Tenancy Agreement in Malaysia: What Tenants and Landlords Must Know

A tenancy agreement in Malaysia is the single document that governs who can do what, who pays for what, and what happens when things go wrong. Reading it carefully before you sign takes twenty minutes. Disputing a poorly drafted clause in court can take two years.

Why the tenancy agreement is your only real protection

Malaysia does not yet have a single residential tenancy statute. The proposed Residential Tenancy Act (RTA) has been in development under KPKT since at least 2020 and, as of June 2026, has still not been tabled in Parliament. Until it becomes law, your rights and obligations are entirely determined by the Contracts Act 1950, general property law under the National Land Code 1965, the Distress Act 1951, and the specific wording of your tenancy agreement.

That last point matters more than most tenants realise: many protections that feel obvious are not implied by law. If a clause is not in your agreement, it is generally not enforceable.

The deposit structure: market norm versus legal requirement

The widely quoted 2+1+0.5 formula is a market convention, not a statutory requirement. No Malaysian law caps security deposits at two months, and there is no mandated refund timeline until the RTA passes.

Component	Standard amount	Nature	Refundable?
Security deposit	2 months’ rent	Held against damage and unpaid rent	Yes, within 30 days of vacant possession
Advance rental	1 month’s rent	First month’s rent, paid upfront	No, it is consumed immediately
Utility deposit	0.5 months’ rent	Covers outstanding electricity and water	Yes, once final bills are cleared

Total upfront cost: 3.5 months’ rent. On a RM 2,000/month rental, that is RM 7,000 before you collect the keys.

What a landlord can legally deduct from your security deposit

Permissible deductions, provided they are documented with receipts or photographs, include:

• Unpaid rent for any month of the tenancy
• Damage beyond fair wear and tear, such as broken fixtures, stained carpets caused by negligence, or missing items on the inventory list
• Outstanding utility bills not settled before departure
• Cleaning costs if the property is returned in a materially worse condition than received

Not permissible deductions:

• Fading paint, minor scuffs, or worn surfaces from normal use: these are fair wear and tear
• Pre-existing damage that was not noted in the inventory list at move-in
• Renovation work the landlord was planning regardless of your tenancy
• Any deduction not evidenced by a receipt or photographic record

The practical lesson: take dated photographs of every room on move-in day, sign an inventory list with the landlord, and keep a copy.

Stamp duty on tenancy agreements: what changed in January 2025

Every tenancy agreement for Malaysian property must be stamped by LHDN under Item 49(a), First Schedule of the Stamp Act 1949. Stamping makes the agreement admissible as evidence in court. An unstamped agreement can be admitted only after penalty duty is paid.

A material change took effect on 1 January 2025 under the Finance Act 2024: the previous RM 2,400 annual rent exemption threshold was abolished. Every tenancy agreement now attracts stamp duty from the first ringgit of annual rent, with a minimum duty of RM 10.

2025 stamp duty rates

Lease term	Rate
Up to 1 year	RM 1 per RM 250 of annual rent
More than 1 year, up to 3 years	RM 3 per RM 250 of annual rent
More than 3 years, up to 5 years	RM 5 per RM 250 of annual rent
More than 5 years	RM 7 per RM 250 of annual rent

Formula: divide the annual rent by RM 250, round up to the nearest whole unit, then multiply by the applicable rate. The minimum payable is RM 10.

Example: RM 2,500/month rent on a 2-year agreement. Annual rent = RM 30,000. Units = 30,000 ÷ 250 = 120. Stamp duty = 120 × RM 3 = RM 360.

Who pays? The Stamp Act 1949 places the default obligation on the lessee (tenant), but this is negotiable and can be allocated to the landlord in the agreement. Whatever the parties agree, write it in.

Deadline: 30 days from the date of signing. Duplicate copies of the same instrument cost an additional RM 10 each.

Penalties for late stamping

Delay period	Penalty
Within 3 months after the 30-day deadline	RM 50 or 10% of the deficient duty, whichever is higher
More than 3 months late	RM 100 or 20% of the deficient duty, whichever is higher

You can stamp through the LHDN MyStamp e-stamping portal at mytax.hasil.gov.my or at any LHDN branch. Bring two signed originals.

