Before agreeing to be a landlord or tenant for any property, you would have to sign a tenancy agreement to ensure the rights of both parties are protected. The tenancy agreement is governed by the Contracts Act 1950 and cannot be terminated at will. Once they are signed, 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), you may not terminate the tenancy early unless there is a clause in the tenancy agreement.
That includes not being able to evict a tenant even if they did not pay up their rental which means that the landlord has to go through legal ways for termination of contract.
Does that mean the contract is a dead-end for the landlord or tenant? If the laws are so rigid, why the need for them in the first place? The tenancy agreement is to protect both parties should any disagreement or dispute arises later on. So, when can the contract be allowed to be terminated? Only under these circumstances:
1. Job relocation
This includes having to work abroad or elsewhere in the country and there is no way for you to be able to stay in your property.
2. Breaching of the agreement
Should any party breach the agreement such as increasing the rental fee suddenly or the tenant subletting the unit without permission, the contract can be terminated.
3. The existing tenant found a replacement tenant
The tenant who wants to leave has found a new tenant, so the landlord does not incur any losses.
So now you know the tenancy agreement allowed to be terminated under what sort of circumstances. The question now is, what will be the consequences of early termination if you are not fall under any of the above-mentioned circumstances?
1. Legal action
The landlord can sue for loss of income due to the breach of contract should the tenant move out without the adhering to the stipulated notice period. Meanwhile, a tenant can seek to recover the cost of relocating or in the case of commercial properties, renovation of the property should the landlord terminate the contract without advance notice to the tenant. However, this boils down to the stipulated terms and conditions signed in the tenancy agreement.
2. Deposit forfeiture
The landlord has the right to forfeit the security deposit, usually equivalent to two months rental.
If the agreement termination is a must regardless the consequences. The tenant or landlord has to prepare an official letter to prove the termination has reach a mutual agreement.
In the official letter of landlord, it should include of this following information:
- Date of termination
- The intention to terminate
- Reference to termination clause in the tenancy agreement
- Reason of termination (in cases of contract breach)
- Date of property handover
- Settlement of any penalties
- Contact details
- Any other additional legal clauses or agreement mutually
Meanwhile, in the termination letter from the tenant, it should have the same content but should also include the following:
- Letter from employer (in cases of transfer to another place)
- Details of tenant replacement, if any
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