Know Your Stuff: Understanding the basics of renting

This article first appeared in City & Country, The Edge Malaysia Weekly, on March 30, 2020 - April 05, 2020.

See: According to the law, the landlord must return the full amount of both deposits unless he or she can prove that there is damage to the property; wear and tear does not count. Photo by Haris Hassan/The Edge

Natasha: The booking form protects both parties from suddenly withdrawing after the booking has been made. Photo by Sam Fong/The Edge

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In City & Country’s cover story for the first issue of this year titled “What to expect in the next decade”, PPC International Sdn Bhd managing director Datuk Siders Sittampalam made an interesting observation about millennials. He said in the coming decade, this group will no longer see the need to own property. As such, the focus will shift from buying to renting.

While renting is significantly less troublesome than buying a property, potential renters should be cognisant of the legal issues and payments involved.

This article will address these two aspects as well as other important matters.

 

Legal matters

According to Zerin Properties real estate negotiator Natasha Gideon, the most important legal document is the booking form.

“This form protects both parties from suddenly withdrawing after the booking has been made,” she says.

Another important document is the tenancy agreement, which must be stamped at the Inland Revenue Board of Malaysia, Natasha adds. A stamp duty fee will be charged.

Metro Homes Realty Bhd executive director See Kok Loong says a legal firm will be engaged to draft the tenancy agreement and two copies will be sent for stamping. “The original copy will be kept by the tenant while the second will go to the landlord.”

To draw up the tenancy agreement, a copy of the owner’s and tenant’s identification card, and the title, details and assessment receipt of the property are required.

See says property owners who seek the services of a real estate agency to lease out the property will have to prepare a copy of the sales and purchase agreement and the title.

“This is to ensure that the person is the owner of the property. A real estate agent will do the checking of those documents,” he explains.

After ownership is confirmed, the owner will need to send in a written appointment to engage the real estate agency’s services.

See says once a tenant is confirmed, a letter of offer and acceptance (also known as the booking form) will be prepared and a copy of the tenant’s identification card must be provided.

 

Upfront payment

See says when the letter of offer and acceptance is signed, the usual practice is that one month’s advance rental will be required of the tenant and placed with the owner’s appointed real estate agency account.

“This advance rental is a form of booking fee. After the tenancy agreement is signed, the tenant does not need to pay the first month’s rental,” he explains. This amount is known as the earnest deposit.

The advance rental will either be issued back to the owner or become the service fee for the agency.

Upon the signing of the tenancy agreement, the tenant usually has to pay two or three months’ rental deposit (known as a security deposit) and one month’s utility deposit. The full amount has to be paid when the agreement is signed.

Natasha says some owners ask for half a month’s utility deposit instead of one. Usually, the amount for the utility deposit is the same as the asking rental.

She adds that the stamp duty fee for the tenancy agreement is usually paid by the tenant. The same goes for the legal fee.

When the tenancy agreement ends and the tenant chooses not to continue renting, the rental and utility deposit will be returned to the tenant after procedures such as the handover of keys and meter reading are done, See elaborates.

“According to the law, the landlord must return the full amount of both deposits unless he or she can prove that there is damage to the property; wear and tear does not count. If the tenant defaults on any condition stated in the tenancy agreement, the landlord is allowed to retain the deposits,” he adds.

 

Other important matters

Property experts stress that it is very important to view the property before renting it. For example, one should test the water pressure, and check for water seepage and level of maintenance.

Natasha advises potential renters to visit the property in the afternoon to get a feel of the room temperature. If one is particular about noise, then one should visit during rush hour to see whether the noise level from nearby traffic is acceptable or tolerable.

“If the property is close to a mosque, go during prayer time so you can get an idea of what you will be living with,” she adds.

For a better idea of the living conditions in the area, Natasha says potential renters should talk to neighbours about what it is like to live there. She also advises driving around the area as well as driving to work from the unit at the usual time they would leave for work.

In addition, the tenant should immediately take pictures of the entire unit after moving in and record them under the inventory list as proof.

Renting a property is a straightforward transaction, says See. Common disputes are usually over the tenancy agreement.

“The agreement might favour one party more than the other and, sometimes, the deal is aborted because of the details,” he explains.

He advises both parties to discuss the details of the agreement to avoid future disputes.