Any good tenancy agreement should include clauses around terminating a tenancy agreement early. Normally this comes with specific conditions that should be met, or penalties for early termination.
Here are some common terms and conditions to look out for:
1) Notice Period
A good tenancy agreement should define a notice period to end the tenancy, stating how many months written notice should be given.
If you’ve decided the rental agreement should be terminated early, either as a landlord or tenant, then your next step is sending an official termination of tenancy agreement letter.
A letter is a way of recording your decision, and the basis on which it has been made. That helps ensure clear communication for both parties, as well as providing evidence of your decision.
2) Replacement tenants
Some agreements will state that the existing tenants must find a replacement to avoid any penalty from ending an agreement early.
3) Default on security deposit
Many tenancy agreements state that the tenant will lose their security deposit if they terminate their tenancy early. This provides a financial backup for landlords while they seek new tenants.
4) Tenancy buyout
Some agreements may allow a ‘tenancy buyout’. This essentially means the tenants will have to pay the remaining months of owed rent on the agreement in order to exit early.
This can be fairly simple if you only have a month or two left, but quite expensive if you’re only halfway through a twelve-month tenancy.
5) Landlord breach
Tenancy agreements come with rights and responsibilities of landlords. If they breach the agreement by making any sudden changes to the property or payment terms, then the tenant is legally enabled to cancel the agreement without a penalty.
6) Diplomatic clause
A diplomatic clause may be included to allow for unavoidable events such as being transferred by your employer overseas.
This can be particularly valuable for Malaysia’s expat community. This clause would define what counts as a triggering event, the notice period required to terminate, and any financial compensation required.
Let’s take a simple scenario. You’re a Malaysian citizen living in a rental apartment in Penang. You land your dream job at a tech company in Kuala Lumpur starting next month. Hooray!
So what’s the problem? You’ve got three months left on your RM1,000 per month rental agreement in George Town, and a RM3,000 security deposit with the landlord.
Depending on your tenancy agreement, you may have a few options. First of all, it’s always wise to talk to your landlord as soon as possible: be honest, and to the point.
In most cases they’re just trying to run a business and earn some cash, which means they’re not really interested in making things difficult.
It could be that there’s a really positive rental market, and they’re happy with you just replacing the tenant. In that case, you can go ahead and put in a little effort, replace yourself on the tenancy, and regain your full security deposit.
It might also be that the landlord isn’t happy with your situation, and instead he requires a 2-month notice for termination of tenancy agreement
In that case, you may end up paying an overlapping period where you’re renting a new property in KL but also having to pay for the property in Penang.
On the other hand, the landlord could ask you to buy-out the tenancy, or suggest you move early but default your security deposit. In that case you’re free to move quickly, but you do lose out on the RM3,000.
Unfortunately, it’s unlikely that a diplomatic clause will cover this move, as it’s internally within Malaysia, and is a choice you’ve made rather than one enforced by your current employer.
In any case, it’s always best to communicate and be open with your landlord. You never know, you might find a way to end your tenancy on time, while saving your security deposit!
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