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Tenancy Agreements in Malaysia: 4 Points You Need to Know in Advance

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Tenancy agreements mean almost the same thing, irrespective of the nation. It’s a legal contract between the tenant and the landlord which includes all relevant information and terms of the tenant–landlord agreement. However, each nation and sometimes even states have their own set of laws that govern tenancy agreements. If you are planning to rent a place in Malaysia, you should know a bit about at least the following.

Hiring an Attorney is Not Necessary, but it’s Advisable

There is no law in Malaysia that makes it obligatory for tenants and landlords to hire a lawyer for preparing and finalizing tenancy agreements, as long as it has been stamped and approved by the Malaysian Inland Revenue Authority. Nevertheless, it is recommended not to sign any such agreements, unless you are absolutely sure that you understand everything it implies. If you are not a local, that is one more reason to have a local real estate lawyer by your side for verifying and scrutinizing the tenancy agreement prepared by the landlord. It helps on account of the language gap as well, when applicable.

Get to Understand the Renewal of Tenancy Agreement System

On the opposite side of the early termination clause is the renewal of tenancy clause. The standard tenancy contract in Malaysia usually lasts for at least two to three years but, if you wish to have rented access to a residential property for a longer period of time, your original agreement should ideally have a renewal of tenancy section in it as well. Tenant agreements with a renewal clause are also described as 2 + 1 or 3 + 1 year rentals, where the first number represents an active tenancy contract’s original tenure, while the second number indicates the same agreement’s potential extension period, if renewed. 

As Property Guru explains, the renewal of tenancy agreement clause will only be applicable if the landowner and the tenant can come to an agreement regarding the new rent price at the tenure’s end. For more detailed information on the subject, visit the linked page above. Although Property Guru is primarily known as the leading Malaysian real estate website for finding, renting and buying property, it’s also a treasure trove full of useful real estate knowledge for newcomers in Malaysia.

Be Careful with the Early Termination Clause

Early termination of a tenancy agreement is ill-advised, but it might not be optional in case of a family emergency or a work transfer. Therefore, if you are in Malaysia on work, or if you are unsure of your residency status in the coming years, do be wary of signing any long-term tenancy agreements. Even a viable reason such as a work transfer to another country may not be considered valid enough to not pay rent for the entire duration of the tenancy agreement.

In such instances, whether you will have to pay rent for the remainder of the term period or not, depends on what the early termination clause in the contract says about it. Before signing, ensure that there is one and that it does not put you in such an awkward financial position. Some landlords will not be willing to negotiate on the early termination clause, while others will not accept a short-term agreement. If your position puts you at a disadvantage because of that, find a different landlord. As far as the diplomacy clause is concerned, we will get to that next.

What About the Diplomacy Clause?

As per the regular diplomacy clause (when included), a tenant may end the agreement before their contract period is over, provided that the tenant’s employer decides to transfer the worker out of Malaysia/lay them off, or the tenant is either not allowed to or is incapable of working in the concerned state or Malaysia as a whole.

To enforce the diplomacy clause, there will likely be several contingent requirements, such as:

  • The landlord will need to be informed two months in advance
  • In case the tenant cannot provide the two-month notice period, they must pay an amount equivalent to two months’ rent at once to the landlord
  • Proof of prohibition by the Malaysian government must be provided to the landlord, if that is the cause
  • Proof of transfer/loss of job must be provided if that is cited as the cause
  • If the rented property has suffered any damage during the tenant’s occupancy, they will have to pay for the damages before leaving
  • The diplomacy clause can only be invoked after paying at least one year of rent

There might be slight variations, but these are usually the primary contingencies on which the diplomacy clause’s validity hinges. As mentioned, the diplomacy clause will not be held valid in most cases if you break the tenancy agreement in less than a year’s time, but there can be exceptions through negotiation. Nevertheless, most tenants will have to pay at least one year’s rent, even if they are transferred to another nation.

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