Malaysia has no dedicated Residential Tenancy Act. There is no standardized tenancy agreement template mandated by law, no rental tribunal for quick dispute resolution, and no statutory framework that spells out landlord and tenant rights the way countries like Australia, the UK, or Singapore do. Your tenancy agreement is governed by the Contract Act 1950, common law principles, and whatever terms you negotiate and put in writing.
This means your tenancy agreement is your primary legal protection. A well-drafted agreement prevents disputes. A poorly drafted one — or worse, a verbal one — leaves you exposed to months of lost rent, property damage, and unenforceable claims.
Here is exactly what every Malaysian landlord needs in their tenancy agreement, how stamp duty works, and the mistakes that cost landlords real money.
Essential Clauses Every Agreement Must Include
A Malaysian tenancy agreement should contain all of the following. Missing any of these creates ambiguity that almost always works against the landlord.
| Clause | What It Covers | Why It Matters |
|---|---|---|
| Parties | Full names, IC/passport numbers of landlord and tenant | Identifies who is legally bound; essential for enforcement |
| Property description | Full address, title details, unit number, car park lot | Prevents disputes over what is included in the tenancy |
| Tenancy term | Start date, end date, duration (typically 1-2 years) | Defines the fixed period; affects stamp duty calculation |
| Rental amount | Monthly rent in RM, due date (typically 1st or 7th of month) | Core commercial term; must be unambiguous |
| Payment method | Bank transfer, standing instruction, account details | Reduces disputes over whether rent was paid |
| Security deposit | Amount (typically 2 months rent), conditions for return | Landlord's primary protection against damage and arrears |
| Utility deposit | Amount (typically 0.5 months rent) | Covers final utility bills after tenant vacates |
| Stamp duty | Who bears the cost (typically tenant) | Legal requirement; unstamped agreements are inadmissible |
| Permitted use | Residential only, number of occupants | Prevents subletting, commercial use, overcrowding |
| Maintenance obligations | Landlord: structural. Tenant: internal fittings, cleanliness | Defines who pays for what type of repair |
| Renewal option | Terms for renewal, notice period, rent review mechanism | Gives both parties clarity on what happens at expiry |
| Termination clause | Notice period (typically 2 months), early termination penalty | Protects landlord from sudden vacancy |
| Inventory list | Attached schedule of all furniture, fittings, appliances | Basis for deducting damage from security deposit |
Security Deposit: The Standard Formula
The market standard in Malaysia is:
- 2 months rent as security deposit
- 1 month rent as advance rental (first month's rent, paid upfront)
- 0.5 months rent as utility deposit
- Total: 3.5 months rent collected before move-in
On an RM 2,500/month rental, that is RM 8,750 collected upfront. The security deposit and utility deposit are held by the landlord for the duration of the tenancy and returned (minus legitimate deductions) within 30 days of vacant possession. The advance rental covers the first month's occupancy and is not refundable.
Some listings and agents quote the deposit structure as "2 + 1 + 0.5" — this refers to 2 months security deposit, 1 month advance rental, and 0.5 months utility deposit. The "2.5 months" figure you may see elsewhere typically excludes the advance rental, counting only the security and utility deposits.
What can be deducted from the security deposit:
- Unpaid rent arrears
- Damage beyond normal wear and tear (documented against inventory)
- Unpaid utility bills
- Cleaning costs if property returned in unacceptable condition
- Cost of replacing missing items from the inventory
What cannot be deducted:
- Normal wear and tear (paint fading, minor scuff marks, appliance aging)
- Pre-existing damage not documented in the inventory check-in
- The landlord's own renovation or upgrade plans
The utility deposit is specifically for settling final water, electricity, and internet bills. It should be returned separately once all final bills are cleared — this can take 1-2 months after the tenant vacates, as utility companies process final readings on their own timeline.
No statutory cap exists. Unlike jurisdictions with rent control, Malaysia does not cap the amount of security deposit a landlord can request. However, 2 + 0.5 months is the market norm. Asking for more (3 + 1, for example) is legal but may deter tenants and narrow your applicant pool.
Stamp Duty on Tenancy Agreements
Stamping your tenancy agreement is a legal requirement under the Stamp Act 1949. An unstamped tenancy agreement is not admissible as evidence in court — which means if your tenant defaults and you go to court, your primary evidence is inadmissible.
This is not theoretical. Landlords have lost cases because their unstamped agreement could not be presented to the court.
