Many tenancy arrangements begin with a simple conversation and a handshake. While verbal agreements may appear convenient, they often create uncertainty when disputes arise. Memories differ, expectations change and disagreements can become difficult to resolve when important terms were never properly documented.
For this reason, every landlord and tenant should ensure that the tenancy is governed by a properly drafted Tenancy Agreement.
A Tenancy Agreement is a legally binding contract between a landlord and a tenant which sets out the rights, responsibilities and obligations of both parties throughout the tenancy period.
Apart from identifying the property being rented, the agreement should clearly state the rental terms, deposits, permitted use of the premises, maintenance responsibilities, restrictions and procedures to be followed should disputes arise.
For furnished properties, the agreement should ideally be accompanied by an inventory list detailing furniture, appliances, fixtures, access cards and other items handed over to the tenant.
A properly drafted agreement protects both landlord and tenant by:
Simply put, a written agreement provides certainty for both parties.
The agreement should accurately identify the property being rented, including:
For furnished properties, an inventory list should also be attached.
The agreement should clearly specify:
The agreement should also explain how deposits may be utilised and under what circumstances deductions may be made.
The agreement should state:
Where renewal rights are granted, the conditions should be clearly defined.
Common landlord obligations may include:
Responsibilities vary from property to property and should be clearly stated.
The tenant’s obligations typically include:
Failure to comply may result in deductions from deposits or other legal consequences.
A tenancy agreement should clearly outline what tenants may and may not do.
Examples include:
These provisions help protect both the property and neighbouring occupants.
The agreement should explain:
Clear dispute-resolution provisions help reduce uncertainty if disagreements arise.
While the above are the basic requirements, several practical clauses are frequently overlooked.
A detailed inventory accompanied by photographs can help prevent disputes regarding:
For furnished properties, this is highly recommended.
Many tenancy disputes arise because neither party clearly understands who is responsible for repairs.
A good agreement should address:
The agreement should specify whether tenants may:
Written consent should generally be obtained before any alterations are made.
Landlords should consider restricting subletting and assignment unless prior written approval is obtained.
This prevents unauthorised occupation by third parties.
It is increasingly common for residential properties to be used as offices, studios or consultancy premises.
Before doing so, tenants should ensure that the intended use complies with:
Obtaining approvals is generally the tenant’s responsibility unless otherwise agreed.
Commercial tenancy agreements are often more detailed and may address:
The nature of the business will often determine the level of detail required.
The Earnest Deposit is typically paid together with a Letter of Offer to reserve the property while the tenancy agreement is being prepared.
It is commonly equivalent to one month’s rental and is usually credited towards the tenancy upon execution.
The Security Deposit serves as protection against breaches of the tenancy agreement, unpaid rent or damage to the property.
A common market practice is two months’ rental.
The Utilities Deposit protects the landlord against unpaid utility bills and related charges.
A common market practice is half a month’s rental, although this may vary depending on the property.
Once signed, the tenancy agreement should be stamped with the Inland Revenue Board of Malaysia (LHDN).
Stamping helps ensure the document can be relied upon as evidence if legal proceedings become necessary.
Stamp duty is generally calculated based on the rental amount and tenancy period. As rates and regulations may change from time to time, landlords and tenants should verify the latest requirements with LHDN or their legal adviser.
A Tenancy Agreement is more than a rental document. It is a risk-management tool designed to protect both landlord and tenant throughout the tenancy period.
Taking the time to understand the key clauses before signing can help avoid misunderstandings, preserve relationships and ensure a smoother rental experience for everyone involved.
Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. Readers should seek independent legal advice for specific legal matters.
Whether you are buying, selling, leasing or investing in property, feel free to connect with Penang Property Angel for professional assistance.
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