Demystifying The 3 Types of Rental Deposits

Right after that comes the complicating tenancy agreement. Tenancy contracts in Malaysia are usually set for a period of one year that requires several deposits to be paid along with it. But these can be negotiated with the landlords since the rent control has been lifted.

There are several types of deposits you’re required to pay when getting a rental house. You might be baffled for a little with the various kinds of deposits, but fear not, this article will answer your doubts!

1. Earnest deposit

This deposit is paid when the tenant is interested in a particular property but is not able to move-in at that time. This deposit is used to reserve the property and is more commonly paid when purchasing a property instead of renting. It is advisable to discuss the terms of this deposit with the landlord before making the payment, as sometimes the deposit is returned or used as the security deposit.

 

2. Security deposit

This deposit is supposed to cover all damages caused to the rented property by the tenant, as well as the furniture that are provided at the rented property. This security deposit is to help the landlord cover-up his rental in search of a new tenant. At times, this deposit may be forfeited if the contract comes to an end before the actual end-date. Usually, this deposit is returned fully to the tenant at the end of the tenancy agreement, given no damages are done to the unit with no pending rental payments.

Repairs are quite common in any household. Hence, if there are urgent and major repairs that need to be done, it is the landlord’s responsibility to get it fixed for the tenant. For those who opt to fix it by themselves, it is wise to take a picture of the repairs (before and after), as well as save the receipt of the repaired or changed items. Ensure that the landlord is informed of this so that you can get a refund on the repair works.

 

3. Utility deposit

The utilities such as electricity and water are calculated as part of the rental payment. Landlords usually collect this deposit or request the tenants to handle these payments by themselves. Landlords use this deposit to pay for the pending utility bills when tenants fail to do so. This deposit is usually returned in full at the end of the tenancy agreement given no pending payments on the utility fees.

 

How does the process work?

Upon agreeing to the terms and conditions of the rental, tenants are usually required to pay the Earnest deposit, which covers one month’s rental and also considered as a booking deposit. The landlord usually will not rent out the unit to other prospective tenants upon receiving this deposit.

Meanwhile, the tenant would be required to pay a security deposit upon signing the tenancy contract. This usually amounts to two months’ rent and a half a months’ utility deposit.

This tenancy agreement should be stamped by the Inland Revenue Department (IRD), whereby the tenant usually pays the stamp duty. The tenancy agreement should be signed within seven days, from the day the earnest deposit is paid.

The foreigners who live in Malaysia should pay attention to the diplomatic clause in their tenancy agreement. This clause will be helpful when the contract has to be terminated much earlier than the actual date. Foreign tenants are required to produce proof supporting their reasons for moving out of Malaysia. The landlord must be given a written notice of two to three months before the termination of the agreement.

Before vacating the rented property, it is also safer that you get your landlord to walk through the place with you, and get them to sign a simple agreement that you have left the place in a fair condition. Tenants mostly assume that nice landlords do not hold the deposits back. It's after all, your money, and you have the right to protect your deposit.

- RinggitProperty -

Tips & Facts about Buying Condos and Apartments along MRT

Purchasing a property is probably the most expensive purchase one will ever make in his or her entire lifetime and there are some "blindsight" of purchasing a property especially who totally depends on the advertisement of the developer or the agent advice such as "15 mints walking distance to MRT" without any clarification and analysis. Hence, here are some tips and facts of purchasing a condo or apartment a long Mass Rapid Transit (MRT).

1) Tips: Consumer behaviour and government policies are important towards shaping consumer perception towards public transports and public usage habits.

    Facts: Malaysia have more than 680,000 new vehicles on the road per year and one out of every 2.8 Malaysian owns a vehicle.

2) Tips: Middle and low income population reap the benefits of the MRT more as they value convenience over luxury. Cost and time savings on commuting, traffic, petrol and vehicle maintenance means a lot for them.

    Facts: High income population value thier privacy and peaceful environment more over the convenience of MRT. Most have many cars or have personal drivers. Many of them have flexible working times and can plan to avoid traffic.

3) Tips: 500 metres represents a walk of under 10 minutes. Malaysia is not a condusive place for walking due to the hot and humid weather. Survey shows that most Malaysians have no issues walking to a destination 10 minutes away, and most will not walk more than 15 minutes to a destination.  

    Facts: According to the 2020 Kuala Lumpur Structure Plan, public transport utilization in KL is very low, it is estimated that 20% of the population of 2 million residents reply on public transport.

4) Tips: Not all MRT stations will have the same treatment, high profile stations, interchange stations, underground stations and stations located in prime areas will experience better treatment in terms of better supporting infrastructure.

