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Your Tenant Does Not Pay Rent, What To Do?

Not published yet ago marcuslml

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Over the past few years, the Malaysia property market has gone from hot to lukewarm and, due to economic uncertainties, the property market is expected to stay flat for the next half of the year. This presents a multitude of problems for landlords, but since we aren’t a property site, we’ll just be focusing on one problem in particular – Rent. Perhaps your tenant lost their job and they don’t have the money to pay you rental. Perhaps they’ve come up with other excuses to postpone payment month-after-month. Either way, you don’t get paid and these are the times when landlord-tenant relationships turn sour. 

Landlords can exercise a few options to recover their rents. Some may fantasize about taking extra-judicial (not legally authorized) means like sending a bullet to the tenants or splashing red paint on the tenants’ car. Of course, these extra-judicial methods are all illegal, and we advise you not to take any of these steps! And of course, there’s also the chance that tenants may run off and cannot be located; making all these extra-judicial methods useless.

This is a bad idea. Don’t forget, it’s YOUR house!

 

Instead, we suggest you to seek proper legal remedies. The law does help you landlords in the event a tenant defaults on you. But don’t go searching for a lawyer just yet! There is one important point you must first know:

 

Your contract is VERY important!

Firstly, the landlord-tenant relationship is a contractual one. Therefore, by and large the contractual relationship – such as the rent, the duration, the limitations and remedies  – can be found under the tenancy or lease agreement signed by both parties. However, while you can  Under Malaysian law, tenancy and lease are more or less the same; just that “tenancy” means renting out your property for less than 3 years and “lease” would be more than 3 years.

Secondly, before you pursue any legal action, you must FIRST make a formal demand in writing for the arrears (overdue) of rent. So instead of sending a bullet, you should send a letter, email or even Whatsapp messages. If you’re sending a letter, it may also help to take a photo just as proof that it was sent. 

You should state clearly in the letter/ message your demands. Include all details as specific and as clearly as possible, such as demanding the tenant pay a certain amount of rent within a certain period of time, or the tenant must vacate the premises. Only after you have made your demand clear, then only can you proceed to look into remedies. 

So let’s say you’ve already sent the demand and the tenant still doesn’t pay. What can you do none very common objective to pursue legal action is to evict the tenants. Landlords want the tenants to leave and they can then rent the property to someone else to ensure stable income. The question is, how to legally and properly evict the tenant?

 

Landlords Cannot Evict Tenants By Force

If you landlords think you can simply lock the gate/door and regain the possession of the premises, then you are wrong! Changing the lock is an effective measure of self-help, but it is legally wrong, as we can see from Section 7(2) of the Specific Relief Act 1950:

“Where a specific immovable property has been let under a tenancy, and that tenancy is determined or has come to an end, but the occupier continues to remain in occupation of the property or part thereof, the person entitled to the possession of the property shall not enforce his right to recover it against the occupier otherwise than by proceedings in the court.”

This section simply means that you cannot recover possession of your property without a proper court order. Getting a proper order simply means you have to first terminate the tenancy agreement and engage a lawyer. Your lawyer will help you sue the tenant for arrear rent and ask for vacant possession order. The court will grant the order and then only you may regain possession of the property. If you forcefully enter the premises, you risk yourself being sued by the tenant for trespass! Unfortunately, it could be a long and costly procedure, the case may drag for three months before you get the possession order; assuming the tenant does not contest the matter in court.

Even if you argue that the property is yours and the tenant does not pay rent, this argument is futile. In the case of Abdul Muthalib Hassan v. Maimoon Hj. Abd. Wahid [1992] 1 CLJ 88, the court has ruled that landlord locking up premises because the tenant does not pay rent is not a justification for trespass.

 

You Can Go For A Distress Action!

Alternatively, as landlord, you may commence for a “distress action”. This is another legal remedy available for landlord under the Distress Act 1951. This right allows landlords to distrain for unpaid rent. Essentially, the landlord can seize the tenant’s goods and sell them for the purpose of recovering arrears (money that is owed to someone). Again, that does not mean you can just go into the tenant’s room and seize his Iphone 7 or Macbook Air. Section 5(1) of the Distress Act 1951 says that you have to apply to a judge for the issuance of a warrant for distress for recovery of rent. This distress action is special in the sense that, it can be carried out by landlord against tenant without terminating the tenancy agreement. Meaning to say, you do not have to terminate the tenancy before commencing this distress action.

Now, do not forget, in Section 28(4) of the Civil Law Act 1956, it says landlord can claim from the tenant double rent  from the expiry of the notice of eviction until the possession is given to the landlord. It is stated:


“(a) Every tenant holding over after the determination of his tenancy shall be chargeable, at the option of his landlord, with double the amount of his rent until possession is given up by him or with double the value during the period of detention of the land or premises so detained, whether notice to that effect has been given or not.”

 

As landlords, you might be reluctant to engage a lawyer (and pay expensive legal fees!), but what about suspending water supply? Yes, you can do that if and only if it is stipulated in the tenancy agreement. If the contract says the landlord can cut off water supply if the tenant arrears in rent, then the court may allow so. And, the best part is that you do not have to get a permission from the court (no need to pay lawyers mahal-mahal!). This is supported by the case of Premier Model (M) v. Philepromenade Sdn Bhd [2001] 1 LNS 173.

 

Sad News, Landlords Have Limited Remedies!

It seems like landlord in Malaysia has very limited remedies in cases of arrears in rent by tenant. The only legislation specifically addressing this issue is the Distress Act 1951. We recognize for a matter of fact, that there is no other specific legislation that governs landlord-tenant relationship.  

Well, in reality, if a tenant does not pay you rent, it is unlikely for him/her to engage a lawyer to sue you for trespass in case if you force enter the premises. Therefore, it is Malaysia’s usual practice for the landlord would lodge a police report in case of arrears by tenant. Then, police officers may escort you in regaining the possession of property. Just remember to take a lot of photos in the property. This is ensure the tenant does not proceed with false claims of lost of property taken by you or property abuse.

It seems like engaging a lawyer is the “proper” way. But again, in reality, how many of us in Malaysia are willing to pay the legal fees? In fact, if you appoint an agent to manage your property, the very first option is to seek assistance from your agent in resolving any tenancy disputes (certainly, agents charge you less than lawyers!)

At the end of the day, we advise you landlords to draw up a good tenancy agreement before renting the property out. Make sure the agreement does secure your rights as landlords! Also, know your tenant before renting the property could avoid arrears in the long run!

This article is for informational purposes only and should not be taken as legal advice. Every situation is unique and dependent on the facts (ie, the circumstances surrounding your individual case) so we recommend that you consult a lawyer before considering any further action. All articles have been scrutinized by a practicing lawyer to ensure accuracy.
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