NAVIGATING TENANCY AGREEMENTS AS A LANDLORD

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NAVIGATING TENANCY AGREEMENTS AS A LANDLORD


A tenancy agreement is a legal contract between a landlord and a tenant that sets out the obligations, rights and responsibilities of both parties for the duration of the tenancy.

If you are a landlord, you may ask yourself: Are tenancy agreements necessary?

Many landlords do not recognise the importance of this legal document, viewing the effort needed to prepare and execute the tenancy agreement as a hassle. However, as there is no legislation in Malaysia that regulates the contractual relationship between a landlord and a tenant, the tenancy agreement becomes the governing document should any disputes arise.

Even if a thorough screening process is done, there may be unforeseen problems that arise between landlord and tenant. Therefore, having a clearly worded tenancy agreement in place would be in the best interest of both parties.

What should a tenancy agreement include?

To help you effectively navigate tenancy agreements as a landlord, here are 5 key items that your tenancy agreement should cover:

1. The permitted usage of the premise

In most tenancy arrangements, the property would be used for residential purposes. This may seem self-explanatory, but the permitted usage of the property needs to be explicitly stated in your agreement to avoid your property being misused. Given the popularity of Airbnb, the tenancy agreement should also contain a clause addressing the issue of sub-letting.

There are cases in Malaysia where, unbeknownst to the landlord, tenants used the rented residential property as a premise to carry out business, or worse, as a hub for illegal activities such as gambling, drugs or even prostitution. In this regard, landlords should also take steps to screen their tenants by performing background checks on their prospective tenants. Read this for PropAdvisor’s top tips to avoid common pitfalls involving bad tenants.

2. The rental amount and mode of payment

Source: www.tuitionexpress.com

Your tenancy agreement should clearly state the amount of rent that needs to be paid at a particular date of the month. Generally, most landlords require the rent to be paid either on the first or the last day of the month. The mode of payment should also be stated, i.e whether the payment of rent is to be made by way of credit card, online bank transfer, or cheque.

This can be varied or negotiated between parties, but do bear in mind that the final arrangement should be clearly stated in your agreement to leave as little room for doubt as possible.

3. The terms and amount of the deposit

Generally, tenants would be required to pay an amount equivalent to two month’s rent as a security deposit once the tenancy agreement is signed. The security deposit will be used to cover any damages caused by the tenant during the tenancy period. The deposit would also cover situations when a tenant terminates their tenancy prematurely or defaults on payment for utilities.

Your tenancy agreement should take this into account, stating that the landlord has a right to forfeit the security deposit should the tenant breaches the terms of the tenancy. Landlords should also be fair to their tenants and include the converse in the agreement– whereby the full amount of the security deposit would be returned at the end of the tenancy as long as there are no issues with the tenancy.

4. The maintenance responsibilities and fees involved

Your tenant’s maintenance responsibilities should be outlined in the tenancy agreement. This will ensure that they are clear about the maintenance expectations and would be aware of fees which they may need to incur to maintain the upkeep of the property.

If landlords wish to include routine maintenance in the monthly rental amount, it should be stated in the tenancy agreement. Generally, tenants are not liable for issues which involve plumbing, drainage or air-conditioning of the property. Nevertheless, tenants are responsible to use the fixtures and fittings in the property in a responsible and careful manner.

5. The tenancy commencement and end date

Landlords should state clearly in the tenancy agreement the commencement and end date of the tenancy. The commencement date of the tenancy is the date the tenant is able to move into the property and the end date is the last date the tenant is able to stay in the property.

It is possible for either party to terminate the tenancy agreement prior to the end date. The tenancy agreement should contain a clause stating that the party wishing to terminate the tenancy agreement has to give 2 to 3 months written notice. This comes into effect if, for instance, the tenant has to move out of the property for various reasons and thus requires an early termination.

Landlords should take note that the tenancy agreement has to be brought to the Inland Revenue Board of Malaysia to be stamped before it is considered as valid. When in doubt, do consult a professional before entering a legally binding agreement.

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