If tenants don't pay rent, what can Malaysian landlords do?

Article is originally written in January 2018.

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 like Propsocial, 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 rent. 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, so we strongly advise you against taking any of these steps! There’s also another scenario where tenants run off and cannot be located; making all these extra-judicial methods useless.

Instead, we suggest you seek proper legal remedies. The law does help 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. You may also want to check with your agent on the specific terms of the agreement and the steps that you can take. 

But wait, what’s the difference between a “tenancy” and a “lease”? 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. Typically, leases are more common for commercial business rentals than residential ones. 

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 a Whatsapp message. It’s also advisable to take screenshots or a photo (if you’re sending a letter) as proof to negate any claims from the tenant saying that they didn’t receive it. You may also want to request that the tenant acknowledges that he or she received the letter, which can be done by signing and dating the document.

The letter should clearly state all 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 reasonable 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. One very common objective to pursue legal action is to evict the tenants so you can rent the property to someone else. The question is, how can you legally and properly evict the tenant?

Landlords cannot evict tenants by force

So let’s say the demand has been sent and the tenant isn’t moving out and is still not paying. It may sound perfectly justifiable to enter your property, throw out their belongings, and change the locks – after all, they are not paying the rent as agreed and it’s YOUR property, right? 

Wellllll… not so. In fact, you may actually get into legal hot soup for doing this, 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 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 a vacant possession order. Only when the court grants the order can you start regaining possession of the property.

If you forcefully enter the premises, you risk yourself being sued by the tenant for trespass! 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 ruled that the landlord locking up the premises because the tenant didn’t pay rent is not a justification for trespass.

Unfortunately, getting a court order could be a long and costly procedure... the case may drag for months before you get the possession order; assuming the tenant does not contest the matter in court, or you might be reluctant to engage a lawyer (and pay expensive legal fees!). A way around this is to suspend the water supply. You can do that if – and only if – it’s stipulated in the tenancy agreement. If the contract says the landlord can cut off water supply if the tenant arrears in rent, then you’re allowed to do so; with the best part being that you do not have to get 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.

While we now know that there are several ways to get the non-paying tenant out of your property, is there a way for you to get back some of the money owed to you?

You can go for a distress action!

A “distress action” 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).

Again, that does NOT mean you can just go into the tenant’s room and seize his iPhone X 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 the landlord against the tenant without terminating the tenancy agreement. Meaning to say, you do not have to terminate the tenancy before commencing this distress action.

In addition, Section 28(4) of the Civil Law Act 1956 says the landlord can claim double rent from the tenant 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.”

Of course, if the tenant isn’t paying you to begin with, enforcing this may be a moot point.

Lastly, if the amount of rent owed is less than RM5,000, you can also look into a small claims procedure. It’s a little more DIY because you won’t need to hire a lawyer, but that also means it’s a lot more affordable. You can read more about this in the link below:

[READ MORE: What’s a small claims procedure?]

Moral of the story – Read your tenancy agreement

As can be seen, there aren’t many laws that govern the landlord-tenant relationship, with the Distress Act 1951 being the only legislation specifically addressing the issue.

But in most real-world cases, it’s the exception rather than the norm for these cases to go to court due to the cost and time involved. It can be said that the more standard practice would be for the landlord to lodge a police report. Then, police officers may escort you in regaining the possession of property. It’s also advisable to take photos or recordings to safeguard yourself against any claims of theft or abuse of the tenant’s belongings. 

If you’ve appointed an agent, the very first option is to seek assistance from your agent in resolving any tenancy disputes.

At the end of the day, the first line of defense against potential headaches is to draw up a good tenancy agreement before renting the property out. Make sure the agreement secures your rights as landlords, and provides the necessary safeguard in the event of non-payment of rent.