Issues in Tenancy Matters

ISSUES IN TENANCY MATTERS IN MALAYSIA
Lee Swee Seng LL.B (Hons) Malaya LLM Malaya, MBA, M. M. I. Arb., CACD Managing Partner Lee Swee Seng & Co. Advocates & Solicitors Patent Agent Notary Public Trade Marks Agent Industrial Design Agent Certified Mediator
INTRODUCTION
The best job in the world is to be a Landlord and to sit back and collect rental of your premises let out. However, problems would arise when the tenant is in default of rental or could not be located.
What action should the Landlord take to effectively terminate the Tenancy Agreement and to recover arrears of rental? What are the safeguards that a Landlord may put in place to avoid the headaches of chasing a tenant for arrears of rental?
TOPICS
TENANCY AGREEMENT vs. LEASE AGREEMENT vs. LICENSE AGREEMENT
TENANCY AND LEASE UNDER THE NATIONAL LAND CODE 1965

MAIN TERMS AND CONDITIONS OF A TENANCY AGREEMENT EVENTS OF DEFAULT BY TENANT EVENTS OF DEFAULT BY LANDLORD NOTICE TO RECTIFY BREACH DISTRESS ACTION UNDER DISTRESS ACT 1951
TOPICS
PROBLEM AREAS IN DISTRESS ACTION
LANDLORDS ACTION OF SELF-HELP

RENEWAL OF A TENANCY/LEASE AGREEMENT SAFEGUARDS IN TENANCY AGREEMENT FOR LANDLORD SAFEGUARDS IN TENANCY AGREEMENT FOR TENANT
TENANCY AGREEMENT
A TENANCY agreement is defined as a contract signed by landlord and tenant which states all the terms and conditions of rent of a property. Tenancy is similar to a lease except that it is created for a term not exceeding three (3) years. Unlike a lease, it cannot be registered as it is specifically called under the NLC as a Tenancy Exempt from Registration. As per Lord Templeman in Street v. Mountford [1985] 2 All ER 289:
To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments. The grant may be express, or may be inferred where the owner accepts weekly or other periodical payments from the Source: Land Law by Teo Keang Sood and Khaw Lake Tee occupier
TENANCY AGREEMENT
There are also certain statutory formalities which must be complied with before a lease or a tenancy may be created. S. 43 of the National Land Code 1965 (NLC 1965) empowers on persons and bodies to whom the land may be disposed by the State Authority in relation to s. 42(1)(c) by permitting an occupation.
Under s. 433 of NLC 1965: where non-citizens and foreign companies may acquire an interest or share or a dealing in land which is only with an approval of the State Authority.
Source: Land Law by Teo Keang Sood and Khaw Lake Tee
LEASE AGREEMENT
A LEASE agreement is defined as a contractual agreement between the lessor and lessee which sets forth all the terms and conditions of the lease. To constitute a lease, there are three (3) substantive requirements: (i) There must be certainty of duration (fixed or periodic term);
(ii) The lessee must be granted exclusive possession of the premises; and (iii) The lease is granted in consideration of the payment of rent.
LEASE AGREEMENT
Leases are registrable with the Land Office and the lessees have a registered interest in the land upon registration. The interests of a lessee is better taken care of/protected compared to a tenant under a tenancy as they only have an equitable interest on the land, that is, their interests would be subject to those with registered interests. However, all tenants/lessees are entitled to the quiet enjoyment of the property subject to the terms and conditions of the governing written documents. A lease can be registered with the Land Office by submitting a duly completed Form 15A NLC with registration fees..
Source: www.elawyer.com.my
LICENSE AGREEMENT
A LICENSE agreement is defined as a document stating that permission being granted by a party (licensor) to another party (licensee). The licensor does not hand over exclusive possession of the property but retains his or her right to use it. In Street v Mountford [1985] 2 All ER: the issue whether or not exclusive possession has been granted as a test for distinguishing between a lease and a license.
TENANCY AND LEASE UNDER THE NATIONAL LAND CODE 1965
S. 221 - Gives the power of proprietor to lease for a term exceeding 3 years to lessee.
S. 224 - Relates to the calculation of terms of the leases and tenancies whether any term for which land is granted exceeds any specified number of years.
S. 227 - Determines the effect of leases and tenancies which shall include the benefits of all registered interest of the tenants.
MAIN TERMS & CONDITIONS OF A TENANCY AGREEMENT

UPON CONFIRMATION:
Tenant is required to place one month's rent as earnest deposit with the Landlord, upon the principal terms and conditions being agreed upon in a pre-agreement of Tenancy signed by the Tenant and Landlord. The Tenancy Agreement will thereafter be prepared together with the Inventory List and signed by the Tenant and Landlord. Upon signing the Tenancy Agreement, the balance payments are to be paid by the Tenant to the Landlord.
Source: LAW & REALITY: Tenancy Agreement by Nicole Tan
SECURITY DEPOSIT: A security deposit equivalent to 2 month's rental and a utility deposit equivalent to month rental to be paid by the Tenant to the Landlord on or before the execution of the Tenancy Agreement, and to be refunded without interest and less any liabilities incurred by the Tenant at the termination of tenancy.
EARNEST DEPOSIT: The Tenant shall pay an Earnest Deposit equivalent to 1 month's rental to secure the said property. This sum shall be deemed as the first month's rental in advance, upon the execution of the Tenancy Agreement.
GOVERNMENT STAMP DUTY/DISBURSEMENT FOR TENANCY AGREEMENT:
All tenancy agreements are required to be stamped as failure to do so would render the agreement inadmissible in court in the event a dispute arises. The stamping fee calculation is based on the amount of monthly rental payable and also the tenancy period. The formula below set out in the Stamp Act 1949 is used to calculate the required stamping fee on the original document.
GOVERNMENT STAMP DUTY/DISBURSEMENT FOR TENANCY AGREEMENT:

When tenancy is for a period
Without fine or premium when average rent other considerations calculated for a whole year
(i) Does not exceed RM 2, 400 (ii) For every RM250 or part In excess of RM2,400
Not exceeding one (1) year
Exceeding one (1) year but not exceeding three (3) years
Nil
Exceeding three (3) years
Nil
Nil
1.00
2.00
4.00
CHECKLIST OF TENANCY:
(a) Parties Landlord Tenant (note: limitation of number of tenants) Whether the individuals, companies, statutory bodies, corporations etc. In the case of a partnership, a representative/partner for and on behalf of the partnership is the party since the partnership is not a separate legal entity.
Source: Malaysian Conveyancing Volume 3 by Judith Sihombing
(b) Recitals (i) Demised premises Description of the land (title particulars) Description of the building Description of the part/portion tenanted/copy of plan Area tenanted and a plan to accurately identify it Particulars of charge, if any
(ii) Additional information, if building List of furniture, fixtures and fittings.
Source: Malaysian Coveyancing Volume 3 by Judith Sihombing
(iii) Additional information if residential/commercial/industrial lot within a building or complex (eg. apartrment/condominium in a residential building, a shop-lot in a shopping complex, or office lot in an office block) List of furniture, fixtures and fittings Whether rental includes: service charges sinking fee any other payments payable to company managing the building Whether sharing common facilities, eg lifts, staircases, washrooms, etc. Provisions of services (eg central airconditioning) and rate of charges Opening and closing hours Operating hours Provision in respect of common property Provision for car-park usage
(iv) Statement on agreement for tenancy
(c) Conditions precedent for application of approvals (i) (ii) Written law, prohibitions or limitations State Authoritys consent (restriction in interest) Chargees consent Any other relevant approvals3
(iii) (iv)
(d) Period of tenancy/lease (i) How many weeks/months/years (ii) Commencement Date (iii) Expiry date
(e) Consideration: payments (i) Rental weekly/monthly/quarterly/ yearly payment (ii) Rental amount (iii) Whether rental payable in advance or in arrears; and the period for payment (eg by the seventh day of each calendar month) (iv) General deposit amount (v) Utilities (vi) Deposit(s) payment date(s)
(f) Consideration other than payments Where the consideration for the agreement is other than monetary payments, it must be specifically spelt out. For purposes of stamp duty, it will be necessary to state a monetary value. (g) Quit rent/assessment increase (i) Who to bear existing quit rent/assessment (ii) Who to bear increase (iii) Use/purpose of premises
Source: Malayisan Conveyancing Volume 3 by Judith Sihombing
(h) Use/purpose of premises State specific purpose/use of premises, such as a residence or an office. (i) Sub-letting rights Whether tenant entitled to sub-lease, sub-let or under-let. (j) Period to remedy breach Period to remedy breach (eg 7 days or 14 days) Note: Requirement for notice under section 235, NLC, before forfeiture.
(k) Renovations If tenant is carrying out renovations, whether landlord to reimburse costs incurred. (l) Option to renew (i) Whether there is an option to renew. (ii) Period to exercise option (eg at least three months before expiry of tenancy). (iii) Option renewal period (eg two years or three years). (iv) Whether at landlords or tenants option (eg at the tenants request the landlord shall (may) ). (v) Term for renewal.
EVENTS OF DEFAULT BY TENANT
Where there is a breach of a covenant to pay rent, then, the landlord must make a formal demand in writing for the rental arrears and state that unless it is paid within a specified time, the tenant must vacate the premises. In Distress Action cases where the rent is in arrears or due to the landlord and it shall be lawful for the landlord to serve upon the tenant a notice stating the amount of such arrears of rent and requiring it to be paid. The landlord may also sue the tenant for breach of covenant to rent for the wrong or improper use of the premises.
Source: English Land Law
EVENTS OF DEFAULT BY LANDLORD
The tenant may have a cause of action in contract in the event that the Landlord fails to fulfill his obligations under the agreed covenant to let. If the breach is capable of remedy, then the tenant must give the landlord a reasonable time to remedy the breach and continue to occupy the premises.
J.R LINCKS EDUCATIONAL CONSULTANTS SDN BHD V. GOH & SONS ENTERPRISE SDN BHD [2008] 3 CLJ 815 One of the issues is that the defendant failed to remedy the breaches under the special conditions in the tenancy agreement, in particular, the commissioning of the lift and the supply of 3 phase electricity.
The water leakage and flooding problem was also not attended to until very much later. The breaches and problems caused hardship and business losses to the plaintiff. The condition of the premises (lack air-conditioning and non-operation of lift) discouraged many prospective students from enrolling. (para 36)
J.R LINCKS EDUCATIONAL CONSULTANTS SDN BHD V. GOH & SONS ENTERPRISE SDN BHD [2008] 3 CLJ 815
Held: The defendant cannot equate the equitable withholding of the rent with willful non-payment. Therefore, the fixed term tenancy could not be terminated before its expiration on 28 February 1997, grounded on an alleged default in payment of the monthly rental. The notice of termination of tenancy dated 26 June 1995 was invalid. (para 36)
NOTICE TO RECTIFY BREACH
Enforcement of the terms in the tenancy agreement can be done by formally: (i) demanding for the arrears; and (ii) stating that failure to comply with the demand will result in commencement of a legal action (writ of distress action or notice of forfeiture to terminate the tenancy).
A notice of termination or notice to vacate must be given to the tenant within the period stated in the tenancy agreement before its expiration.
The landlord has the right to vacant possession of the premises from the tenant without payment of any compensation.
Before an action of forfeiture can be taken, the Landlord must first issue a notice in writing: (i) specifying the particular breach; (ii) entailing the tenant to remedy the breach; and (iii) make compensation (if required).
Forfeiture would terminate the tenancy.

DISTRESS ACTION UNDER DISTRESS ACT 1951
This is one of Landlords remedies for non-payment of rent by tenant.

