Guide to Tenancy Agreements: Everything You Need to Know

If you’re involved in renting a property—whether you’re a landlord or a tenant—it’s essential to have a written tenancy agreement. A tenancy agreement outlines the terms, conditions, and responsibilities of the landlord and tenant during the tenancy period. Without one, both parties are at risk if issues arise.

For landlords, not having a written tenancy agreement for your investment property can prevent you from taking legal action if a tenant disappears or causes other problems. Furthermore, not having a contract can void insurance claims if a tenant damages your property. You also won’t be able to deduct claimable expenses that reduce your rental property income tax.

For tenants, not having a written contract could leave your rights unprotected in the event of sudden eviction, putting you and any dependents in a difficult situation.

Now that you understand the importance of a written tenancy agreement, let’s explore the essentials that should be included in every agreement.

Details on both parties

First and foremost, the tenancy agreement must include details on both parties:

• Full legal name
• NRIC number for Malaysians
• Passport number for non-Malaysians
• Phone number
• Email (optional)

Rental property details and purpose

The tenancy agreement should include a detailed description of the rental property, such as:

Tenancy duration

A tenancy agreement also needs to state the agreed duration period and the terms and conditions for renewing and ending the agreement.

Rental and deposits

Clearly outlining rent, payment terms, and deposits in your tenancy agreement can save you significant hassle if you ever need legal action for missed payments or tenants who disappear.

Here are more details on the required deposits typically included in tenancy agreements and the standard amounts in Malaysia.

Obligations of landlord and tenant

The final section needs to detail the rights and responsibilities of the tenant and the landlord. Here’s what to typically include.

Stamp Duty, Administration, and Legal Fees

After the landlord and tenant have signed the agreement in the presence of a lawyer, the tenancy agreement must be stamped by Lembaga Hasil Dalam Negeri Malaysia (LHDN) to gain legal approval. Tenants are responsible for covering the stamp duty fees, which vary based on the rent amount and duration of the tenancy.

Here’s an example calculation:

1. Calculate annual rent:
   • Monthly rent: RM1,000
   • Annual rent: RM1,000 x 12 months = RM12,000
2. Deduct the exemption
   • Deduct RM2,400 from the annual rent: RM12,000 - RM2,400 = RM9,600
3. Divide the balance by RM250 into units.
   • RM9,600 ÷ RM250 = 38.4 (round to 38 units)
4. Apply the stamp duty rate based on the tenancy duration to each unit.
   • 1 year agreement: RM1 x 38 units = RM38
   • 1-3 years agreement: RM 2 x 38 units = RM76

Moreover, legal fees are also applicable for each tenancy agreement starting from July 15 2023 based on the newly gazetted Solicitors’ Remuneration Order 2023 following the table below:

Conclusion

In conclusion, while tenancy agreements can vary, including these essential components are crucial for protecting landlords and tenants. A well-drafted agreement helps ensure a smooth rental experience, minimising potential conflicts and misunderstandings.

Moreover, you and your tenant should be aware of the relevant costs associated with tenancy agreements to ensure all parties are financially prepared and make an informed decision.

💡 The information provided above is purely for educational purposes.