The Lease Agreement

Understand what to expect from the tenancy agreement when renting property in Malaysia...

Once a property to rent has been found, contact the landlord, usually via an estate agent, to make an offer. Most landlords are open to negotiation on the amount of rent to be paid and the estate agent has a good idea of the amount the landlord is hoping for. It is a good idea to have a feel for the local rental market value.

Once the terms of the lease have been agreed with the landlord, an earnest deposit, usually one month's rent, has to be paid, which becomes the first month's rent. This guarantees the agreement made with the landlord until all payments have been made and a tenancy agreement is signed.

A letter of offer is signed at the same time, which outlines the basic terms and conditions of the lease, as well as what other payments are due and when.

In the next seven days a security deposit of two months' rent and a utility deposit also need to be paid. The value of the security deposit can vary, but half of the monthly rent is normal. These are kept by the landlord to be returned at the end of the tenancy period, minus any costs for damages incurred and unpaid bills.

Tenancy Agreement

In Malaysia tenancy agreements are prepared by the landlord's lawyer. The tenancy agreement must be stamped so that it can be used as evidence in a court of law. Tenancy agreements are usually drawn up for between one and three years; tenancy renewal and any rent adjustments should be agreed in advance. There is no standard form for these agreements, but they usually include:

  • Details of both parties
  • Beginning and end date of the agreed tenancy period
  • Rent payment details
  • Responsibilities of both the tenant and landlord

A tenancy agreement also usually includes who is responsible for maintaining the property and who is responsible for damages. Most landlords require that a property is returned to its original state when it is vacated; it is advisable to agree what, if anything, needs to be done with the landlord a couple of months in advance of vacating the property. This makes it more likely for a tenant to get their deposit back in full.

Some landlords want tenancy agreements with an exit clause, which allows for early termination of the tenancy; it is also referred to as a diplomatic clause. Often the clause requires that the landlord is either compensated for at least two months' rent or is given two months' written notice. A tenant who wants to terminate a contract early often has to provide evidence that they are leaving, such as the cancellation of a work permit. In most tenancy agreements, an exit clause does not take effect in the first 12 months of the lease.

Many landlords also want their tenants to sign an inventory which lists and states the condition of everything in the property. It is advisable to check that it is accurate.

Utilities

It is common for landlords to keep the utility bills for electricity and water in their own name, so new tenants don't have to arrange connection to utilities. However, in this case, tenants are required to pay a deposit against unpaid bills.

Stamping and Stamp Duty

Stamping is when a lawyer validates a tenancy agreement. It is usual for the landlord or an estate agent to organise stamping, but the tenant pays for it. The amount paid is a proportion of the annual rent.

Further Information