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FAQs of Legal Fees and Stamp Duty Issues of Tenancy Agreement

July 5th, 2009 · 26 Comments

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Following my 2 previous post entitled The Legal Issues between Landlords and Tenants and Can you force your tenant to leave by cutting the utilities in the premises? below are the 11 Frequent Asked Questions in relation to the legal fees and stamp duty issues:

Q1. Is it a MUST to engage a lawyer to draft my tenancy agreement? Ans: There is no law requires a tenancy agreement MUST be drafted by a lawyer. However, it is always advisable to engage a lawyer to draft a tenancy agreement for the one party and on another hand, the other party should engage a lawyer to advise him/her on the agreement drafted by the other party. The reason is obvious as lawyers are legally trained, they are able to advise clients on the legal implication of certain terms (e.g. issue of sub-letting of a premises) and sometimes if necessary the lawyers may advise thier clients to conduct some preliminary search on the counter party, e.g. company search, bankruptcy search and even land search.Q2. Can a lawyer act for both landlord and tenant?

Ans: NO as it will be deemed as conflict of interest. see Rule 1 below.

Q3. Who should pay for the legal fees in drafting a tenancy agreement?

Ans: The law is silent on this point, it is entirely depend on the negotiation and agreement of both parties. However, based the normal market practice, tenant is the one who will be asked to pay for the tenancy agreement. Tips – if you are a tenant and the landlord ask you to pay for the legal fees for the tenancy agreement, please insist that you should appoint your lawyer to draft the tenancy agreement, as many landlord or real estate agent will tell you that the terms in the tenancy agreement is standard. In the event the tenant appoints his lawyer to draft the tenancy agreement, it is always advisable for the landlord to appoint his lawyer to vet through the agreement and advise him if any clause need to be revised.

Q4. What is the legal fees involved?   

Ans: Based on the SECOND SCHEDULE of the Solicitors’ Remuneration Order 2006:

“Where the monthly rent for the first RM10,000  – legal fees is 25% (subject to a minimum fee of RM300).

For the next RM90,000 – legal fee is 10%

Where the rent is in excess of RM100,000 – legal fees is negotiable on the excess (but shall not exceed 10% of such excess).

RULES UNDER THE SECOND SCHEDULE
1. A solicitor shall act only for the landlord or the tenant and the remuneration of the solicitor shall be in accordance with the applicable scale fee in this Schedule.

2. Any consideration in the tenancy agreement expressed to he payable other than by way of rent (e.g. service charge, hire of furniture and fixtures) shall be deemed lo be rent for the purposes of this Schedule.

3. Where a varying rent is payable, the remuneration of the solicitor shall be based on the highest amount of rent payable.

4. Where the consideration for a tenancy agreement is expressed to be partly for a money payment or premium and partly for a rent, the remuneration of the solicitor shall be the aggregate of-

(a) the scale fees for a sale or purchase agreement based on the amount equal to the money payment or premium as specified in the First Schedule; and

(b) the scale fees based on the rent as specified in this Schedule.

5. Where a solicitor represents the landlord in respect of tenancies of 10 or more units in a building or part of a building in which a standard form of lease or tenancy agreement is used, or where a lease or tenancy agreement is renewed upon substantially the same terms and conditions, the remuneration of such solicitor in respect of each of such tenancy shall be 50% of the applicable scale fee in this Schedule, subject to a minimum fee of RM300 for tenancies. ” 

Q5. What are the procedures after signing a tenancy agreement?

Ans: The tenancy agreement should be sent for stamping.

Q6. Who shall bear for the stamping fees?

Ans: Again the law is silent on this point. However, based on market practice, usually the tenant is liable to pay for the stamping fees.

Q7. How much of stamp duty shall I pay for my tenancy agreement? 

Ans: Below is the extraction from the website of the Inland Revenue Office:

“Tenant And Landlord

-The lease or tenancy instrument which secures annual rent not exceeding RM2,400 is EXEMPTED from duty and presentation of these instruments at a stamping office or centre is not necessary.

-The prescribed rate of duty on the instrument which secures annual rent exceeding RM2,400 is as follows:

(For every RM 250 or part thereof in excess of RM2, 400)
When the lease is for a period Duty Rate
Not exceeding one year RM1.00
Exceeding one but not exceeding three years RM2.00
Exceeding three years or for any indefinite period RM4.00

(For every RM250 or part thereof in excess of RM2,400

-If the consideration for tenancy constitutes or includes a PREMIUM, additional duty is chargeable and it is calculated on the amount of the premium at the rate chargeable on immovable property.