A distress action, that is, to seize the tenants goods and sell them to pay the arrears. The landlords right to distress is governed by the Distress Act 1951 which gives the landlord the statutory power to distrain for the arrears of rent.
DISTRESS ACTION
Generally, under the section 5(1) of the 1951 Act, the landlord may apply to a Judge for the issue of a warrant of distress for the recovery of rent due AND
payable to the landlord by a tenant of any premises for a period not exceeding twelve (12) completed months of the tenancy preceding the date of the application
AND
the Judge or Registrar may make such order accordingly.
DISTRESS ACTION
A distress action involves the landlord going into the demised premises to impound (take possession) goods to the value of the rents owed, so as to compel the tenant to pay up. Distress will be lifted once Tenant has paid arrears of rent in full or to the satisfaction of Landlord. Wrongful recovery of goods will expose the Landlord to an action of trespass by real owners of goods.
If the Tenant fails to repay in time, the Landlord can sell goods and reimburse himself for the rent owed, from the proceeds. Any balance must be returned.
DISTRESS ACTION
A writ of distress action is taken out without the involvement/knowledge of the tenant (ex parte). It does not terminate the tenancy but allows the landlord to seize and auction off the tenants/ lessees property (except personal belongings such as clothes and tools of trade) to recover the arrears.
DISTRESS ACTION
It must be noted, however, that as a writ of distress does not terminate the tenancy, there is a risk that the tenant may fail to pay rent again resulting in the need for another writ of distress action. Further, should the tenant contest the action, it would be a lengthy and costly process.
Right to Distrain
Under section 5(3) of the Distress Act 1951, the Landlord may also similarly distrain for arrears of rent after the determination of the tenancy, provided that either: (i) the tenant is still in the occupation of the premises; or (ii) if the goods of the tenant are still on the premises.
In other words, the Act gives the landlord an immediate remedy to recover the arrears of rent covering a period of twelve (12) months.
Right to Distrain
Section 20(1) of the 1951 Act gives the landlord a six (6) months priority of rental over other judgment creditors who may have attached the property of the tenant for the recovery of judgment sums even before the landlord. Pursuant to that section the landlord shall not attach the goods on the premises but issues the warrant and a notice of such warrant to the bailiff concerned.
Right to Distrain
Thereafter the bailiff proceeds with the sale of the property under the earlier attachment and sets aside a sum amounting to six months rental from the proceeds of the sale and pays the same to the landlord.
MARI BOUTIQUE SDN BHD v. JAYA JUSCO SDN BHD [2003] 4 CLJ 848
Is double rent recoverable via Distress Act 1951? No, according to MARI BOUTIQUE a) s. 4, shall not distrain for double rent b) s. 5(1), distraining for rent for a period not exceeding 12 months and tenancy still subsisting c) s. 5(3), arrears of rent may be recovered after termination provided either the tenant is still in occupation or any goods of tenant still on premises
MARI BOUTIQUE SDN BHD v. JAYA JUSCO SDN BHD [2003] 4 CLJ 848
Landlord is entitled to claim double rent from tenant under s. 28(4) Civil Law Act 1956, where the tenant remains in occupation of premises after termination.
Double rent is not contractual rent but a form of damages for failing to quit the premises after tenancy is terminated. But, double rent is not arrears of rent, hence not recoverable by a writ if distress under the 1951 Act.
ABDUL MUTHALIB HASSAN v MAIMOON HJ. ABD. WAHID [1992] 1 CLJ 88
In this case the plaintiff is suing the defendant (DW1) for the return of all his belongings wrongfully detained by the defendant at the business premises. The owner of the premises was one named Hj. Abdul Wahid now deceased, the father of the defendant. According to the plaintiff (PW1), he became the tenant of the said premises by way of an oral agreement with effect from 20 August 1977 for the purpose of carrying on the business He had been paying the rent to the late Hj. Abdul Wahid until his death in June 1984. Thereafter he continued paying the rent to his daughter, the defendant. The rent was to be paid on the first of every month.
ABDUL MUTHALIB HASSANS CASE [1992] 1 CLJ 88
As from 1 June 1985, PW1 was not in good health and so on 10 June 1985 he leased out his business to one Abu Bakar for one year at a monthly rental of RM450.
However by a notice dated 28 December 1985 (P3), PW1 terminated the said agreement on the grounds that Abu Bakar had defaulted in the payment of rental and committed some other breaches as well.
So on 3 January 1986 Abu Bakar surrendered both the business and the premises to PW1.
ABDUL MUTHALIB HASSAN S CASE [1992] 1 CLJ 88
In the meantime, the defendant (DW1) served PW1 with a written notice dated 20 February 1985 (P6) to vacate the said premises within one month on the ground that PW1 had rented out the premises to Abu Bakar without her consent.
On 27 January 1986 the premises were closed and padlocked allegedly done by DW1. Hence the present suit filed by PW1. HELD: Locking up premises for non-payment of rent is no justification for trespass though it may mitigate damages.
Even though there is a term of the tenancy agreement which allows the landlord to evict the tenant and/or to recover possession of the demised premises upon the nonpayment of rent, the Malaysian legal system is pro-tenant. The landlord is prohibited from evicting the tenant and/or to recover possession of the demised premises without a court order.

However, even if the landlord manages to eventually evict the non-paying tenant, the landlord finds it difficult to recover unpaid rents. The current practice now is for the landlord to lodge a police report and break the lock in the presence of a police officer in order to avoid further complications. A prudent landlord would even take photos of the interior of the demised premises to ensure that the tenant would not later claim loss of properties.

