Rental Deposit, Agreement and Stamping Legal Fee

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 (2) months’ rent, and a half (1/2) 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 various 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.

Legal fees and stamp duty

The guide to legal fees and stamp duty payable in preparation of rental agreement is as follows:

Legal Fee for Rental Agreement period of below 3 years:

For first MYR 10,000 rental – 25% of the monthly rent

For the next MYR 90,000   – 20% of the monthly rent

Where rent is in excess of MYR 100,000 – negotiable

Legal Fee for Rental Agreement period of above 3 years:
For first MYR 10,000 rental – 50% of the monthly rent
For the next MYR 90,000    – 20% of the monthly rent
Where rent is in excess of MYR 100,000 – negotiable

Stamp duty payable to Land Office for Tenancy:

Rental for every MYR 250 in excess of MYR 2,400 rental

Less than 1 year : MYR 1

Between 1-3 years : MYR 2

More than 3 years: MYR 3

Note: Rental amount below MYR 2,400 – no stamp duty.

For an example renting of property of MYR3,000 per month:

Legal fee  : MYR 3,000 x 25% = MYR 750
Stamp Duty : (MYR 36,000 (annual rent)-MYR 2,400/MYR 250) x 1 year = MYR 134.40 

Total fees payable for legal fee and stamp duty will be MYR 884.40.

During the tenancy, the utilities bill such as electricity, water and gas is payable by tenant. The monthly property maintenance payable to management office will be at the responsibility of the property owner.