-If the lease provides for differential rent, please contact The Deputy Collector of Stamp Duty for further information.”

Q8. When shall I stamp my tenancy agreement?

Ans: Below is the extraction from the website of the Inland Revenue Office:

“Instruments executed in Malaysia
In general all instruments executed in Malaysia should be stamped on or before the time of execution.

Instruments executed out of Malaysia
Instruments other than cheques or promissory notes must be stamped within 30 days after it has first been received in Malaysia.

Stamping of documents after executions
In general, any unstamped or insufficiently stamped instrument excluding cheque or promissory note drawn or made within Malaysia may be stamped after execution on payment of the unpaid duty, if the instrument is presented for stamping;

-Within 30 days of its execution if executed within Malaysia or;

-Within 30 days after it has been first received in Malaysia if it has been executed out of Malaysia.”

Q9. What if I did not stamp the tenancy agreement within the time stipulated above? 

Ans: Below is the extraction from the website of the Inland Revenue Office:

An instrument may be stamped within 30 days of its execution if executed within Malaysia or within 30 days after it has been first received in Malaysia if it has been executed outside Malaysia.

If it is not stamped within the period stipulated, a penalty of

(a) RM25.00 or 5% of the deficient duty, whichever is the greater, if stamped within 3 months after the time for stamping;

(b) RM50.00 or 10% of the deficient duty, whichever is the greater, if stamped after 3 months but not later than 6 months after the time for stamping;

(c) RM100.00 or 20% of the deficient duty, whichever is the greater, if stamped after 6 months from the time for stamping;

may be imposed

(the above rates are effective from 1/1/2003)

Q10. What are the mode of payment of the stamp duty?

Ans: Below is the extraction from the website of the Inland Revenue Office:

Payment may be made in the following manner:-

(i) Cash (if the duty does not exceed RM100) or

(ii) Revenue Stamp (if the duty does not exceed RM500) or

(iii) Money Order, Solicitor’s Cheque or Bank Draft,made payable to the Deputy Collector of Stamp Duty and sent together with the relevant instrument to the stamp duty office by hand or through registered post.

Q11. Where shall I stamp my tenancy agreement?

Ans: you may sent your tenancy agreement to any branch of the Inland Revenue Office (Lembaga Dalam Hasil Negeri).

Tags: -==Legal Tips==- · Property Law

26 responses so far ↓

  • 1 Kai Fen // Jul 6, 2009 at 1:56 pm

    very useful info..thanks eddie

  • 2 Eddie Law // Jul 6, 2009 at 1:58 pm

    Thanks Kai Fen.

  • 3 Sun // Nov 25, 2009 at 3:21 pm

    Hi Eddie
    I find your info most helpful. If you don’t mind, may I ask:
    1. I need to sign a tenancy agreement on my father’s behalf – how can I do this in Malaysia? Just a letter of authrisation or do I need a Power of Attorney, and if so, is there a simple sample so that it’s valid in Malaysia? and do I need to stamp the POA for it to be valid?
    2. from your info above, just to re-confirm, so if a tenancy agreement is of value of less than RM2400 per month, i don’t need to stamp it, even if it’s, say, 2 different tenancy agreements, for 1st floor & gnd floor of the same property?
    Awaiting your advice, Eddie & thank you.

  • 4 YapCT // Apr 18, 2010 at 5:46 pm

    Dear Eddie Law,
    Please advise what should the landlord do when the tenant refuse to pay for the legal fees & stamping of tenancy agreement, even it was included as a clause in the agreement.

    Tenancy Agreement was prepared at own arrangement without going through lawyer. The tenant has paid for the security & utilities deposit plus 1 month advance. But the tenant is denying that the legal fees & stamping are to be paid by them.

  • 5 Yen // May 19, 2010 at 9:38 am

    Hi,eddie

    Question 1)
    I have a simple copy of tenancy agreement (just a piece of paper). It is agree by landlord and tenant.Can I go to LHDN to stamping the copy?

