Renters’ Rights: If You Are A Tenant, Arm Yourself With These!
Bank Negara Malaysia revealed that the country faces a shortage of affordable housing. After reviewing its data, the bank said homes in the country were seriously unaffordable in 2016 by international standards.
According to its quarterly bulletin, the maximum affordable house price in the country had to be RM282,000, based on the housing cost-burden approach. But the actual median is RM313,000, which is way beyond the reach of many where the median national household income is only RM5,228.
This is not the first time the central bank has flagged the unaffordability of homes in the country. Last year, during the launch of its property market monitor Housing Watch, BNM found the problem with homeownership was not the lack of access to credit, but not having enough income and houses generally being too expensive.
While there are certain hacks and tips to work around these issues, a positive is that even if you are averse to a long-term relationship with your bank or genuinely struggling with living costs, independence is not a pipe dream. Renting is the way to go.
Now, that may be a practical choice, the question looming on everyone’s mind is, “Are you protected as a tenant?”
Laying down the law?
At writing time, Parliament has yet to pass any comprehensive law covering landlord and tenant. Surprised?
The only property-related act that was discussed and even abolished was the Control of Rent Act 1966 which applied to rent-controlled premises or “pre-war” buildings: those colonial buildings built before World War 2.
As constructing some form of landlord-tenant legislation will be in bits, here’s a list of laws to familiarise yourself with: Contracts Act 1950; Civil Law Act 1956; Distress Act 1951; Specific Relief Act 1950; and Common Law/Case Law.
Also we do have a definition of a tenancy, according to Act 56 of the National Land Code 1965, which is a short-term agreement usually not more than three years.
There is an unfavourable condition to being a tenant. For example, you sign on for a three-year agreement. This means as you pay your monthly rentals, you are fulfilling the tenancy agreement for a full period of three years.
But two years in, you decide to terminate your tenancy. You may have to still pay the rentals for the remaining one year.
Source: Malaysian Bar
But a written agreement is not a must in law, for a tenancy to kick in; it can even be oral. But to be on the safe side, it is always advisable to have your tenancy in written agreement.
That stamping fee
A tenancy agreement is simply a contract which spells out clearly all the terms and conditions regarding the rental of a certain property. This is signed by landlord and client after a round of negotiations.
But once this paper is signed, both are bound by what is stipulated in the agreement and are expected to honour those terms.
Some landlords may write their own tenancy agreements but best practice necessitates that a lawyer is the best person to do so, or in the case you are dealing with a moonshine version of it, ensure it is revised or reviewed by a professional. The goal is to ensure both parties are protected during the tenancy period.
On hiring lawyers
The legal fees involved for drafting the tenancy agreement is usually absorbed by the landlord and it is more of common practice as there are no provisions for this. That means if tenants want to vet the tenancy agreement, the onus is on them to hire their own lawyer.
Although the legal fees to draft the agreement are typically paid by the landlord, the stamp duty is borne by the tenant. And here’s how to calculate the stamp duty fee:
Legal fees for tenancy agreement period for three years and below. These refer to annual rent.
First RM10,000 – 25% of monthly rent
Next RM90,000 – 20% of monthly rent
More than RM100,000 – negotiable
Rental for every RM250 in excess of RM2,400 rental
Less than 1 year: RM1
Between 1-3 years: RM2
More than 3 years: RM3
Annual rental below RM2,400 – no stamp duty
Source: Speedrent, LHDN
So let’s break it down for a property going at RM1,600 a month:
|Legal fee||RM1,600 x 25% = RM400|
|Stamp duty||[(RM19,200 [annual rent] – RM2,400)/RM250] x 1 year = RM67.20|
|Overall total||RM400 + RM67.20 = RM467.20|
What to look out for in a tenancy agreement
Other than the legal fees and stamp duty, there are many other clauses under the tenancy agreement that you should pay attention to. Missing out on one of these important clauses can result in dispute or additional costs on your end.
Use this checklist if you are a first-timer or on the lookout for a new unit. Just remember that time is always on your side and always resist the temptation to give into that salesy pitch of the real estate agent.
1. Monthly rental
Since Malaysia abolished the Control of Rent Act 1966, homeowners and potential tenants can negotiate rental rates freely. Usually landlords will state the range they are looking for, and it is up to the tenants to comply or not.
To ensure you are paying a fair rental, shop around and compare the rental of similar units within the same area, and negotiate accordingly.
If you agree on a certain amount, your tenancy agreement should have a set date when the rent should be paid monthly. Most of the time, this happens at the end of the month, with a grace period of an additional seven days.
This is also not set in stone as you could negotiate a date both you and your landlord can agree on, should you need to pay at a slightly later date every month.
An “as-is” basis means the tenant agrees to rent the house in its present condition. That means if you did not realise that the house has a leaky sink because you failed to do due diligence by checking out the property beforehand, you would not be able to complain that your landlord gave you the short end of the stick.