Can the Landlord suspend the water supply when the Tenant fails to pay rent?
The Defendants gave notice to the Plaintiff that if they still fail to pay the outstanding charges, the Defendant would suspend the water supply. After ignoring the Defendants notice, the Defendants suspended water supply to the tenants.
PREMIER MODEL (M) v. PHILEPROMENADE SDN BHD & ORS [2001] 1 LNS 173
The main provision of the said agreement which is 5.01(b)(4) reads that: the vendor is entitled to suspend any services, utilities etc in the event of default in the payment of any dues.
The term service charge in s1.01(m) includes electric power and water supply.
The plaintiff prays for an injunction to restore water and/or electricity supply and restrain Defendant from turning off or interfering with the said meters.
PREMIER MODEL (M) v. &PHILEPROMENADE SDN BHD ORS [2001] 1 LNS 173
It was held that the Defendants were well within their rights to suspend water supply if the occupier fails to pay service charges. With regards to the application for injunction, since the Defendants restored water supply, therefore, there is no need to grant the injunction. Furthermore, an injunction should only be granted if the Defendant has committed a wrong, and since the Defendants action to suspend water supply was well within the s.5.01(b)(4) of the said agreement, the application to seek for an injunction to stop the action should not be entertained.
PREMIER MODEL (M) v. &PHILEPROMENADE SDN BHD ORS [2001] 1 LNS 173
What is wrongful seizure?
Goods and chattels belonging to applicants are seized under Distress Act 1951, and the applicant applied for the goods to be released to them. Applicants leased out to Emporium President and Supermarket Sdn Bhd a few items and chattels as stated in Lease Agreement. Counsel for applicants argued that seizure is wrongful and bad in law. Secondly, goods did not belong to the emporium, and thus, wrongly seized.
UNITED ORIENT LEASING CO SDN BHD v. PERDANA PROPERTIES SDN BHD (FC) [1980] 1 LNS 87
What is wrongful seizure?
S. 20 of the District Act1951, landlord cannot levy execution of property which has already been executed and that landlords only right is the payments out of sales of the property. Appeal allowed and goods returned to appellants.
UNITED ORIENT LEASING CO SDN BHD v. PERDANA PROPERTIES SDN BHD (FC) [1980] 1 LNS 87
Is the landlord entitled to cut the supply of utilities?
The Plaintiff bought houses from the Defendant, a development company. It was agreed that the Defendant would provide all utilities such as water, electricity etc. The Defendant then imposed maintenance charges on the Plaintiff and a dispute arose between them, and thus, resulting the Defendant to cut off the water supply.
KONG PENG PEW & ORS v. MERU VALLEY RESORT BHD [2003] 6 CLJ 392
The Plaintiff filed an action against the Defendant over the dispute on the said maintenance charges. However, pending disposal of that action, the Plaintiff sought an interlocutory injunction directing the Defendant to connect the water supply and an injunction to restrain the Defendant from disconnecting the water supply.
The Plaintiff argued that provisions cl.14, 16 and 17 of the agreement made the Defendant to provide for the utilities and the Defendant had no right to cut off the water supply. The Court held that the Defendant has infringed that right and allowed the application of the injunction.
Can the Landlord increase maintenance charges?
The Plaintiff claimed for an injunction that the Defendants reconnected the water supply and an injunction to restrain the Defendant from shutting of the water supply. The Defendant counter-claimed for overdue maintenance fees.
HO SIEW CHOONG v. ON-KWARD REALTY SDN BHD & ANOR [2000] 8 CLJ 175
Can the Landlord increase maintenance charges? The Plaintiff has no objection on the existing maintenance charges but on the new maintenance charges.
The Court held that the Plaintiff be awarded RM1,000.00 as damages, dismissed the counter-claim but made no order with regards to the injunction as the Defendant reconnected the water supply.
HO SIEW CHOONG v. ON-KWARD REALTY SDN BHD & ANOR [2000] 8 CLJ 175
Receiverships and winding up proceedings of companies create peculiar problems with regard to corporate tenancies.
This is because the right of the landlord as against the tenant company to distrain for arrears of rent may be limited both under the Common Law and the particular statutory provisions namely, the Companies Act 1965 and the Distress Act 1951.
SOURCE: THE LANDLORD AND THE COMPANY-SOME PROBLEMS RELATING TO DISTRESS by S. Sagadeva
For instance, different considerations apply at the various stages from receivership to winding up as regards the priority and the ranking of claims between the landlord, the debenture holders under a floating charge and least of all the unsecured creditor.
The appointment of a receiver under a floating charge crystallises the debenture.