    Question 2)
    As you say: An instrument may be stamped within 30 days of its execution if executed within Malaysia or within 30 days after it has been first received in Malaysia if it has been executed outside Malaysia

    The copy already execute from April 2009 (payment had made),but the stamping still not yet make. What should i do if i do the stamping right now?

    Question 3)
    The period of rent is 10 years (5 years died and 5 year live).If i had make the stamping,i need to renew the copy for every year??

    Please guide me.
    Thank

  • 6 Sharon // Jun 11, 2010 at 10:59 pm

    hello,
    when the tenant wants to renew the agreement after the 1 yr period , do we have to pay for a new agreement or just pay stamp duty?

  • 7 sean // Jul 13, 2010 at 1:23 pm

    What an interesting article.
    I am currently looking at a lease and have had many meetings / discussions. Landlord has produced standard lease (typically a shopping center type) but property is a shop lot.
    I cannot get them to change terms of lease. The standard answer is “we will give u undertaking in a letter but not in the lease” I cannot understand this. Can you shine any light on this one.

  • 8 francesca romana // Sep 17, 2010 at 1:10 am

    Hello. I am planning to rent out my car to someone (a stranger) for few months. Do you think its better if i see a lawyer to draft my agreement? How much will the lawyer fee be you reckon?
    Appreciate your reply. Thank you.

  • 9 Sherry // Nov 7, 2010 at 7:56 pm

    Hello, may i ask if it is possible to replace the stamp duty with post stamp of an equal amount/value? I want to avoid going down to the inland revenue office. Will the lenancy agreement still be valid in that case?

  • 10 kc // Nov 17, 2010 at 6:00 pm

    i have draft myself a tenancy agreement. but where can i get the stamp duty on it.
    is it legal in law that if i do the tenancy agreement by this way?

  • 11 angeline // Dec 2, 2010 at 4:58 pm

    i had just stamp my rental agreement at the mbsa office, one doc is rm10 and the other is rm 20 which copy is tenant and the landlord. i was told rm10 for tenant, is it correct? please advise. thanks

  • 12 Eric // Mar 15, 2011 at 10:43 pm

    Dear Eddie,
    The Tenancy Agreement drafted by a lawyer is near expiring. Me (Landlord) & my tenant have no problem with each other and are prepared to renew the Tenancy for a further 5-year period with an agreed increase of 10% rental and all terms remain unchanged. To save costs, the tenant requested that we just copy the tenancy agreement, sign it & then send for stamping. Is this valid and legal ? (apart from the copyright issue). Is the Tenancy Agreement enforceable in the court of law should there be a dispute in the future ?

  • 13 Eddie Law // Mar 15, 2011 at 11:12 pm

    Eric – the revised tenancy agreement may still be enforceable (provided the original terms in the agreement are enforceable), however, also make sure you pay the sufficient stamp duty and get the neutral parties as witnesses.

  • 14 Eric // Mar 16, 2011 at 12:20 am

    Dear Eddie,
    Thank you for the prompt reply. Your comments and advice have been most helpful.

  • 15 siti // Mar 21, 2011 at 2:45 pm

    Dear Eddie,

    If tenancy Agreement silent on the issue of sub-letting the premise, can the tenant sublet wihout obtaining approval from the Landlord?

  • 16 Amethyst Song // Mar 30, 2011 at 10:17 pm

    Hi Eddie,

    would like to seek for you advice for the following scenario.

    we have move in to the house for about one month. owner keep dragging for the tenancy agreement, as he said he is busy.

    The problem happened when one night, I reach home around 11.30pm. I try to open my room door with the key, but i failed. I asked another housemate for help. both of us failed to open the door using the key and nearly 45mins of effort.

    that time was midnight, no way to call a lock smith to my house, so me and the other housemate decided to break the lock. we broke the door and some minor scratches on the door.

    I plan to call the lock smith to replace the lock. In this case, who should be bearing the cost?

    I told the owner, the owner refuse to bear the cost, and tell me that if i’m not happy with it, repair it and move out.

    I would like to know, what can I do with this?

  • 17 Jeiyaraj // Apr 4, 2011 at 3:08 pm

    Hi Eddie,

    Thanks for this informative article. Got a few questions:
    1) Assuming the tenancy agreement is effective 1st April, & it’s now 4th April, with a monthly rental of RM350/-, my estimate on the stamp duty is RM7.20. Am I right?

