What to do when your tenant does not pay rent?

The sad truth is that the laws of Malaysia are pro-tenant. In this article, we will discuss about the laws governing tenancies, as well as the legal remedies available to a landlord. You may also read this Article in Chinese【点击这里阅读中文版】

Tenancy vs. Lease
Before we discuss in detail about what to do and what not to do when your tenant does not pay the rent, it is worth noting that a tenancy differs from a lease. A tenancy is for a term not exceeding three (3) years and a lease is for a term exceeding three (3) years but not exceeding ninety-nine (99) years if it relates to the whole land, or thirty (30) years if it relates to only part of the land. In contrast to a tenancy, a lease is a registrable interest. What this means is that when the lease is duly registered, any person who conducts land search on that particular piece of land would be aware of the existence of the lease. It serves as a notice to the world at large that a lease has been granted over the whole or part of the land. An unregistered lease is still valid in law, but the unregistered lessee does not enjoy the same protection as a registered lessee does.

Governing laws
While a lease is governed by the National Land Code 1965, there is no single Act of Parliament that governs tenancies. Hence, the only binding document for a landlord and his tenant is the tenancy agreement. The tenancy agreement is generally governed by the Contracts Act 1950, while several other Acts of Parliament are used in solving landlord-tenant disputes, including but not limited to the Civil Law Act 1956, Distress Act 1951 and Specific Relief Act 1950.

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​Tenancy agreements
To your surprise, a tenancy agreement is not a must in law. The National Land Code 1965 provides that a tenancy may be granted by word of mouth. Even if such is the case, it is always advisable to have a tenancy agreement in writing to ensure that the interests of the landlord and the tenant are protected and that both the landlord and the tenant are aware of their respective rights, duties, obligations and covenants.

A tenancy agreement is an agreement signed by the landlord and the tenant which contains all the terms and conditions mutually agreed by both parties. It is worth noting that unlike the sale and purchase agreements prescribed by the Housing Development (Control and Licensing) Act 1966, there is no such thing as a standard tenancy agreement.

The parties to a tenancy agreement, i.e., the landlord and the tenant, are therefore free to negotiate the terms and conditions of the tenancy agreement, and will be bound by the mutually agreed terms and conditions contained therein once the tenancy agreement is signed by the parties. There is no excuse for the parties that they signed without fully understanding the terms and conditions. It is therefore imperative that the parties consult a lawyer if in doubt with any of the terms and conditions of the tenancy agreement to ensure that the interests of the parties are always protected.

Important clauses in a tenancy agreement
Having ascertained that a tenancy agreement is a matter of mutual agreement, below are the important clauses in the tenancy agreement that the parties should take note of: -

1. Particulars of the landlord and the tenant
2. Particulars of the premises
3. Purpose of the tenancy
4. Monthly rental (amount, mode of payment and date of payment)
5. Security and utility deposits (amount and forfeiture of the deposits)
6. Tenancy period (commencement and end dates, termination and option to renew)
7. Covenants and obligations of the parties
8. Fixtures and fittings list
9. Special conditions (no cooking, no smoking, no pets, etc.)

​​Legal remedies that a landlord has
Having discussed the above, we now proceed to the most important part of this article, i.e., what exactly can you do, and what you should never do, when your tenant does not pay the rent - one of the greatest nightmares for a landlord. As mentioned above, as the laws of Malaysia are generally pro-tenant, the landlord will usually find himself in a disadvantaged position. Notwithstanding the fact that the laws are pro-tenant, there are still remedies available to the landlord.

Unlawful to evict the tenant without a court order
It is important to note that when a tenant does not pay the rent and refuses to vacate the premises, it is unlawful for the landlord to evict the tenant without first obtaining a court order, notwithstanding that the premises belong ultimately to the landlord, or that the tenant refuses to pay the rent. The landlord has to first engage a lawyer and terminate the tenancy before applying for the court order.

Warrant for distress
Another legal remedy available for the landlord is to apply to the court for the issuance of a warrant of distress, which can be applied and obtained ex parte, for the recovery of the rent due and payable to the landlord. It is important to note that the distress action does not allow the tenant to recover the possession of the premises, but rather to recover the amount owed by the tenant to the landlord by confiscating and seizing the tenant's goods and selling them off at a public auction. As the distress action can be taken without the landlord first terminating the tenancy, the tenancy will, unless terminated, continue even after the distress action.

Double rent from tenant
When a tenant is holding over after the determination of the tenancy, the landlord has the option to charge the tenant with double rent until tenant gives up the possession of the premises. It is important to note that there have been decided cases which held that the recovery of double rent is not as of right but one of courts' discretion.

Small claims procedure
Alternatively, if the amount owed is less than RM5,000.00, the landlord can take advantage of the small claims procedure as provided by the Rules of Court 2012. The landlord can submit a claim to court without engaging a lawyer. In fact, legal representation is not permissible although the landlord may consult a lawyer. This small claims procedure is a topic for a separate discussion.

Other remedies
Over the years, tenancy agreements have been drafted by lawyers to include other remedies for the landlords such as the cutting off of the electricity or water supply. Such remedies very much depend on the practical consideration and whether they were actually provided for in the tenancy agreements. Whether such right is actually enforceable is also worth another discussion.

Conclusion
As can be seen above, even though the laws are pro-tenant, there are still remedies available to a landlord to recover the rent owed to him or to recover the possession of the premises. If you are a tenant, your landlord would really appreciate your timely and punctual payment of rent. Do note that some landlords rely on the monthly rents as their main source of income.

You may also read this Article in Chinese【点击这里阅读中文版】