Standard clauses: what belongs in every agreement

Malaysia has no prescribed template, which means the quality of a tenancy agreement depends entirely on whoever drafted it. These clauses should appear in every agreement:

1. Parties and property description. Full legal names of both landlord and tenant (matching their MyKad or passport), the registered property address, and a description of what is included (parking bay, store room, furniture).

2. Tenancy term. The exact start and end dates. If the landlord grants an option to renew, specify the notice period and whether rent can be revised and by how much.

3. Rent, due date, and late payment consequences. The monthly rental amount, the date it is due (typically the first of each month), the grace period if any, and the late payment penalty. Courts will enforce late payment clauses that are reasonable.

4. Deposit amounts and refund conditions. The exact amount of each deposit, what deductions are allowed, and the refund timeline (typically 30 days from vacant possession). Vague wording here is the most common source of post-tenancy disputes.

5. Maintenance and repair. The general principle is that the landlord is responsible for structural and major repairs (roof, plumbing, electrical wiring, external walls) and the tenant is responsible for internal maintenance and minor items (light bulbs, fuses, cleaning). Appliances: agree in writing who pays for repairs above a certain cost, say RM 300.

6. Re-entry clause. This gives the landlord the right to repossess the property if rent is unpaid for a specified period (typically 14 or 30 days). Without this clause, a landlord has no contractual right of re-entry and must rely entirely on court proceedings.

7. Permitted use and subletting. The agreement should state residential use only and prohibit subletting without written consent. An Airbnb operation by a tenant in a building that prohibits short-term letting can expose both the tenant and, potentially, the landlord to management body action.

8. Termination notice. One to two months’ written notice is standard for either party to end the tenancy at the natural expiry date or during the term (subject to other provisions).

9. Inventory list. An attached schedule, signed by both parties, listing all furniture, fittings, and appliances with their condition. This document is the arbiter of damage disputes.

10. Governing law. Malaysia. Courts in [specific state], if relevant to the property location.

Clauses that are not enforceable

Some clauses appear in Malaysian tenancy agreements but are legally unenforceable or questionable:

• “Tenant forfeits all deposits if they leave one day early.” Courts apply general contract principles: a landlord can only recover actual loss, not a penalty disproportionate to the breach. Forfeiture of the full security deposit as a penalty for minor early exit, when no actual loss occurred, may be challenged.
• “No children” or “no foreigners.” Discriminatory restrictions on occupancy are not backed by specific tenancy legislation, and their enforceability is contested. The proposed RTA is expected to expressly ban racial and family-status discrimination.
• “Tenant cannot redecorate under any circumstances.” Completely restricting all painting or decoration is enforceable, but a clause that requires the tenant to return the property to its original condition at the end of the tenancy (at the tenant’s cost) must be balanced against fair wear and tear.
• “Landlord may enter the property at any time.” A tenant’s right to quiet enjoyment is implied at common law. A clause purporting to give the landlord unfettered access without notice would be very difficult to enforce in practice, and courts would likely read in a requirement for reasonable notice.
• “No legal action except by arbitration at the landlord’s chosen firm.” An arbitration clause that is oppressively one-sided may be set aside under general contract principles.

The diplomatic clause: an exit for expatriates

A diplomatic clause is a negotiated early-termination provision found most commonly in agreements for expatriates who may be reposted mid-tenancy. A typical diplomatic clause allows the tenant to terminate the agreement after the first year of a multi-year lease, provided the tenant:

1. Is transferred by their employer to another state or country, or has their employment terminated;
2. Provides documentary evidence (employer transfer letter or redundancy notice); and
3. Gives at least two months’ written notice.

If the diplomatic clause conditions are met, the tenant exits without forfeiting the security deposit, paying only any outstanding rent and documented damage. If the conditions are not met, the tenant is in breach of contract and the landlord is entitled to forfeit the deposit and sue for any additional losses.

There is no legal obligation on either party to include a diplomatic clause. It is a commercial negotiation. Expatriates renting in Malaysia should make its inclusion a condition of signing.

Landlord remedies when rent is not paid

Without the proposed Residential Tenancy Act, a landlord whose tenant has stopped paying rent has three routes:

1. Re-entry under the tenancy agreement. If the agreement contains a re-entry clause, the landlord may serve written notice and, after the specified period, peaceably re-enter the property. “Peaceably” is key: cutting locks, removing possessions, disconnecting utilities, or physically removing the tenant without a court order is illegal self-help eviction and exposes the landlord to civil and potentially criminal liability.