    2) My plan is to draw an agreement for 1 year, which can be renewed annually. My tenant insists on a 5-year agreement, without increase in rent. Can I insist on drawing an annual agreement?

  • 18 Steve // Apr 21, 2011 at 12:01 pm

    great info. tks

  • 19 Jacq Lim // May 3, 2011 at 9:33 pm

    Dear Eddie Law,
    I have the same issue faced by YapCT.

    Please advise what should the landlord do when the tenant refuse to pay for the legal fees & stamping of tenancy agreement, even it was included as a clause in the agreement.

    Tenancy Agreement was prepared at own arrangement without going through lawyer. The tenant has paid for the security & utilities deposit plus 1 month advance. But the tenant is denying that the legal fees & stamping are to be paid by them.

    How can I convince the tenant ( by not mentioning that this is standard procedure/normal practice) to bear the cost of the stamping fee?

  • 20 Eddie Law // May 5, 2011 at 4:36 pm

    Hi Jacq – if paying stamp duty is an obligation of the tenant under the contract, and if he does not comply with it then he is in breach of the agreement. you can refer to the relevant clause in the agreement to see what is your rights if another party is in breach of one of the terms of the agreement.

  • 21 jane // Jun 8, 2011 at 8:01 pm

    i want to buy a house (RM265K-leasehold)& was asked to apply 4 loan 2 buy the land (43K)&then apply 4 another loan (house loan) – the bal (265K-43K)! am I being duped? why apply 4 2 loans to buy a leasehold house?

  • 22 hass // Jul 8, 2011 at 10:18 am

    Can i rent out only a partial of my land but the whole?

  • 23 Edward // Jul 15, 2011 at 12:26 pm

    HI Eddie,
    Refer Below answer, Mean agreeable between Landlord and tenant and the word is usually mean no legal said it must be the tenant rite?

    Q6. Who shall bear for the stamping fees?

    Ans: Again the law is silent on this point. However, based on market practice, usually the tenant is liable to pay for the stamping fees.

  • 24 Fun // Sep 9, 2011 at 12:38 pm

    Hi Eddie
    Appreciate your view on this.
    My current tenancy agreement is not stamped although I have paid the money to the landlord. It will expires in 16 months time .Now there’s a change in management on the part of my landlord and the new office do not want to honour the existing agreement . They insist on a new agreement with increase rate and backdate commencement to July2011. I’m now require to pay for the new agreement and also rent at the new rate.
    What’s your take on this base on existing law? Should I insist they honour the old agreement or should I just agree on the new terms and sign again? I know either way I’m the loser as there’s no gaurantee I will not be booted out in the end.

  • 25 margareth // Sep 13, 2011 at 11:42 am

    Hi Eddie,

    Thanks for this info.

    I have a query regarding this stamp matter. Is it stampt on ONE original tenancy agreement kept by the landlord, or as tenant we also normally get the copy duly stamped?

    thanks.

  • 26 Kim // Mar 14, 2012 at 12:55 pm

    Hello Eddie,

    I gain a lot from your articles.

    However, I have bad experience appointing a lawyer to do my tenancy and as a landlord I paid the legal fees and stamp duty.

    Unfortunately, my previous tenant runaway and when I came to this lawyer who did the tenancy, he can’t even help me much to repossess my premise. I myself who did all writing, the running to make police reports and video recording. I even willing to pay him the legal fees for repossession but until today I do not get his actual progress after numerous calls.

    As a landlord, I want to repossess my premise as soon as possible so that I can rent it out to new tenant and not forget it is not easy to meet the suitable tenant.

    And I got the right tenant. Since this lawyer is working on my repossession and he has all the detail, I am appointing him again as my tenancy lawyer with many doubts to his service. It is proven that I am receiving his rude and irresponsible service.

    Now, I am wondering do I really need a lawyer? What can he do to protect me? With tenancy agreement, tenant still can runaway and I can’t recover my losses not even repossession quickly. The worst is I am doing most of the running but paying lawyer fees.

    If the law is pro-tenant, why do I need to pay lawyer to do the tenancy agreement? Would it better if there is no agreement signed that as a landlord I can evict tenant immediately?

    In short, as a landlord, I can’t see the advantage of having tenancy agreement. So, why don’t I save on legal fees and draft the agreement myself?

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