is that the tenant is given the first option to renew the tenancy of which the tenant must give notice of such intention three months before the expiry of the tenancy.

Usually, the tenant is prohibited from sub-letting the demised premises to another party. However, the tenant may be able to do so with the landlord’s consent.

Another pertinent point to look for by the landlord is the provision for a deposit for the breaking of wall(s) in the event the tenant is renting two or more contiguous units. A related issue is that the tenant must not make any alterations to the exterior or interior of the demised premises without the previous consent in writing of the landlord.

The tenant is supposed to yield up the demised premises with all fixtures and fittings belonging to the landlord upon the determination of the tenancy in good and tenantable repair and condition, fair wear and tear excepted. The tenant shall make good at their own expense any damage caused to the demised premises or fixtures and fittings therein as a result of the tenant’s act or neglect.

The landlord is supposed to pay all quit rent and assessment imposed or charged upon the owner of the demised premises; and to maintain upkeep and repair whenever necessary the roof, main structure, external walls, main drains and pipes of the demised premises.

Notice of termination

A notice of termination or notice to vacate must be given to the tenant within the period stated in the tenancy agreement before its expiration. The landlord has the right to vacant possession of the premises from the tenant without payment of any compensation.

Recovery of possession

Even though there is a term of the tenancy agreement which allows the landlord to evict the tenant and/or to recover possession of the demised premises upon the nonpayment of rent, the Malaysian legal system is pro-tenant. The landlord is prohibited from evicting the tenant and/or to recover possession of the demised premises without a court order. However, even if the landlord manages to eventually evict the non-paying tenant, the landlord finds it difficult to recover unpaid rents.

Sometimes, unscrupulous tenants would suddenly leave the demised premises without informing the landlord. When the landlord breaks the lock to take possession of the demised premises, the landlord is then slapped with a civil suit claiming for an astronomical amount for the landlord’s purported “self-help”.

The current practice now is for the landlord to lodge a police report and break the lock in the presence of a police officer in order to avoid further complications. A prudent landlord would even take photos of the interior of the demised premises to ensure that the tenant would not later claim loss of properties.

The writer is a member of the Conveyancing Practice Committee, Bar Council, Malaysia www.malaysianbar.org.my.

Note: This column is brought to you by the Malaysian Bar Council for your information only. It does not constitute legal advice. You should, therefore, seek professional legal advice for your specific needs. Neither the Malaysian Bar nor the Sun Media Corp Sdn Bhd shall be liable to any reader who suffers losses as a result of relying on this column.

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