The rights of the debenture holder under the floating charge become paramount only after the charge "crystallises". Therefore, whether or not the debenture holder under a floating charge will take priority over other creditors will depend on the time at which the charge attaches or "crystallises" on the assets of the company. Crystallisation of the charge occurs on the happening of certain specified events and more often than not, the debenture deed spells out the circumstances that would cause the crystallisation of the charge.
But, the mere happening of the event specified alone is insufficient to crystallise the charge. The debenture holder must take some "step" to enforce the security.
He must appoint a receiver. For this reason, the debenture secured by a floating charge is a major disadvantage in that the security may not attach until the debenture holder takes a step, by which point of time the company may already be in a financial straight jacket.
But, in New Zealand, another view has evolved. The substance of such a view is that the floating charge crystallises the moment the event specified in the deed of debenture occurs irregardless whether the debenture holder takes any step to appoint a receiver. This concept of "automatic crystallisation" has been upheld in the case of Re Manurewa Transport Ltd. [1971] NZLR 909, where Speight J ruled that the floating charge had crystallised when the company attempted to create the subsequent charge in breach of the clause in the debenture.
In such a case, where the company is in arrears of rent, the landlord may still, notwithstanding the receivership distrain for the said rent owing. But in view of the provisions of the Companies Act 1965, it is doubtful whether the Courts would allow the landlord an unfettered right to distrain after the appointment of a receiver. Section 191(1) of the Act clearly states that the provisions of s. 292(1) as regards to preferential debts shall apply where a receiver has been appointed.
In such a case, therefore, monies coming into the hands of the receiver will be applied and paid out to preferential creditors as provided by s. 292(1). This being so, the receiver could very well resist the distress on the ground that the landlord is not listed as one of the preferred creditors. And therefore, the receiver is not duty bound to pay the arrears of rental from the monies coming into his hands.
HAW PAR BROTHERS INTERNATIONAL LTD v. OVERSEAS TEXTILES CO LTD [1978] 2 MLJ 19
The respondents, the Landlord applied to distrain for rent against the company after a receiver and manager was appointed by the debenture holders. The leave to distrain was granted by the Registrar but on an application made by the debenture holders the Court ordered the distress to be suspended pending the determination of the issue whether the Landlord had a prior right to the receivers. HELD:
(i)
As the landlord was only an unsecured creditor, not having any greater rights than an execution creditor, he took subject only to the equity of the debenture holder.
HAW PAR BROTHERS INTERNATIONAL LTD v. OVERSEAS TEXTILES CO LTD [1978] 2 MLJ 19
(ii) As the charge had crystallised the goods were no more the companys and the landlord therefore was prohibited under the Distress Act, to distrain on goods not belonging to the tenant.
(iii) As the receiver took possession of the goods, the goods no longer belonged to the company, and therefore the landlord cannot distrain on the goods of a "stranger". It must be clarified that taking possession of goods in the premises does not divest the true ownership in the goods. It still depends on the true construction of the debenture deed.
SUPREME HOLDINGS v. THE SHERIFF, SURPREME COURT of Spore & Anor [1987] 1 MLJ 10
The movable property (owned by Peter Chews Pte Ltd) was seized by the Sheriff pursuant to two writs of seizure and sale taken out by two creditors. The landlords/applicants then applied for and obtained a writ of distress against their tenants Peter Chews Pte Ltd, for recovery of arrears of rent and service charge due from the tenants for six months. Another creditor Hin Seng Pte Ltd petitioned for winding-up of the tenants.
On 26 July 1985, a winding up order was made against the tenants, and the Official Receiver was appointed the liquidators of the tenants. The movable property which was seized under the writs of seizure and sale was sold on 8 May 1985 and the net proceeds were in the hands of the Sheriff. The applicants as the landlords claimed under section 20(1) of the Distress Act, the Sheriff is obliged to pay the proceeds to in priority to any other payment. On the other hand, the Official Receiver and liquidator of the tenant (in the opposition) claimed that section 335(2) of the Companies Act applies to the proceeds and the Sheriff is obliged to pay the whole thereof to the Liquidator.
HELD: (i) the obligation of the Sheriff under s. 20(1) of the Distress Act is not affected by the winding-up proceedings of the tenants. The proceeds from the sale of the movable property of the tenants in his hands are not free from the right of the Sheriff for his own indemnity;
(ii) s. 335(2) of the Companies Act deals with the rights of the execution creditor, the execution debtor and the Sheriff when he has no legal duties to third parties; but the section is limited to ordinary cases of execution;
(iii) the effect the court would give to s. 20(1) of the Distress Act is consistent with a situation where movable property of a tenant is not under seizure by the Sheriff in execution and his landlord has put in force a distress thereon for arrears of rent due from his tenant prior to the presentation of the winding-up petition against the tenant in such an event the landlord would be entitled to the proceeds of sale from the movable property distrained up to an amount due for the past 12 months rent, unaffected by the operation of s. 334 and s. 335 of the Companies Act;
(iv) the application should therefore be allowed and the applicants were entitled to the net proceeds of sale of the movable property of the tenants in the hands of the Sheriff.

The Effect of Winding Up
Under the Companies Act 1965, winding up is deemed to have commenced:
Section 219(2) - in the case of a winding up by the Court, on the date of presentation of the petition. AND
Section 219(1) - in the case of voluntary winding up, at the time of passing of the special resolution.

The Effect of Winding Up
Under s. 292 of the Companies Act 1965, the landlord is not one of preferred creditors in the winding up.
Therefore, it would seem that once winding up has commenced, the right of the landlord to distrain and obtain priority over other preferred creditors, including the debenture holder under a floating charge becomes limited. As a company may go into winding up subsequent to the commencement of a distress by the landlord, or even before it, it is convenient to discuss the rights of the landlord under two headings as different considerations apply at both stages.

Where Distress is Levied before the Commencement of Winding up
If the landlord puts in force the distress before the commencement of the winding up but has not completed it by sale, he will be allowed to proceed with it notwithstanding the subsequent winding up. In the case of Despite the existence of s. 298(1) of the Companies Act, it has been held that the landlord in such cases can, retain the benefit of his attachment though the company is subsequently wound up. But ss. 224 and 263(1) pose an impediment to the landlord in these circumstances.

Section 224 - Any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding up by Court shall be void. Section 263(1) - is substantially the same except that it applies to a case of a voluntary winding up. However,
Section 263(2) - After the commencement of the winding up no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.

Though both ss. 224 and 263(1) provide that any such distress, execution and attachment to be void, it has been held that the provisions do not absolutely render them void ab initio and of no effect. A distress levied before the winding up can still be proceeded with by leave of the Court after the commencement of the winding up by virtue of s. 263(1) and s. 226(3). Likewise, it can be restrained by way of an objection by the other creditors or the liquidator.
KREDIN SDN BHD v. DEVELOPMENT & COMMERCIAL BANK BHD [1995] 3 MLJ 304
On 14 August 1987, Bank Bumiputra Malaysia Bhd filed a petition to wind up the appellant company (`Kredin`) in the High Court. However, up until the date of this judgment the winding-up petition was still pending hearing. On 23 January 1988, the respondent bank (`D & C`) sued Kredin on a loan agreement in the High Court and judgment was entered against it.
In order to execute this judgment, D & C registered a prohibitory order on a few parcels of land belonging to the Kredin on 31 March 1992 and also applied for a writ of seizure and sale of the land in the High Court (`the execution proceedings`). Following the execution proceedings, Kredin made applications, inter alia, to set aside the prohibitory order on the ground that it was void under s. 224 of the Companies Act 1965 (`the Act`), as it was filed after the commencement of the winding up under s. 219(2) of the Act.
The application was, however, dismissed on the ground that the prohibitory order could only be rendered void after a winding-up order had been made under s. 224 and since a winding-up order may ultimately not be made, the execution was not void. Kredin has appealed to the Court of Appeal. The issue before the court is the interpretation to be given to s. 219(2) of the Act, and its practical effect when read together with s. 224.
HELD, allowing the appeal, Per Siti Norma Yaakob JCA:
(1). Section 224 of the Act provides that any attachment, sequestration, distress or execution put in force against the estate or effects of a company after the commencement of the winding up by the court shall be void. Pursuant to s. 219(2), a compulsory winding-up is deemed to commence at the time when the winding-up petition is presented.
(2). The intention of Parliament in enacting ss 219(2) and 224 of the Act is to ensure that no creditors, particularly the unsecured creditors, who execute their claims against the company would be enriched at the expense of other unsecured creditors, between the date when the winding-up petition is presented and when the winding-up order is made by the court (`the interim period`). (3). It follows that the execution which was put in force during the interim period was void, and the fact that a winding-up order may not ultimately be made was irrelevant. However, in the event that a winding-up order is made, it will relate back to the date when the winding-up petition was presented, under the doctrine of relation back.

