I. Verifying the Legitimacy of the Property Owner

Most people, after reading a tenancy agreement, readily agree to sign it without questioning whether the other party is the legitimate owner of the property. Unfortunately, there have been instances of scammers impersonating property owners, collecting deposits from tenants, and disappearing afterward.

Legally, if the other party is not the legitimate owner, any signed tenancy agreement will be deemed void ab initio. To avoid unnecessary trouble, consider engaging a lawyer to verify whether the other party is the rightful owner before signing the agreement.

II. Deposits: Advance Rental, Security Deposit, Utility Deposit

• Advance Rental:
  Generally, property agents or owners will request potential tenants to sign a Letter of Offer and pay an advance rental before signing the tenancy agreement. This serves as compensation for the owner if the potential tenant decides not to proceed with the agreement. Legally, this is permissible. The advance rental paid by the tenant can be applied as the first month’s rent, part of the agent’s commission, or part of the security deposit, depending on the terms outlined in the Letter of Offer.
• Security Deposit:
  Typically, the security deposit amounts to 1-3 months’ rent. In the event the tenant breaches the tenancy agreement (e.g., failure to pay rent), the owner can forfeit the security deposit as compensation. Most tenancy agreements specify that the owner cannot use the security deposit during the tenancy unless there is a breach. However, if both parties agree, the agreement can include terms allowing the owner to deduct rent from the security deposit.
• Utility Deposit:
  This deposit compensates the owner for any unpaid utility bills left by the tenant. Legally, there is no fixed amount for the utility deposit, but it is usually equivalent to ½ or 1 month’s rent. If the tenant clears all utility bills by the end of the tenancy, the owner must return the utility deposit.

III. Responsibility for Legal Fees, Stamp Duty, and Indah Water Charges in a Tenancy Agreement

In Malaysia, legal fees and stamp duty for a tenancy agreement are generally borne by the tenant. However, these costs can be partially or fully transferred to the landlord without violating the law.

Most tenancy agreements do not specify who is responsible for Indah Water charges. According to the Sewerage Services (Charges) Regulations 1994, this cost is borne by the landlord. However, the charges can be partially or fully transferred to the tenant, which is also permissible under the law.

IV. Actions Landlords Can Take If a Tenant Breaches the Agreement

In cases where a tenant breaches the agreement by failing to pay rent, standard tenancy agreements typically grant landlords the right to terminate the agreement and forfeit the security deposit. More comprehensive agreements may also allow landlords to take self-help remedies, such as:

• A. Disconnecting utilities;
• B. Applying to the management to deactivate the tenant’s access card(s);
• C. Imposing late payment interest; and/or
• D. Other measures.

Note: These remedies can only be implemented if explicitly stated in the tenancy agreement. However, according to court precedents, landlords are not allowed to change the locks to force the tenant out, even if the agreement includes such a clause.

If the tenant refuses to vacate the property after the above remedies are applied, the landlord must appoint a lawyer to apply for an Eviction Order under the Specific Relief Act 1950 to reclaim their property. Forcibly reclaiming the property without an eviction order may expose the landlord to legal counterclaims by the tenant.

V. Renewal Clause (Option to Renew)

Most tenancy agreements include a renewal clause, allowing tenants to extend the lease for a specified period upon the expiry of the initial term.

Before signing the tenancy agreement, tenants should carefully review the pre-conditions stated in the renewal clause (e.g., required notice period, potential adjustments to rent or security deposit, new special conditions, and other requirements).

If these pre-conditions are not met, the landlord has the discretion to refuse the renewal.

VI. Maintenance Matters

To avoid unnecessary disputes, for properties furnished with furniture or equipment, a checklist clearly outlining the maintenance responsibilities of both parties can be prepared by a lawyer and attached to the tenancy agreement.

Before signing the tenancy agreement, tenants should test the furniture and equipment in the property to ensure there are no damages. This helps prevent landlords from making unfounded claims for compensation after the agreement is signed.

If a tenant plans to renovate the property, they must notify the landlord before signing the tenancy agreement. Typically, tenancy agreements will require tenants to remove renovations and fixtures within a specific period and restore the property to its original condition. Failure to comply with this clause may result in the landlord claiming compensation from the tenant.

To ensure no important details are overlooked, landlords can engage a lawyer to draft the tenancy agreement. Prospective tenants are also advised to consult a lawyer before signing the agreement to determine if any amendments are necessary.

Disclaimer: The information provided is for general purposes only. ANN & AIN, ADVOCATES & SOLICITORS make no representations or warranties regarding the accuracy or fitness of the information for any particular purpose. While we have made every effort to ensure the information is accurate as of the time of writing, it should not be relied upon for making any financial, investment, real estate, or legal decisions. Always seek professional advice that considers your personal circumstances.