ANYONE can become a tenant who rents a room, a house, a condominium, a factory or an office premises for a period of time from an owner. However, you may not be aware of the actual conditions of the premises even though you have inspected the premises together with an estate agent once before/upon signing the Offer to Rent.

A Tenancy Agreement is used to protect the interests of the Landlord and Tenant. You may not wish to end up in a situation where you do not understand what you have signed, or you have signed a lop-sided agreement which favours heavily towards the Landlord.

WHAT CLAUSES SHOULD YOU LOOK OUT FOR?

1. EARLY TERMINATION

What happens if you wish to exit the tenancy period earlier than the expiry date? Are you required to compensate the Landlord for the unexpired tenancy period?

You may find this clause in many tenancy agreements. It basically deals with what the Landlord can do when you wish to terminate the agreement before expiry of the tenancy period.

The Landlord may impose requirements on you as follows to recover their losses during the unexpired tenancy period:

That you are allowed to terminate the tenancy agreement after a minimum period of tenancy, for instance, after a year time; or
That you shall pay rental for the unexpired period of the term of the Tenancy or find replacement of a new tenant.

These clauses seem unfair to you. Nonetheless, such clause becomes valid and enforceable under the law upon parties sign the agreement. You cannot claim that you do not understand the meaning of such clauses later.

According to Section 75 Contracts Act 1950, the innocent party is able to claim damages against the defaulting party for actual damages or losses as a result of breach of contract.

In Berjaya Times Square Sdn Bhd v Twingems Sdn Bhd & Anor and another action (“Twingems’ case”), it was held by Asmabi Mohamad JC that the losses suffered by the landlord owing to non-performance by the tenant of its obligations under the tenancy agreement were actual losses and pursuant to cl 10(2) of the tenancy agreement in the context, the defendant is liable to pay for the entire duration of the tenancy under the tenancy agreement.

Suggestions to Move Forward

Of course, it is important to scrutinize your Tenancy Agreement properly and negotiate with your Landlord before signing the Tenancy Agreement. There are few options to protect yourself against the compensation part pertaining to the early termination clause:

You may include in the tenancy agreement that ” the Landlord shall refund the Tenant the sum of any rent so received if the Demised Premises is let out during the said unexpired period.” This clause helps to create a win-win situation between parties where you could release or mitigate your liability under the tenancy agreement; OR
Alternatively, you may include a Diplomatic Clause that the compensation payable to the Landlord in the event of early termination of the tenancy be enforceable after a certain period of tenancy e.g after one year of tenancy. This helps you to exit the tenancy agreement earlier with lesser losses.

2. OPTION TO RENEW

Do you get the first right to continue the tenancy above other third party outsiders when the tenancy agreement is about to end soon? Are you able to control the rate when your Landlord increases the rental during renewal of the tenancy?

One of your nightmares as a Tenant is that he receives exorbitant increment in rental while the Landlord renews the tenancy agreement. For example, the current rental is RM2,000.00 per month. Upon expiry of the tenancy agreement, the tenant wishes to renew the tenancy agreement. The Landlord agrees but the rental will be revised to RM5,000.00 per month.

Suggestions to Move Forward

Therefore, in order to protect your best interest as a tenant, you could negotiate with your Landlord to fix the rate of rental increment when the tenancy agreement is renewed. For instance, parties may include an Option to Renew Clause into the new tenancy agreement that “the Tenant shall be given an option to renew the tenancy agreement for one (1) year at a renewed monthly rental rate not exceeding twenty percent (20%) from the current monthly rental rate.”

3. RIGHT TO FIRST REFUSAL

Does the Landlord have to first offer you when he/she wants to sell the property during the tenancy period? In the event the property is sold to any third party for valuable consideration, will your business/interest be affected?

Imagine that you are renting a house or condominium, the Landlord gives you a notice demanding you to vacate the premises within a week time. You may not be able to find a new place within such short period of time. The situation becomes worse if you are renting a factory running your business, say a production house. Would you be able to find a new factory to move out all your inventories and machines within a week time?

Suggestions to Move Forward

As a Tenant, you may consider to add a Right of First Refusal Clause into your Tenancy Agreement in the event you wish to own the property in the future or to avoid any disruption to your business operations during the tenancy period. A right of first refusal clause would give you the first right to get the offer to purchase the property in the event your Landlord intends to sell off the property during the tenancy period. You may choose to accept or reject the offer. If you choose to reject it, a right of first refusal may allow the Landlord to sell the property to a

third party purchaser subject to or without subject to your tenancy. In the event the new owner refuses to take up the property subject to your tenancy, you may reserve sufficient period of time for you to find a new premise and move out from the existing premises subject to payment of rental up to the date of delivery of the vacant possession of the premises.