2. Distress action under the Distress Act 1951. The landlord applies ex parte (without the tenant present) to the Magistrates’ Court (arrears below RM 100,000) or Sessions Court (above RM 100,000) for a warrant of distress. If granted, a court bailiff attends the premises, inventories, and seizes the tenant’s movable property. The goods are auctioned, with proceeds applied first to bailiff fees, then to rent arrears. The landlord can recover up to 12 completed months of arrears under this route. Items protected from seizure include essential clothing, bedding, and tools of the tenant’s trade. Crucially, distress action recovers money. It does not result in the tenant vacating the property.

3. Court action for possession. The landlord files an originating summons in court for an order for possession. Only a court-appointed bailiff can physically execute the order. This process can take several months to over a year in a contested case.

The absence of a fast-track residential tenancy tribunal is a major gap in the current framework, and one of the primary reasons KPKT is working on the RTA.

What the proposed Residential Tenancy Act will change

As of June 2026, the RTA is in final drafting under KPKT and has not been tabled in Parliament. Based on public consultations and stakeholder submissions, the expected provisions include:

• Mandatory written agreements with a standard template to prevent unfair clauses
• Deposit caps (likely two months’ rent for security deposit)
• Prescribed refund timelines for deposits
• Minimum notice requirements for rent increases and termination
• A Residential Tenancy Tribunal for low-cost dispute resolution, similar to the Small Claims Tribunal model
• A national tenancy registry to track agreements

For the latest updates, monitor KPKT’s official portal at www.kpkt.gov.my.

For the deposit formula and a step-by-step move-in guide, see our renting in Malaysia overview. To understand all the costs before signing anything, see the full cost of buying vs renting in Malaysia.

Key takeaways

• A tenancy agreement is your primary legal protection because Malaysia has no residential tenancy statute. Every right not in the agreement may not exist.
• The standard deposit formula is 2+1+0.5: two months security deposit, one month advance rental, and half a month utility deposit, totalling 3.5 months upfront.
• Stamp duty changed on 1 January 2025: the RM 2,400 exemption was removed. Rates range from RM 1 to RM 7 per RM 250 of annual rent depending on the lease term. Minimum duty is RM 10. Stamp within 30 days.
• An unstamped agreement cannot be tendered as evidence in court without paying penalty duty.
• Landlords cannot evict, change locks, or disconnect utilities without a court order. Self-help eviction is illegal.
• The Distress Act 1951 allows landlords to seize a tenant’s movable goods via a court warrant to recover up to 12 months of rent arrears. It does not result in eviction.
• The Residential Tenancy Act is still in drafting (June 2026) and has not yet been tabled.

Frequently asked questions

Q: Can a landlord keep my entire security deposit if I leave one month early?

Only if the tenancy agreement expressly permits forfeiture as a remedy for early exit. Even then, courts apply general contract principles and may reduce a penalty that is disproportionate to the landlord’s actual loss. Document everything so you can contest an unfair deduction.

Q: Does stamp duty apply to a month-to-month tenancy?

Yes. Even a periodic or month-to-month tenancy agreement is an instrument under the Stamp Act 1949 and should be stamped. A verbal month-to-month arrangement is technically a contract but cannot be used as evidence without a written, stamped document.

Q: My landlord entered the property without notice. What can I do?

You have a right to quiet enjoyment at common law. Write to the landlord immediately to record the breach. If it recurs, you may have grounds to treat the lease as repudiated and apply to court for relief. Check your agreement for any entry-notice provisions first.

Q: How long does a distress action take?

An uncontested distress application can be heard within two to four weeks. If the tenant applies to set aside the warrant (which they can do), the proceedings become contested and can take several months. The tenant must pay the rent owed or provide security to set aside the warrant.

Q: If there is no diplomatic clause and I need to leave early due to a job transfer, what are my options?

Without a diplomatic clause, early termination is a breach of contract. Your options are: (1) negotiate a mutual agreement with the landlord, possibly agreeing to help find a replacement tenant in exchange for a partial deposit refund; (2) continue paying rent for the notice period even after vacating; or (3) accept the deposit forfeiture if the landlord insists. Always negotiate in writing so any agreement has legal effect.