Stamp Duty Rates
Stamp duty on tenancy agreements is calculated based on the full annual rent and the lease duration. Effective 1 January 2025, the previous RM 2,400 annual rent exemption has been removed. Minimum stamp duty is RM 10.
| Lease Duration | Rate per RM 250 of Annual Rent |
|---|---|
| Not exceeding 1 year | RM 1 |
| Exceeding 1 year but not exceeding 3 years | RM 3 |
| Exceeding 3 years but not exceeding 5 years | RM 5 |
| Exceeding 5 years | RM 7 |
Worked example: RM 2,500/month rent, 2-year tenancy
- Annual rent:
RM 2,500 x 12 = RM 30,000 - Number of RM 250 units:
RM 30,000 / RM 250 = 120 - Rate for 1-3 year lease: RM 3 per unit
- Stamp duty:
120 x RM 3 = RM 360
Worked example: RM 1,800/month rent, 1-year tenancy
- Annual rent:
RM 1,800 x 12 = RM 21,600 - Number of RM 250 units:
RM 21,600 / RM 250 = 86.4(round up to 87) - Rate for up to 1 year: RM 1 per unit
- Stamp duty:
87 x RM 1 = RM 87
Who Pays Stamp Duty?
Negotiable — but market practice is for the tenant to bear the stamp duty cost. This should be explicitly stated in the agreement. Some landlords split the cost 50/50 as a goodwill gesture. Either way, make sure the agreement specifies who pays.
How to Stamp the Agreement
Tenancy agreements can be stamped at:
- Any LHDN (Inland Revenue Board) stamp duty counter
- Online via the LHDN Stamps portal (stamps.hasil.gov.my)
The agreement must be stamped within 30 days of execution. Late stamping incurs penalties under a 2-tier system: RM 50 or 10% of the duty (whichever is higher) within 3 months, and RM 100 or 20% of the duty (whichever is higher) beyond 3 months.
An unstamped tenancy agreement is inadmissible in Malaysian courts. If your tenant stops paying rent and you need to pursue legal action, the first thing the court asks for is the stamped tenancy agreement. Without it, your case is crippled before it starts. Stamp every agreement, every time.
Landlord Protection Clauses
Beyond the essentials, these clauses protect your financial position:
Right of Re-Entry
This clause gives the landlord the right to re-enter and repossess the property if the tenant breaches the agreement — typically defined as rent arrears exceeding a specified period (commonly 1-2 months). Without this clause, repossession requires a court order even after the tenant has abandoned the property.
Sample wording: "If the rent or any part thereof shall be in arrears for fourteen (14) days after the same shall have become due (whether demanded or not), it shall be lawful for the Landlord to re-enter the Premises and the tenancy shall thereupon absolutely cease and determine."
Personal Guarantee
For tenants who are employed individuals (not companies), include a personal guarantee clause. If the tenant is a company or a foreigner on a work pass, consider requiring a Malaysian guarantor — someone who assumes liability for rental arrears and damages if the tenant defaults or leaves the country.
Diplomatic Clause
This clause allows the tenant to terminate the agreement early (usually with 2 months notice) if they are transferred out of the state or country by their employer. The tenant must provide documentary proof (transfer letter from employer).
Why include this even though it benefits the tenant: it prevents messy disputes when expat tenants are repatriated. Without a diplomatic clause, a departing tenant may simply abandon the property and forfeit the deposit — leaving you with an empty unit and no formal termination. A diplomatic clause gives you advance notice and an orderly handover.
No-Subletting Clause
Explicitly prohibit the tenant from subletting, sharing, or listing the property on short-term rental platforms (Airbnb, etc.) without written consent. Subletting without your knowledge exposes you to unknown occupants, potential damage, and possible violations of strata by-laws or local regulations.
Landlord's Right to Inspect
Include a clause permitting the landlord to inspect the property with reasonable notice (typically 24-48 hours written notice). This allows you to check the property condition periodically without being accused of violating the tenant's quiet enjoyment.
Tenant Protection Clauses
A fair agreement protects both sides. Three standard tenant protections:
Quiet enjoyment: The tenant has the right to use the property without unreasonable interference — you cannot enter without notice or make disruptive changes during the tenancy.
Landlord's maintenance obligations: The landlord handles structural repairs (roof, walls, plumbing, electrical). The tenant handles internal upkeep (cleaning, appliances, light bulbs). Define a threshold (e.g., RM 200-500) for who handles what.
