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Property investment is the hype but property nightmares are often shoved under the carpets. In this series of Property Nightmare Stories, PropertyGuru gets down on the ground to find out firsthand what can happen when the tenant or landlord voids a contract.
Passive income from rental properties are every person’s dream. But here are some stories of things gone horribly wrong when the tenancy agreement is not properly negotiated and enforced.
Amanda and her MIA Tenant
Amanda* is a kindly old lady who owns a unit in Cyberia Smart Home @ Cyberjaya. A time ago, she rented out her fully furnished house to a Mongolian student. During the student’s last few months staying in the house, he did not pay his rent – but being a kindly lady, Amanda allowed him to continue living in the house.
Knowing that the student was going to leave the country soon, Amanda reminded the student to settle all his outstanding utility bills and handover the keys to the house before he left. On the keys handover date, Amanda attempted to call the student; but no one picked up the call. Realising that something wasn’t quite right, Amanda went to check her unit out.
The student had already left – and imagine her shock when she discovered her unit was damaged, in a major mess and terrible condition. The utility bills which totalled to a couple of thousand ringgit were left unpaid. Amanda was shocked, extremely disappointed and sad that her kindness was taken for granted. She had to pay for cleaners to clean up the space, and due to her limited budget she had to repaint the entire house herself in tears of weariness.
In the end, due to the damage inflicted on a majority of the household items, Amanda could only rent her house out for RM1,000 in basic condition.
*Name changed to protect privacy
Scenarios like Amanda’s are unfortunately altogether very common. Speaking to professional lawyers who specialise in creating tenancy agreements, PropertyGuru has pinpointed the crucial aspects of renting out a property to anyone:
i. If your tenant is making late rental payments, ensure that they pay interest and make prompt payment in the future or evict them. This is a practice that most landlords do not enforce.
ii. Request proof of utility bills payment every month to ensure that the Tenant pays them. It can be as simple as the Tenant taking a photo of the receipt and sending it to the Landlord via WhatsApp monthly.
iii. Carry out surprise inspections on the property. It can be during festive seasons where you drop in to wish them well – and if you find damaged items, you can request your Tenant to repair or replace the damaged fixtures or fittings as based on the Tenant Agreement.
iv. Always check out your potential Tenants. If your property is Commercial titled and is meant for running businesses, obtain your Tenant’s company details or the details of their business partners. If the Tenant is an employee, obtain the details of their employer’s details. If possible, get a local guarantor, and consider a fixed term tenancy where the Tenant will be charged a penalty if they terminate the agreement prematurely. The Landlord can also request a higher security deposit or even a quarter or half yearly advance rental.
By enforcing all of the above steps, in the event that the Tenant breaches their contract, the landlord will have the right to:
i. Forfeit all security and utility deposits due to the breach. To a certain extent, the Landlord will also be able to demand that the Tenant pays for some of the costs incurred for cleaning and clearing the property.
ii. Alternatively, if the contract is still ongoing, the Landlord may issue a written notice to the Tenant reminding them of the contract agreements and demanding that they make payment on their rental and utility bills. In the event that the Tenant fails to do so, the Landlord may evict the Tenant. In the event that the Tenant refuses to leave, the Landlord may obtain a Court Order to get the Tenant to leave the property. A Court Order is however costly and time consuming.
iii. The Landlord can also further sue the Tenant in court for failing to pay rental and the utility bills, for the cleaning and clearing expenses and for other loss or damaged goods. However if the Tenant has left the country as in Amanda’s case, the case will take longer and be more costly. If the Landlord chooses to take this step, then they should consider if the amount of money they get back will justify the expense, trouble and time utilised in suing the Tenant.
Amanda’s case is altogether an unfortunately all too common scenario. In order to avoid getting into the same pitfall as Amanda, Landlords should consider hiring a lawyer to draft their Tenancy Agreements and then enforce them strictly.
To visit some of the other nightmares, look for the one you resonate with most:
This article was contributed by Alvin Teo (Advocate & Solicitor- Messrs Mak, Ng, Shao & Kee) and Nicole Ng (Advocate & Solicitor- Messrs Elizabeth Siew & Co). For more information or legal assistance, contact or email them at 07-3341922 ([email protected]) or 03-8075 0901 ([email protected]).