Important Clauses to look out in your Tenancy Agreement (Part 1)

The Complete Guide to Salient Terms of Tenancy Agreement

A Tenancy Agreement is a contract signed by the Landlord and the Tenant which states all the salient terms and conditions of renting a property. Tenancy is created for a term not exceeding three years and unlike a lease, it need not be registered-Section 213(2) of the National Land Code (Revised-2020). In Malaysia, there aren’t fixed laws that regulates tenancies and the relationship between the Landlord and Tenant and a proposed act for this is still in the works. Hence, it can be quite hard to define the duties and obligations of the Landlord and Tenant. In order to protect both the Landlord and Tenant, a clearly-worded Tenancy Agreement is important.

A Tenancy Agreement is essential to protect the interests of the Landlord and Tenant. All terms and conditions are to be discussed and finalised between the Landlord and Tenant before it is executed. The Tenancy Agreement serves as a finalised, concrete version of the negotiations. The question then is, what exactly are the terms we need to have in a Tenancy Agreement? Today we will be looking at the salient terms from both the Landlord’s and Tenant’s perspectives.

Salient Terms of Tenancy Agreements-Landlord’s Perspective

1. Rental Payment Terms- Landlord should make it clear in the Tenancy Agreement the timing of which the monthly rental have to be paid by the Tenant, i.e., on the 1st day of every month, or on or before the 7th day of every month etc.
2. Deposits- The Tenancy Agreement should make it clear that the deposits must be maintained for the tenancy period and cannot be treated as payment of rental otherwise the Tenant may insist that the deposits be used towards payment of last few months’ rental and Landlord will not have any security against damages/breaches caused by the Tenant in terms of yielding possession or settling utility charges etc. The Tenancy Agreement shall also provide rights to Landlord to retain or deduct from deposits towards settlement of any charges/costs/utilities which the Tenant failed to pay.
3. Forfeiture of Deposits- In the event the Tenant terminate tenancy earlier, the deposits shall be forfeited by the Landlord as agreed liquidated damages, as this will provide a financial backup for Landlord while they seek for new tenants.
4. Payment of Utilities- The Tenancy Agreement shall provide that the Tenant is required to provide receipts on a monthly basis in relation to settlement of utilities charges. And also, to provide Landlord with the rights to stop and suspend services or use of utilities supplied to the demised premises if the Tenant failed to pay utility charges for, i.e., 3 months.
5. Maintenance of Demised Premises and Landlord’s Fixtures- During the term of tenancy, the Tenant shall keep the demised premises, the furniture, fixtures and fittings together with any additions thereto in a good and tenantable repair and condition (fair wear and tear excepted). “Fair wear and tear excepted” mean that if the demised premises or any fixtures and fittings are damaged due to normal and daily use, the Tenant shall not bear the cost of replacement.
6. Sub-Letting- Sub-letting by the Tenant without Landlord’s approval is prohibited. If the Landlord approve the sub-tenancy, ensure it is made clear in the Tenancy Agreement that the Tenant continues to be responsible for all actions of the sub-tenant and to indemnify the Landlord against damages/breaches caused by the sub-tenant.
7. To Repair or Replace Any Damaged or Lost Items- The Tenant shall repair or replace at the expiration or sooner determination of the term of tenancy, at their own expenses, the Landlord’s 2 furniture, fixtures and fittings and other property within the demised premises, as may have become damaged or lost as a result of the Tenant’s act or neglect.
8. Yielding Possession- The Tenancy Agreement shall make clear that the Tenant is responsible to clear all of Tenant’s fixtures, fittings and yielding the demised premises in its original state and condition (fair wear and tear excepted) in good clean and tenantable condition prior to expiry of the tenancy. If the Tenant failed to do so, Landlord shall be given the rights to reinstate and offset the costs from the deposits.
9. Not to Modify or Renovate Anything Without Landlord’s Permission- Not to make or permit any alteration in the construction or structure of the demised premises without the written consent of the Landlord.
10. Rights to Dispose of the Demised Premise- Landlord shall has the right to sell or dispose of or novate the demised premises to any party as the Landlord wishes. Next, we will cover the responsibilities and obligations of the Landlord.

We will be looking at salient terms from the Tenant’s perspective (To be continued in Part 2).