Reasonable notice: Both parties should provide equal notice for termination — typically 2 months written notice.
Common Landlord Mistakes
These mistakes cost Malaysian landlords thousands of ringgit every year. All are preventable.
1. Not Stamping the Agreement
Already covered above, but it bears repeating: an unstamped agreement is inadmissible in court. The RM 100-300 stamp duty cost is insignificant compared to the RM 5,000-50,000 you stand to lose if you cannot enforce the agreement. For more on how stamp duty is calculated across different document types, see our stamp duty guide.
2. No Inventory Check-In or Photo Documentation
Without a documented inventory (with photographs) at the start of the tenancy, you have no baseline for assessing damage when the tenant moves out. Walk through with the tenant, photograph every room and appliance, note existing damage, and have both parties sign. Repeat at check-out and compare. Without this, every damage deduction from the deposit becomes a dispute.
3. Verbal Agreements
A verbal tenancy agreement is technically enforceable under the Contract Act 1950 — but proving its terms is nearly impossible. The cost of a properly drafted agreement (RM 300-800 for a lawyer, or free using standard templates) is trivial compared to the risk of having no documented rent amount, deposit terms, or termination provisions.
4. Not Collecting the Full Deposit Upfront
Some landlords accept partial deposit payments to secure a tenant quickly. If the tenant cannot afford the full 3.5 months upfront (2 months security + 1 month advance rental + 0.5 months utility), they may struggle with rent. Collect the full amount before handing over keys.
Eviction: What Happens When Things Go Wrong
Malaysia does not permit self-help eviction. You cannot change the locks, cut utilities, remove the tenant's belongings, or physically remove the tenant — even if they owe months of rent. Doing so exposes you to criminal charges (trespass, theft) and civil liability.
Legal Eviction Process
The legal process for removing a defaulting tenant:
- Serve a written notice to the tenant citing the breach (typically rent arrears) and demanding remedy within a specified period (14-30 days)
- File a writ of summons in the Magistrate's Court or Sessions Court if the tenant does not remedy the breach
- Obtain a court order for vacant possession — this typically takes 3-6 months from filing
- Execute the court order with the assistance of the court bailiff if the tenant still refuses to vacate
Estimated costs:
- Legal fees: RM 3,000 - RM 8,000
- Court filing fees: RM 100 - RM 500
- Bailiff fees (if needed): RM 500 - RM 2,000
- Timeline: 3-6 months minimum, can extend to 12+ months if the tenant contests
Distress for Rent
An alternative remedy: under the Distress Act 1951, a landlord can apply to the court to seize the tenant's movable property (furniture, electronics, vehicles on the premises) to recover unpaid rent. The court issues a warrant of distress, and a bailiff seizes and auctions the items.
This is faster than full eviction proceedings but limited to recovering rent arrears — it does not give you vacant possession. It is most effective when the tenant has valuable personal property on the premises.
The total cost of evicting a non-paying tenant in Malaysia — including lost rent, legal fees, and property repair — averages RM 15,000-30,000 for a typical residential property. This is why proper tenant screening and a well-drafted agreement are the best investments a landlord can make.
Tax Deductibility of Tenancy Costs
For landlords declaring rental income to LHDN, the following tenancy-related costs are deductible from gross rental income:
| Deductible Item | Notes |
|---|---|
| Stamp duty on tenancy agreement | Deductible in the year incurred |
| Legal fees for drafting agreement | Deductible in the year incurred |
| Agent commission for finding tenant | Deductible in the year incurred |
| Fire insurance premium | Annually deductible |
| Assessment tax and quit rent | Annually deductible |
| Maintenance and sinking fund fees | Annually deductible |
| Repairs and maintenance | Deductible if for maintaining the property (not improvements) |
| Interest / profit on housing loan | Deductible against rental income |
These deductions reduce your chargeable rental income and therefore your tax liability. Maintain receipts for all expenses — LHDN can request documentation during audit.
For a complete guide on how rental income is taxed in Malaysia, including worked examples at different income levels, see our rental income tax guide.
Getting the agreement right costs RM 300-800 in legal fees — or nothing if you use a well-vetted template. Getting it wrong costs months of lost rent, unrecoverable damage, and legal fees that dwarf the cost of proper drafting. The agreement is your first and most important line of defense as a landlord.
For an understanding of how tenancy costs fit into the broader picture of rental property ownership expenses, see our analysis of the true cost of owning a Malaysian rental property.