So always before signing the contract, do a thorough spot check of the house. Because this allows the landlord to fix any faulty items around the house.
This also applies to “white goods” such as fridge, washing machine, hairdryer, etc. Basically, test everything, check every nook and corner.
2. Security deposit
As its name suggests, this acts as an “insurance” of sorts for the landlord in case a tenant inflicts damages to his or her property. This encompasses any furniture provided during the tenancy period.
Another reason for the deposit is to ensure the tenancy expires on an agree end-date. On the side of the landlord, if for whatever reason he needs the tenant to leave before the agreed date, the security deposit will be returned to the tenant. This applies on the tenant’s side, too: if he or she has to leave before the agreed date, the deposit is forfeited.
The security deposit also protects the landlord in the event the tenant fails to pay his rental.
The terms and conditions governing the security deposit and its release are stipulated in the tenancy agreement and this also includes how many months’ notice a tenant should give the landlord before the naturally expiry of the tenancy, as well as what should the landlord do if he or she is the initiator.
It’s common over here for a security deposit to consist of two months’ gross rental and a half month’s rent for utilities. So, if your monthly rental is RM2,500, the security deposit will be RM6,250. The half month’s rent for utilities cover any outstanding utility bills leave behind by the tenant.
To protect yourself, always check the tenancy agreement thoroughly and iron out all details before you pay any deposit. If you pay the deposit, even a certain percentage of it first, and then realised that you can’t live with some of the clauses set out in the agreement, your deposit can be forfeited.
3. Landlord and tenant details
Ensure that in the tenancy agreement, the full name, IC/passport number, and address of both parties are available and accurate. This will serve as reference should any problem arise with the tenancy.
Break down repairs
Let’s say the aircond the landlord provides breaks down? Or if your bathroom ceiling is suddenly leaky? What do you do?
If you are living in a condo or apartment, it goes back to who is responsible for the leak. So you notify your landlord and building management. Malaysian laws stipulate that the unit above caused the leak and the management would start their investigation there. So if the unit above caused the leak, the owner of the said unit would have to bear the cost of repairs for you.
But if it’s the aircond, then things get a little muddy as the law does not touch on it. So to see who is responsible for repairs, check your contract.
4. Commencement and end date
The date you are given the keys to your unit is the date the tenancy commences. The date you move out is the end date. In your agreement, this includes the notice period tenants should serve before moving out or if they want to renew the tenancy agreement.
5. Special requirements
The sky’s the limit for this one. It can range from the number of people allowed to live in a unit to a “no pets” rental policy. If you are a smoker, you better check on that too. Usually these tie in with the requirements set by the unit’s joint management body.
The best way to go about this is to hash out every single point with your landlord and negotiate the pain points, even if the landlord drops the default “standard agreement” line. Doing this avoids costly legal problems in the future.
6. Mode of payment
The payment method should also be specified in the agreement. For example, certain landlords prefer to collect the rental in cash at the unit, while others prefer to have the rental banked into their account.
Most landlords are fine with online bank transfers and for good reason: hassle-free and trackable. But, on your end as a tenant, make sure you file the receipts in a timely manner, whether it’s a .pdf or hard copy.
Now that million dollar question: Can your landlord kick you out should you lapse in your monthly payment?
Christopher Chan, associate director with Hartamas Real Estate Group, in an opinion piece covering tenancy laws, highlighted that it is unlawful for property owners to evict their tenants or recover possession of the house or room without a court order under Section 7(2) of the Specific Relief Act 1950.
Landlords are also prohibited from resorting to extreme measures such as changing the locks or kicking out tenants without necessary court documents to show. And if they do so, they can be sued for trespassing by their tenants.
These four points usually govern landlord behaviour:
- Paying all necessary charges related to the property such as quit rent, assessment, maintenance fees, etc.
- Maintaining a fire insurance for the unit.
- Allowing his or her tenant to enjoy “quiet enjoyment” of the property. Meaning, the landlord cannot use his/her set of keys to enter your unit without permission. He also doesn’t have the right to demand you to open the house to him without reason.
- Maintaining what is considered the major infrastructure in the houses such as piping, electrical wirings and other structural repairs.
According to Chan, with the aid of a lawyer, the landlord should first give the tenant a notice to pay up. If the tenant fails to settle the arrears as agreed in the tenancy agreement, the landlord has to serve the tenant with a notice of termination and file a suit to obtain a court order.
This entire process takes seven months and may cost the landlord about RM10,000. So, it’s a fallacy that the laws of the land are “pro-landlord.”
But that’s also why if you are the tenant to always ensure you meet those monthly payments in a timely manner because part of that transaction comes with having your own private space, even though it is not technically yours to begin with.
And what if something ugly rears its head such as being retrenched from your job? Contact your landlord and speak to them about it, because your landlord is just like you, the only difference is that these monthly rentals make up their monthly income.