02/01/2023
What should be included in a tenancy agreement?
Here are the basic documents that need to be obtained prior to renting a property in Malaysia.
1. Property details and purpose of use
Mention the address of the home and the purpose of its rental. In addition, indicate what kind of residential property is being leased. The unit number of apartments or condos must be stated, and whether the entire house or only specific room(s) is to be rented.
If the house is partially or fully furnished/fitted, the owner should attach an inventory in the rental contract, which the tenant needs to verify before signing. The landlord may include clauses to provide for routine inventories during and at the end of the contract.
2. Duration of Tenancy
State the start and end dates of the intended tenancy duration. In Malaysia, leases usually range from 1 to 3 years. Monthly leases are also common. Either party may specify terms and conditions to allow the occupant to extend/renew the tenancy.
3. Rental amount and deposits
State the exact rent per month in the contract, alongside the due date and its manner or payment (bank deposit/transfer/cash). Also state the exact amount the tenant needs to pay for Security Deposit, Earnest Deposit, and Utility Deposit.
4. Obligations of landlord
The owner is obliged to pay all necessary charges for maintaining the property like quit rent, assessment fees, maintenance fees, charges to maintain or repair infrastructure like wiring, piping, posts, and beams. The landlord must respect the rights of the tenant to privacy and provide the tenant exclusive usage of the property for the duration of the contract.
Annual property tax comes in this section. This tax has to be paid to the relevant authorities. For this, insuring the property and paying insurance premiums are a must. Also, the furniture and other tools that were provided must be in good working condition.
For the landlords, there is another tax called rental income tax. This tax is paid for the money you make from renting out your properties.
Then comes real property gains tax (RPGT). As a landlord, when you are profited from selling a property, you have to pay RPGT.
However, you can ask for a 50% income tax exemption on your rental income. The following criterias are for this income tax exemption โ
Valid only for residential properties
Valid only for Malaysian residents
Rental income earned must not exceed RM2,000 per month per property
The property is leased under a lawful tenancy agreement between owner and tenant
Tax exemption is permitted for a maximum period of 3 years of assessment in a row
Applicable for tenancies made in the year of assessment 2018 to 2020
5. Obligations of tenant
General obligations of the tenant are paying rent on time, in addition to the deposits and utility fees. The tenant is responsible for maintaining safety and cleanliness, and following necessary laws.
6. Rules, prohibitions, and limitations on the property
It specifies the impermissible activities on the property. If, for instance, renovations or modifications are disallowed without permission. The use of property for entrepreneurial purposes, gambling or drugs may be forbidden.
The landlord may also add other clauses, such as limiting the occupants to a certain number or a single family.
7. Dispute resolution
This part states the dispute resolution process, if there are any misinterpretations in the agreement, or if there is dispute between the parties, unless clearly stated in the rest of the documentation.
8. Special terms, conditions, or sub-clauses
Miscellaneous conditions and clauses that either the landlord or the tenant wants to incorporate in the rental agreement in Malaysia. For expatriate tenants, concerned parties may want to include a clause giving the tenant the right to terminate the contract before full term if the tenant must relocate away from the current holding.
Many of the details have to be clearly documented and explained to prevent misunderstandings and disputes.
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