Whether you are a landlord or a tenant, a tenancy agreement or a rental agreement protects the rights of both parties. This document comprises various terms including the tenancy period; deposit and rental amount; mode of payment; option to renew the agreement; obligations of both parties; and something that is often overlooked – a termination clause.
In tenancy agreements, the rental property is usually referred to as “demised premises”. It basically means the physical boundaries of the property which is being rented out. Like all contracts in Malaysia, tenancy agreements are governed by the Contracts Act 1950 and cannot be terminated at will. Any breach of the agreement by either party has legal repercussions.
The tenancy agreement becomes a legally binding document after the stamp duty (borne by the tenant) has been paid and the original signed document stamped by the Malaysia Inland Revenue Board or Lembaga Hasil Dalam Negeri Malaysia (LHDN).
Can a landlord terminate a tenancy agreement early?
Unless there is a clause in the tenancy agreement that allows for early termination, then no, a landlord cannot terminate a tenancy agreement early. Even if the tenant is behind on rental payments, the tenancy agreement is still in effect and the landlord will have to go through legal means to collect rental arrears.
The landlord would have to send a letter of demand to the tenant and get proof that it has been received, usually by getting the tenant to sign an acknowledgement receipt. If the tenant still does not pay the outstanding rent, evicting him or her by force is not an option. The landlord would have to engage a lawyer to get a court order under the Specific Relief Act 1950. With the court order, the landlord can then lodge a police report to enter the premises with police presence.
There are many samples of a tenancy agreements, and the early termination clause might not be included in generic ones. Detailed ones will usually have a provision for landlords to terminate the agreement if the rental is not paid by a certain date (usually 30 days). The clause for early termination is something that needs to be agreed on by both parties and added to the document from the get-go.
When is it okay for me to terminate my lease early?
There are several situations where you can terminate your lease early. Again, this is dependent on whether the specific clauses have been included in the tenancy agreement.
- When you have been relocated for your job. This diplomatic clause is very common for expatriates renting in Malaysia in case they are transferred back home or to another country by their employers. This exit clause usually allows for termination after one year of property rental, but it can be negotiated with the landlord.
- You found a replacement tenant. In most cases, tenants can terminate the lease early if they are able to find a replacement tenant for the landlord. This means that the landlord would not incur any additional costs to look for a tenant because you want to terminate the lease early
- Breach of tenancy agreement. If the landlord or tenant breaches any part of the agreement, the other party can legally ask to terminate the contract. Examples of breach of contract are the landlord changing the terms of payment or renovating the property. The tenant could be breaching the contract if they sub-let the property.
What happens if you end a tenancy agreement early?
There are consequences of ending a tenancy agreement early if there is no termination clause included in the tenancy agreement. Forfeiture of security deposit: If a tenant ends the tenancy agreement early, the landlord has the right to forfeit the security deposit, usually equivalent to two months rental. If the remaining period of the contract is more than two months, the landlord can also insist that the tenant pay the rest of the rental amount (after subtracting the security deposit). Legal action: Both the landlord and the tenant can sue for damages if the other party decides to terminate the agreement early. The landlord can sue for loss of income due to the breach of contract. A tenant can seek to recover the cost of relocating or in the case of commercial properties, renovation of the property. For special circumstances like the COVID-19 pandemic and the ensuing movement control orders (MCO), the tenancy agreement still stands. The only exception is if the tenancy agreement has a force majeure clause for the termination of the contract if an unexpected event like natural disaster, pandemic or war occurs.
How do I terminate a tenancy agreement in Malaysia?
A tenancy agreement is usually terminated with a written notice not less than two months from the date of termination. If the tenant must move out immediately, he or she would usually have to pay rent for the equivalent of the notice period.
These terms would have been included in the agreement.
An example would be: “In the event of the Tenant being transferred to another state or country by his employer, then the Tenant is entitled on producing written evidence to the effect to give two (2) months’ notice to terminate this agreement or pay to the Landlord two (2) months’ rent in lieu of such notice.”
The termination letter from a landlord should include this information:
- The intention to terminate
- Date of termination
- Reference to termination clause in the tenancy agreement
- Reason of termination (in cases of contract breach)
- Date of property handover o Settlement of any penalties
- Contact details
A termination letter from the tenant has the same content but should also include:
- Letter from employer (in cases of transfer to another country)
- Details of tenant replacement if any
There are sample termination letters available that you can use as a reference. You can refer to this sample letter of termination of tenancy agreement by a tenant or free template for lease termination.
In conclusion, a tenancy agreement can be terminated early only if there are provisions for such termination in the contract. Be prepared to face legal action if you wish to terminate the contract before the agreed term ends.
What To Watch Out for if You Want to Terminate Your Agreement Early
If you plan to terminate your tenancy agreement early, you should:
- Make sure you’re abiding by your tenancy agreement terms.
- Create a copy of your termination letter and keep it.
- Send your notice before you vacate the house or apartment
- Failing to pay an agreed-upon fee for early termination or send your landlord a notice within the set timeframe is considered unlawful behavior. In that case, your landlord can sue you and make you pay up the remaining rent.
What if Your Tenancy Agreement Doesn’t Have an Early Termination Clause?
If your tenancy agreement doesn’t have an early termination clause, don’t despair. You can still send your landlord a request to negotiate the early termination terms.
Look at some instances in which it’s easy to terminate the agreement before its expiration date without the early termination clause:
- Suffering domestic abuse
- Getting deployed by the military
- Moving into a retirement home
- Notifying the landlord of any repairs they need to do and them failing to respond
Even if none of these scenarios apply to you, you can reach a mutual termination agreement with your landlord.
Usually, landlords request several months’ rent from the tenants that want to terminate the agreement early.
You may need to relinquish your security deposit or find a new tenant to avoid having to pay the remaining rent for a few months.
The Consequences of Breaking a Lease Agreement
If a tenant fails to honour a lease contract, he or she could face serious consequences, including lawsuits. Tenants can get a derogatory mark on the credit report, which means that they will have difficulties renting a new property. A lessee who needs to break the contract should negotiate with the landlord before doing so. Lessors often allow tenants to break the lease to avoid looking for new lessees.
Every lease should include an early termination clause to allow tenants to request contract termination without consequences. The clause would protect the tenant in case the landlord doesn’t fulfil the obligations under the lease.
Can You Draw Up a Residential Lease Agreement Yourself?
Many landlords want to avoid hiring a lawyer to save money. That’s why they search for free lease agreement templates to make the contract. While you can probably find lease agreement forms online, making this type of contract on your own is risky.
Leases need to contain many important terms to ensure both parties are equally protected. If you choose to draw up a lease agreement yourself, you risk forgetting to mention crucial clauses, some of which could be required by your state’s laws. Since you can’t change the terms of the lease until it expires, you’ll have to wait for at least one year before including the forgotten clause(s).
Betty Gill 10th Aug. 2021
Credit to Karr Wei, 27th July 2021