Trouble with Tenants: What Can Landlords Do?

July 15, 2020

Delinquent tenants have always been the predicament of a landlord. More so in light of the COVID-19 pandemic that has affected the income of many, including tenants. As some landlords may depend wholly on rental as their source of income, questions arise as to what can be done by landlords to safeguard their rights against defaulting tenants.

This alert seeks to summarise the rights and remedies available to a landlord under existing legislations in Malaysia.

Evicting A Tenant To Recover Possession of Property

An eviction is a legal proceeding that allows a landlord to put a tenant on notice of the failure to pay rent, to file a lawsuit, and subsequently to obtain a court order requiring the tenant to vacate the premises.

Section 235 of the National Land Code 1965 provides that a notice must be served before forfeiture of any tenancy for breach of any of the provisions therein and the notice must be in writing specifying the particular breach complained of, and if it is capable of remedy, requiring the person to remedy it. In the Saadian v Ong Ting Chai case, the High Court held that the notice to quit takes effect from the date it is served on the party concerned and not the date of the notice or the day it was sent.

Landlords and tenants should be mindful that an eviction can only be done by way of a court order. This is clearly laid down in Section 7(2) of the Specific Relief Act 1950 (SRA 1950) which states that “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”.

The failure to comply with the mandatory requirement of Section 7(2) of the SRA 1950 will subject the landlord to reinstate and to compensate the tenant to its original position before the unlawful eviction.

Distress Action

A distress action is a process to seize the tenant’s goods and sell them in order to pay rent. However, this is not executed by the landlord himself. Section 5(1) of the Distress Act 1951 (DA 1951) permits a landlord to apply to a Judge or a Registrar for the issue of a warrant of distress to recover rent due and payable to the landlord.

The warrant of distress confers authority on the bailiff to enter the premise and seize the goods. A sum of money may be incurred by the landlord to cover the fees and expenses of the bailiff.

The net proceeds of the revenue gained from the sale will be applied first for the payment of the fees and expenses of the bailiff and the balance to cover the overdue rent and costs due by the tenant to the landlord. In the event that there is surplus from the sale, the balance is returned to the tenant or the person entitled to it.

Double Rental

A landlord’s strongest position is to claim for double rental against the defaulting tenants. Section 28(4)(a) of the Civil Law Act 1965 (CLA 1965) provides that in the event the tenant remains in occupation after the termination of tenancy agreement, the landlord is entitled to claim for double the amount of rental until the tenant evicts the premise.

It must be noted that double rental is a form of damages for failure of the tenant to evict the premises after termination of tenancy. This principle was propounded by the Federal Court in Krishna Sreedhara Panicka v Chiam Soh Yong Realty Co. Ltd case where the Federal Court held that double rent is actually damages which may be awarded at the court’s discretion and it is penal in nature. The Federal Court in explained that:

“The respondents’ claim is actually not rent but a penal sum which the former tenant has to pay for the inconvenience and loss he causes the landlord in refusing to give vacant possession of the premises on the determination of the tenancy. The provision, being penal in nature, must be construed with some degree of stricture. In awarding damages the court always has a discretion.”

The Federal Court then went on to hold that “there must be something in the nature of contumacy on the part of the tenant in holding over to render him liable to double value.” This nature of contumacy was further explained in the KBB Properties Sdn Bhd v Yong Chon Chiang case where the High Court held:

“In law, a tenant can only be said to be holding over if there is evidence of willful intent or conduct to prevent the landlord from obtaining possession of the premises after the tenancy has expired. In such a case the tenant is liable to pay double rent to the landlord.”

This means that when the tenant is holding over possession, the ball is then in the landlord’s court to show that it was done willfully to prevent the landlord from obtaining possession.

Observation

It is important to note that the contractual relationship between landlords and tenants is governed by the tenancy agreement. Hence, it is crucial to highlight certain clauses in respect of the tenancy i.e. payment of rental, penalty in the event of default and forfeiture of deposit. Although there is no specific law governing tenancy in Malaysia, the SRA 1950, DA 1951 and CLA 1965 provide for remedies which the landlord may seek in the event of a breach of tenancy agreement.