<bgsound src="http://www.ijigg.com/songs/V2BFBCGCPAD" > My Big Big Adventure: FAQs on Legal Fees and Stamp Duty Issues of Tenancy Agreement

Saturday, August 07, 2010

FAQs on Legal Fees and Stamp Duty Issues of Tenancy Agreement


Q1. Is it a MUST to engage a lawyer to draft my tenancy agreement? Ans: There is no law requires a tenancy agreement MUST be drafted by a lawyer. However, it is always advisable to engage a lawyer to draft a tenancy agreement for the one party and on another hand, the other party should engage a lawyer to advise him/her on the agreement drafted by the other party. The reason is obvious as lawyers are legally trained, they are able to advise clients on the legal implication of certain terms (e.g. issue of sub-letting of a premises) and sometimes if necessary the lawyers may advise thier clients to conduct some preliminary search on the counter party, e.g. company search, bankruptcy search and even land search.Q2. Can a lawyer act for both landlord and tenant?

Ans: NO as it will be deemed as conflict of interest. see Rule 1 below.

Q3. Who should pay for the legal fees in drafting a tenancy agreement?

Ans: The law is silent on this point, it is entirely depend on the negotiation and agreement of both parties. However, based the normal market practice, tenant is the one who will be asked to pay for the tenancy agreement. Tips – if you are a tenant and the landlord ask you to pay for the legal fees for the tenancy agreement, please insist that you should appoint your lawyer to draft the tenancy agreement, as many landlord or real estate agent will tell you that the terms in the tenancy agreement is standard. In the event the tenant appoints his lawyer to draft the tenancy agreement, it is always advisable for the landlord to appoint his lawyer to vet through the agreement and advise him if any clause need to be revised.

Q4. What is the legal fees involved?

Ans: Based on the SECOND SCHEDULE of the Solicitors’ Remuneration Order 2006:

“Where the monthly rent for the first RM10,000 – legal fees is 25% (subject to a minimum fee of RM300).

For the next RM90,000 – legal fee is 10%

Where the rent is in excess of RM100,000 – legal fees is negotiable on the excess (but shall not exceed 10% of such excess).

1. A solicitor shall act only for the landlord or the tenant and the remuneration of the solicitor shall be in accordance with the applicable scale fee in this Schedule.

2. Any consideration in the tenancy agreement expressed to he payable other than by way of rent (e.g. service charge, hire of furniture and fixtures) shall be deemed lo be rent for the purposes of this Schedule.

3. Where a varying rent is payable, the remuneration of the solicitor shall be based on the highest amount of rent payable.

4. Where the consideration for a tenancy agreement is expressed to be partly for a money payment or premium and partly for a rent, the remuneration of the solicitor shall be the aggregate of-

(a) the scale fees for a sale or purchase agreement based on the amount equal to the money payment or premium as specified in the First Schedule; and

(b) the scale fees based on the rent as specified in this Schedule.

5. Where a solicitor represents the landlord in respect of tenancies of 10 or more units in a building or part of a building in which a standard form of lease or tenancy agreement is used, or where a lease or tenancy agreement is renewed upon substantially the same terms and conditions, the remuneration of such solicitor in respect of each of such tenancy shall be 50% of the applicable scale fee in this Schedule, subject to a minimum fee of RM300 for tenancies.

Q5. What are the procedures after signing a tenancy agreement?

Ans: The tenancy agreement should be sent for stamping.

Q6. Who shall bear for the stamping fees?

Ans: Again the law is silent on this point. However, based on market practice, usually the tenant is liable to pay for the stamping fees.

Q7. How much of stamp duty shall I pay for my tenancy agreement?

Ans: Below is the extraction from the website of the Inland Revenue Office:

“Tenant And Landlord

-The lease or tenancy instrument which secures annual rent not exceeding RM2,400 is EXEMPTED from duty and presentation of these instruments at a stamping office or centre is not necessary.

-The prescribed rate of duty on the instrument which secures annual rent exceeding RM2,400 is as follows:

(For every RM 250 or part thereof in excess of RM2, 400)
When the lease is for a period Duty Rate
Not exceeding one year RM1.00
Exceeding one but not exceeding three years RM2.00
Exceeding three years or for any indefinite period RM4.00

(For every RM250 or part thereof in excess of RM2,400

-If the consideration for tenancy constitutes or includes a PREMIUM, additional duty is chargeable and it is calculated on the amount of the premium at the rate chargeable on immovable property.

-If the lease provides for differential rent, please contact The Deputy Collector of Stamp Duty for further information.”

Q8. When shall I stamp my tenancy agreement?

Ans: Below is the extraction from the website of the Inland Revenue Office:

“Instruments executed in Malaysia
In general all instruments executed in Malaysia should be stamped on or before the time of execution.

Instruments executed out of Malaysia
Instruments other than cheques or promissory notes must be stamped within 30 days after it has first been received in Malaysia.

Stamping of documents after executions
In general, any unstamped or insufficiently stamped instrument excluding cheque or promissory note drawn or made within Malaysia may be stamped after execution on payment of the unpaid duty, if the instrument is presented for stamping;

-Within 30 days of its execution if executed within Malaysia or;

-Within 30 days after it has been first received in Malaysia if it has been executed out of Malaysia.”

Q9. What if I did not stamp the tenancy agreement within the time stipulated above?

Ans: Below is the extraction from the website of the Inland Revenue Office:

An instrument may be stamped within 30 days of its execution if executed within Malaysia or within 30 days after it has been first received in Malaysia if it has been executed outside Malaysia.

If it is not stamped within the period stipulated, a penalty of

(a) RM25.00 or 5% of the deficient duty, whichever is the greater, if stamped within 3 months after the time for stamping;

(b) RM50.00 or 10% of the deficient duty, whichever is the greater, if stamped after 3 months but not later than 6 months after the time for stamping;

(c) RM100.00 or 20% of the deficient duty, whichever is the greater, if stamped after 6 months from the time for stamping;

may be imposed

(the above rates are effective from 1/1/2003)

Q10. What are the mode of payment of the stamp duty?

Ans: Below is the extraction from the website of the Inland Revenue Office:

Payment may be made in the following manner:-

(i) Cash (if the duty does not exceed RM100) or

(ii) Revenue Stamp (if the duty does not exceed RM500) or

(iii) Money Order, Solicitor’s Cheque or Bank Draft,made payable to the Deputy Collector of Stamp Duty and sent together with the relevant instrument to the stamp duty office by hand or through registered post.

Q11. Where shall I stamp my tenancy agreement?

Ans: you may sent your tenancy agreement to any branch of the Inland Revenue Office (Lembaga Dalam Hasil Negeri).

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