Rental contracts

Deposits and rental agreements in Malaysia

Rental contracts

Malaysian tenancy contracts are usually set for a term of 1 year and require several deposits.

Rent control in Malaysia was abolished a few years ago and rents can be negotiated freely. There is no specific law that regulates the duties and responsibilities of landlords and tenants, yet there are still basic guidelines for rental agreements which are commonly followed.

Renting procedure

After agreeing on the terms and conditions for the rentals, the tenant will be required to pay several deposits. The first step is the payment of an “Earnest deposit”. This usually equals the amount of one months’ rent and is a booking deposit. This means the landlord cannot rent the property to another tenant after receiving this deposit. The “Earnest deposit” can be eventually used as the first month’s rent.

Within 7 days of agreement between landlord and tenant, both sign the tenancy contract. Subsequently, the tenant pays a “Security deposit” which usually amounts to two months’ rent, and a half a months’ rent as “Utility deposit”.

The tenancy agreement has to eventually be stamped by the Malaysian Inland Revenue Authority to become valid. The stamp duty is usually paid by the tenant.

Termination of rental contracts

In order to terminate the tenancy agreement, the party wishing to terminate has to give 2 to 3 months written notice. A renewal of the contract has to be agreed upon from both the landlord and the tenant.

The contracts usually contain a special clause, which is referred to as “diplomatic clause”. This comes into effect if the tenant has to leave the country for vaious reasons and thus requires an early termination. The tenant has to show evidence of why he has to leave, for instance an employment dismissal. In most cases this clause can only take effect after the first 12 months of lease. A written notice of two months is required.

Further reading

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