Distress After The Commencement of Winding Up
When the landlord levies distress after winding up has commenced, he apparently loses the favour of the Court in that generally he will not be allowed to proceed unless he can show why he should be allowed to have an advantage over the other creditors in the winding up.
TECK YOW BROTHERS HAND-BAG TRADING COMPANY v. MAHARANI SUPERMARKET SDN BHD [1989] 1 MLJ 101
This was an application by the petitioner for the winding up of the respondent company. A creditor, the landlord of the premises, objected to the application. It was alleged that the company was indebted to the petitioner for $4,093. The objector had levied distress after the commencement of the petition for winding up and the distress realized a sum of $61,000. The amount due to the objector was $45,000.
TECK YOW BROTHERS HAND-BAG TRADING COMPANY v. MAHARANI SUPERMARKET SDN BHD [1989] 1 MLJ 101 HELD, granting the petition by Abu Mansor J:
(1). The objector had interest in the subject matter of the winding up and has locus standi.
(2). The evidence in this case is overwhelming that the respondent company is unable to pay its debt. The petitioner has proved to the satisfaction of the court that the respondent was unable to pay its debt and in so determining the court is allowed to do so by taking into account the contingent and prospective liabilities of the respondent company.
(3). The notice under s. 218(2)(a) of the Companies Act 1965 is in the circumstances unnecessary and the court ordered that it be dispensed with as the petition is not wholly founded on s. 218(2)(a) of the Companies Act 1965. Section 218(2)(a),(b) and (c) are mutually exclusive, and on the facts and in the exercise of its discretion, a company can be wound up by the court on any of the grounds (a), (b) or (c).
(4). In this case the petitioner has published in the gazette and once in two local newspapers and this was sufficient publication. (5). As the company is unable to pay its debts, there is sufficient ground to enable the court to exercise its discretion to order winding up of the company. As it also appeared that the directors of the company had absconded and a provisional liquidator had already been appointed it is just and equitable that the company be wound up.
SINGMA SAWMILL CO SDN BHD v. ASIAN HOLDINGS (INDUSTRIALISED BULDINGS) SDN BHD [1979] 1 MLJ 41
Singma Sawmill Co Sdn Bhd, the appellants to this appeal, are the applicants in Distress Suits No 1/77 and No 6/77. They applied for and obtained Warrants of Distress to be issued against Asian Holdings (Industrialised Buildings) Sdn Bhd, the respondents, for arrears of rent. As a result the Bailiff of the High Court, Johore Bahru executed Warrants of Distress on 8 February 1977 and 22 June 1977, respectively. On 26 November 1977 the respondents applied by way of motion to discharge the Warrants of Distress and to dismiss the actions on two principal grounds, namely, the use of the land is illegal, therefore the contract of tenancy is void or voidable, and, the machines are fixtures and therefore cannot be distrained.
SINGMA SAWMILL CO SDN BHD v. ASIAN HOLDINGS (INDUSTRIALISED BULDINGS) SDN BHD [1979] 1 MLJ 41 HELD:
(i) By the proviso to s. 10 of the Distress Act 1951, the court was not required to release t he distrained goods unless it was satisfied that the immediate tenant had no right of property and that the goods belonged to the claimant. Even if the court was satisfied with these two ingredients, it would not necessarily follow that the court must release the goods. The court could still order them to be distrained if they fell under any categories of goods listed in s. 12 of the Distress Act 1951;
SINGMA SAWMILL CO SDN BHD v. ASIAN HOLDINGS (INDUSTRIALISED BULDINGS) SDN BHD [1979] 1 MLJ 41
(ii) the circumstances required that the claimants, as owners, should have taken positive steps if not at the outset, at least after the expiry of the lease, to assert that the machinery belonged to them. Instead, they were largely responsible for representing that the defendants assets lay with the machinery and for painting the defendants with the colour of ownership of the machinery.
Self-help is a form of redressing or preventing wrongs by ones own action without recourse to legal proceedings. Many a time, landlords resort to self-help eviction which can take many forms including changing the locks to the apartments, removing a tenants belongings or shutting off the utilities to the apartment without regarding if they are in violation of the law.
Source: Is Self-help any help at all? by Ashley Chew & Ong Li San
The beauty of self-help is that self-help will enable landlords to enforce their contractual rights quickly and efficiently without resorting to judicial process. However, self-help measures are controversial because they amount to taking the law into ones own hands. Landlords who engage in self-help evictions often argue that the tenant was in violation of the tenancy/ lease in some manner in the first place and thus, the landlord is entitled to possession.
Source: Is Self-help any help at all? by Ashley Chew & Ong Li San
TRUSTEES OF LEONG SAN TONG KHOO KONGSI (PENANG) REGISTERED & ORS v. POH SWEESIANG [1987] 2 CLJ
The learned Hashim Yeop Sani SCJ said that section 7 of the Specifc Relief Act 1950 provides that a person entitled to the possession of land may recover it in the manner prescribed by the law relating to civil procedure. In the context of the provision of s. 7 of the 1950 Act, the word may is permissive and discretionary and it is not obligatory on the part of a person entitled to the possession of land to restore exclusively or solely to a Court of law. In other words, s. 7 of the does not exclude the common law remedy of self-help. This is a remedy which is always available unless expressly excluded.
ER ENG BONG [2001] 1 CLJ 289
The remedy of self-help was alluded in this case. In this case, the learned Abdul Malik Ishak J stated that the amended s. 7(2) of the Specific Relief Act which came into force on 31 January 1992 by Act A 811 would relegate the remedy of self-help into oblivion as the owner of the property can only seek to enforce his right to recover his property from the occupier by way of a court action. S. 7(2) of the Act is as follows: When a specific immovable property has been let under a tenancy, and that tenancy is determined or has come to an end, but the occupier continues to remain in occupation of the property or part thereof, 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 court.
DR. HARJIT SINGH v. SUHAIMI BIN SAMAT & ANOR [1995] 1 LNS 62
Conduct of defendants locking plaintiff out of the premises amounted to a breach in tort in contravention of s.7, Specific Relief Act1950. Defendant should obtain court order before it can recover possession of the property from the plaintiff is mandatory. S. 7(2) of the 1950 Act imposes a precondition of obtaining a court order before the defendant can recover possession of the property.
NUR-ISLAM WORLDWIDE INDUSTRIES SDN BHD v. YEE KOK SUM [2001] 7 CLJ 494
Right of re-entry and forfeiture