4. DEFAULT BY LANDLORD

What rights do you have when your Landlord has breached the terms and conditions of the tenancy agreement?

In a tenancy agreement, the Landlord may also commit breach of the agreement such as failure to refund deposit to you upon expiry of the tenancy agreement, failure to give you any notice when entering the premises, wrongfully disconnect water and electricity supplies to the premises, wrongfully unlock the premises and stop your access into the premises and etc.

Suggestions to Move Forward

In your tenancy agreement, you may include clauses as follow to protect your interest:

(a) That you enjoy exclusive enjoyment of the property without any nuisance and disturbance during the tenancy period;

(b) To include the purpose of the tenancy;

(d) Ensure that there is no clause which allows the Landlord to unlock the premises without your consent;

(e) That the Landlord may disconnect water and electricity supplies to the premises provided that you default payment of the rental and other utilities charges;

(f) That the deposit cannot be used to set off the rental every month. It must be refunded to you upon termination of the tenancy agreement within x days subject to lawful deductions of all outstanding outgoings. In the event the Landlord fails to return the deposit/balance deposit to you, you reserve your rights to charge late payment interest, sue and claim for all losses and damages against the Landlord.

5. TENANT’S COVENANTS OR OBLIGATIONS

Before you sign a tenancy agreement, are you allowed or prohibited to sub-let, to rare pets, to renovate/alter/modify the conditions of the property, to cook or barbeque in the premises etc?

Please DO NOT assume that your Landlord allows you to act like a King and do anything to the premises as you wish by granting you a right to use and stay in the premises. For very simple reason, you are not the legal owner.

For example, a lot of Airbnb property managers rent a property and sub-let the rooms in the property to the individuals. Some companies rent a property and sub-let the rooms in the property to their workers for the purpose of accomodation. The Landlord may not allow you to do this.

Suggestions to Move Forward

The Landlord will impose a list of obligations on you to ensure that you take care of the conditions of the premises well.

As a Tenant, you should communicate with the Landlord prior to the signing of the tenancy agreement that what would you like to do to/inside the premises during the tenancy period:

(a) You have intention to sub-let the property to others in the future;

(b) You would want to bring in your pets;

(d) You would like to have a parking lot;

(e) You would like to store some goods in the premises;

(f) You would like to store some explosive and dangerous items inside the premises; or

(e) Or any other special requests.

In the event the Landlord does not agree to your requests and the requests are really important to you, then you may consider not to take up the premises. Under the stratified properties i.e. condominium / apartments, you should also be aware of the house rules/management rules of the housing development. It will be perfectly fine as long as you obtain written consent from the Landlord to carry out any action to the premises.

6. MAINTENANCE OF PREMISES

During the tenancy period, who is responsible to maintain the conditions of the roof, the wall, the pipes, sockets, electricity wires, fixtures and fittings, ceiling, etc? What if there is leakage on the roof and wall? The Landlord or the Tenant?

A lot of people are under the impression that you, as the tenant is responsible for each and every corner of the premises because you are using the premises. Some owners may also require you to hand over vacant possession of the premises in its original conditions.

Suggestions to Move Forward

Normally, the Landlord is the one who shall be held responsible to make good the defects on the main structures of the premises such as the roof, the wall and etc.

You, on the other hand, would be responsible to keep fixtures and fittings in the premises in good and tenantable conditions. You may include clauses as follows into the tenancy agreement to protect your interest:

(a) That the landlord repairs any defects on the main structures of the premises at its own costs and expenses;

(b) That the landlord gives notice of appointment before the landlord’s agents carry out such repairs;

(c) That you repair the fixtures and fittings in the premises at your own costs and expenses (fair wear and tear excepted); and

(d) That you deliver vacant possession of the premises in a good and tenantable condition as at the date of the tenancy agreement.

It is unfair for a tenant to re-deliver vacant possession of the premises to the Landlord in its “ORIGINAL” condition. “Original condition” means the conditions which were received by the Landlord when he/she first took vacant possession (the keys) from the developer. As a tenant, you are not the first-hand party who took vacant possession of the premises and therefore, you are not obliged to re-deliver vacant possession of the premises in its original condition. You are obliged to re-deliver vacant possession of the premises in the condition as at the date of the tenancy agreement.

The contents of this article do not constitute legal or other professional advice or an opinion of any kind. It is provided for general information purposes only.

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By Chloe Lim & Carmen Leong