S. 5(1) of the Distress Act 1951 S. 4 of the Distress Act 1951
NUR-ISLAM WORLDWIDE INDUSTRIES SDN BHD v. YEE KOK SUM [2001] 7 CLJ 494
On the facts, landlord entered onto premises without any Court order and sealed premises.
Landlord may be deemed a trespasser. In short, the self-help remedy can no longer be used as a result of the amendment to s. 7(2) in 1992.
SME AEROSPACE SDN BHD v. STEYR MANNLICHER (M) SDN BHD [2006] 5 CLJ 121
In this recent case, it was held that the use of the word shall in s. 7(2) of the Specific Relief Act imposed a precondition of obtaining a court order before attempting to recover possession of a property. Thus, the requirement to first and foremost obtain a court order was a mandatory one. Further, the law does not allow any person to take the law into his own hands and forcibly evict another person from the property. The learned judge went on further to agree that s. 8(1) of the Act reinforced the right of a person who has been wrongfully dispossessed of an immovable property otherwise than in due course of the law.
SME AEROSPACE SDN BHD v. STEYR MANNLICHER (M) SDN BHD [2006] 5 CLJ 121 Section 8(1) of the Act provides:
If any person is dispossessed without his consent of immovable property otherwise than in due course of law, he or any person claiming through him may, by suit, recover possession thereof, notwithstanding any other title that may be set up in the suit.
Therefore, a tenant who holds over after the expiry of the period of tenancy, is entitled to sue his landlord for possession under s. 8 of the Act, if forcibly dispossessed by him.
RENEWAL OF A TENANCY/LEASE AGREEMENT
The landlord and tenant are bound by the terms of the tenancy agreement. Their rights are provided for in the said agreement. The principle of freedom to contract ensures a win-win situation for both parties provided that there is a consensus ad idem (meeting of minds). Therefore, it is not true that there is only one standard tenancy agreement. An astute person would ensure that the terms are not one sided.
Source: Rental Issues by Bhag Singh
When a person rents a house he would like to be assured that he is able to continue to stay there for a reasonable period. At the same time, he does not want to be committed indefinitely. The Landlord who is usually the owner of the premises also does not want to commit himself for an indefinite period for he may need the premises for his own use or he may need to sell the premises at some time.
Though the Landlord is willing to rent out the premises for the foreseeable future, he may not want to commit himself to the same rental for the entire period is willing to let out the premises.
Hence, it is not uncommon to enter into a tenancy agreement for an initial period of one, two or even three years and a tenancy agreement is accordingly drawn up. Renewal with a possible rent adjustment must be mutually agreed upon. The usual practice is that the tenant is given the first option to renew the tenancy of which the tenant must give notice of such intention three months before the expiry of the tenancy. This gives a unilateral right to the tenant to renew the tenancy for a further term and an opportunity for the Landlord to have the land rent adjusted.
Such a clause would effectively serve the interest of the tenant in securing an extended term of the tenancy if the extended term were to be the same with an increase or percentage increase stipulated. The tenants interest would be well protected even if the mechanism for fixing the rental was provided for.
Unfortunately, many tenancies or even lease agreements do not spell this out. If an existing lease or tenancy or agreement is examined many of them will be found to contain an option clause which does not fix the rent but which leaves the issue to be decided later.
Thus, a typical option clause may read.:

Upon the expiration of the term hereby stipulated the tenant shall by notice given three months before the expiry of this agreement renew the tenancy for a further term of three years upon the same terms and conditions herein stated except this clause as to rental. The rental for the renewed term shall be mutually agreed upon between the parties.
In some cases it may even be provided that the rental shall be determined by the Landlord. The question that arises is as to whether in such instances the tenant would have a meaningful right of renewal?
Arising out of a clause like this there are two matters that require attention. One is the need for the Tenant to give notice at or before the stipulated time to the Landlord.
If giving of the notice is overlooked, the right to an option is lost unless the landlord agrees to waive this requirement.
The other issue relates to rental for the renewed term. This is where the perceived rights of the tenant may be again lost because either the parties cannot agree to the rental.
POPULAR BOOK CO PTE LTD v. SEA SUN FURNISHING PTE LTD [1991] 3 MLJ 10
Where the renewed term was to be for a period of three years commencing from the date immediately following the expiration of term hereby created, at a revised rent to be determined by the landlord and upon terms and conditions as shall be imposed by the landlord. When the earlier term came to an end, the plaintiffs were informed by the defendants solicitors that their clients were prepared to renew the lease for a farther term of three years at a rent of S$28,728.
The plaintiffs rejected the notification on the ground that the rent was unconscionable and far in excess of the market rate. An application was made to Court for a decision as to whether in the circumstances the right of the Landlord to revise the rental was subject to such revision being fair and reasonable?
It was contended by the Tenant that there are three types of options for renewal of leases: (1) where there is no formula for quantifying the rent and no machinery to determine it; (2) where there is a stated formula but no effective machinery; and (3) where both the formula and the machinery are provided.
It was argued by the Tenant that the option to renew the lease was of the first type and therefore it was for the Court to provide the formula so that the tenancy and the option clause would not be frustrated. The Court, however, went on to decide that as the rent demanded by the Landlord was not acceptable to the tenant there was no renewal of the tenancy which had therefore come to an end.
A distinction was drawn between the tenancy in this case which was for three years and English cases involving leases where the Court had intervened and provided the formula to exercise its power to either fix a rent or provide a mechanism to do so. What was involved in the English cases where the Courts were willing to intervene was a rent review in the context of a an existing lease period as against the renewal of a tenancy.
It would therefore serve Tenants interests to be aware that where either: (i) the rental for the renewed term of the tenancy is not pre-agreed; or
(ii) a formula or mechanism for its determination is not provided for, the right of the tenant to renew the tenancy where the rental is to be agreed upon; or
(iii) the power to determine the rental is placed in the hands of the landlord may turn out to be illusory.
SAFEGUARDS IN TENANCY AGREEMENT FOR LANDLORD
One pertinent point to look for by the landlord is the provision for a deposit for the breaking of wall(s) in the event the tenant is renting two or more contiguous units. A related issue is that the tenant must not make any alterations to the exterior or interior of the demised premises without the previous consent in writing of the landlord.
SAFEGUARDS IN TENANCY AGREEMENT FOR LANDLORD
The tenant is supposed to yield up the demised premises with all fixtures and fittings belonging to the landlord upon the determination of the tenancy in good and tenantable (i) (ii) (iii) (iv) repair; and condition; and fair wear; and tear excepted.
The tenant shall make good at their own expense any damage caused to the demised premises or fixtures and fittings therein as a result of the tenants act or neglect.
SAFEGUARDS IN TENANCY AGREEMENTS FOR TENANT
The landlord is supposed to: (i) pay all quit rent and assessment imposed or charged upon the owner of the demised premises; and to maintain upkeep and repair whenever necessary (a) the roof,; (b) main structure; (c) external walls; (d) main drains; and (e) pipes of the demised premise.
(ii)
CONCLUSION
Landlords have very little remedies when it comes to rent in arrears. Malaysia still does not have Statutes with regards to Landlord and Tenant. Landlords have no specific legislation other than the distress action under Distress Act 1951.
CONCLUSION
Landlords are always looked upon as the bad guys as they have no other alternative, but, to evict the tenant when rent is in arrears or sue in court. Landlords would rather evict the current tenant and find a replacement immediately to maintain his steady flow of income.

Issues in Tenancy Matters

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ISSUES IN TENANCY MATTERS IN MALAYSIA

TENANCY AGREEMENT vs. LEASE AGREEMENT vs. LICENSE AGREEMENT

TENANCY AND LEASE UNDER THE NATIONAL LAND CODE 1965

PROBLEM AREAS IN DISTRESS ACTION

LANDLORDS ACTION OF SELF-HELP

TENANCY AND LEASE UNDER THE NATIONAL LAND CODE 1965

MAIN TERMS & CONDITIONS OF A TENANCY AGREEMENT

Source: LAW & REALITY: Tenancy Agreement by Nicole Tan

Source: LAW & REALITY: Tenancy Agreement by Nicole Tan

GOVERNMENT STAMP DUTY/DISBURSEMENT FOR TENANCY AGREEMENT:

Source: LAW & REALITY: Tenancy Agreement by Nicole Tan

GOVERNMENT STAMP DUTY/DISBURSEMENT FOR TENANCY AGREEMENT:

Not exceeding one (1) year

Exceeding three (3) years

Source: LAW & REALITY: Tenancy Agreement by Nicole Tan

Source: Malaysian Conveyancing Volume 3 by Judith Sihombing

(ii) Additional information, if building List of furniture, fixtures and fittings.

Source: Malaysian Coveyancing Volume 3 by Judith Sihombing

Source: Malaysian Conveyancing Volume 3 by Judith Sihombing

Source: Malayisan Conveyancing Volume 3 by Judith Sihombing

EVENTS OF DEFAULT BY TENANT

EVENTS OF DEFAULT BY LANDLORD

NOTICE TO RECTIFY BREACH

NOTICE TO RECTIFY BREACH

NOTICE TO RECTIFY BREACH

Forfeiture would terminate the tenancy.

DISTRESS ACTION UNDER DISTRESS ACT 1951

This is one of Landlords remedies for non-payment of rent by tenant.

the Judge or Registrar may make such order accordingly.

ABDUL MUTHALIB HASSAN v MAIMOON HJ. ABD. WAHID [1992] 1 CLJ 88

ABDUL MUTHALIB HASSANS CASE [1992] 1 CLJ 88

ABDUL MUTHALIB HASSAN S CASE [1992] 1 CLJ 88

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

Source: LAW & REALITY: Tenancy Agreement by Nicole Tan

PROBLEM AREAS IN DISTRESS ACTION

What is wrongful seizure?

What is wrongful seizure?

Is the landlord entitled to cut the supply of utilities?

Is the landlord entitled to cut the supply of utilities?

Is the landlord entitled to cut the supply of utilities?

Can the Landlord increase maintenance charges?

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

The appointment of a receiver under a floating charge crystallises the debenture.

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

PROBLEM AREAS IN DISTRESS ACTION

HELD, allowing the appeal, Per Siti Norma Yaakob JCA:

PROBLEM AREAS IN DISTRESS ACTION

LANDLORDS ACTION OF SELF-HELP

LANDLORDS ACTION OF SELF-HELP

ER ENG BONG [2001] 1 CLJ 289

Right of re-entry and forfeiture

RENEWAL OF A TENANCY/LEASE AGREEMENT