    Facts: The success of an MRT station is also very much reliant on good supporting infrastructure includes adequate parking spaces, proper walkways, link bridges, good taxi, bus and shuttle bus connectivity as well as good security. 

5) Tips: Look for properties with strong fundamentals including good schools nearby, the availability of jobs, access to healthcare, good entertainment and lifestyle options and connectivity of public transports.

     Facts: Remember to plan your ultimate goal before investing into properties. Properties can be held for own stay, capital appreciation or rental yield. It is advisable to consult a knowledgeable and experienced real estate agent or research throughly before embarking on your investment journey.

- Bryan Chin-

  Founder

  HiProperty.com

How to extend lease for leasehold properties

The extension of leases for leasehold properties is governed under section 197 of the National Land Code (Act 56 of 1965) pertaining to the applications for approval of surrender of the whole of the land, as well as the land rules of the various states.

For the state of Selangor, the extension of lease is governed by the Selangor Land Rules 2003 and Selangor Quarry Rules 2003.

The Selangor government has come out with two options relating to this matter as follows:

1) Option no.1

To pay a mere RM1,000 for the extension of lease. This is provided the owner of the property does not re-sell it to profiteer. However you are allowed to transfer the property to family members. The State Authorities will lodge in a Registrar Caveat on the property to prevent the owner from disposing the property under this option; OR

2) Option no.2

To pay the full rate of premium for the lease extension. With this option, the owner can then dispose the property immediately after obtaining the new title. Currently the Selangor State Government is giving 30% rebate on the rate of premium under this option.

Bear in mind that under Option 1, after the new title has come out, the owner would not be able to receive the rebate anymore should he or she later decide to sell the property on the open market, and would then have to pay the the full rate of premium.

Some lawyers are charging a fee of RM1,000 to do the application for their clients regardless of option 1 or 2.

How to calculate the premium in Selangor

If you wish to renew your lease for a residential property within the state of Selangor, the formula for the calculation of the rate of premium is as stated below. The formula is derived from Section 7 entitled ‘Premium’ of the Selangor Land Rules 2003 & Selangor Quarry Rules 2003.

Premium = ¼ x 1/100 x Market Value of land (in sq ft) x number of years to renew x land area (in sq ft)

Example: For a 3,000 sq ft residential property in PJ with 10 years remaining on the lease (assuming it was valued @ RM120 per sq ft by the Authorities), the lease renewal fee calculation is= 0.25 X 0.01 X 120 X 89 X 3,000 = RM 80,100.

Leases are usually renewed so that there are 99 years of lease on the title. Therefore, if you have 10 years remaining on your lease, you need only pay for an extension of 89 years (99 years-10 years).

After deducting the 30% rebate, the fee payable would be RM 56,070.

The calculation of the rate of premium as mentioned above is on the land itself and does not include the building erected on the land.

Under Option no. 1 and no. 2, there is a further RM500 to be paid as contribution to the state’s cemetery trust fund, Tabung Amanah Perkuburan. The fund will enable the State Government to buy land for cemeteries.

Process of lease extension

The process of lease extension involves the government department called ‘Pentadbir Tanah Daerah Petaling’.

Among other things, the applicant (who is also the owner of the property) has to do the following:

• To complete Borang 12A ‘Permohonan Untuk Menyerahkan Balik Tanah (Mengenai kesemua tanah itu)’ (application to surrender and re-alienate land to extend lease duration);

• To complete ‘Borang Perihal Tanah dan Peribadi Pemohon’;

• To complete ‘Jadual 1 (Peraturan 2) Kanun Tanah Negara Perintah Tanah Kerajaan’;

• To complete the Form ‘Butir-Butir Permohonan Tanah Oleh Individu’;

• To give the original title of the property;

• To give copies of your quit rent (cukai tanah) and assessments (cukai taksiran) receipts for the current year;

• To give a copy of his/ her National Registration Identity Card (NRIC)

The whole process may take approximately 2 years from the time of submission of the application right up to the obtaining the new title.

- Christopher Chan -

HSR to be ready by 2027, construction to take seven years

Construction sector

Maintain “overweight”: A local business daily reported that the Kuala Lumpur high speed rail (HSR) project will commence operations in 2027 from its initial target of 2020. The procurement process, which could start by early 2017 is anticipated to take about two to three years once a bilateral agreement between the Malaysian and Singaporean governments is signed by the end of this year.

This would be followed by the construction of the HSR line, which is expected to take more than seven years. Measuring a total of 350km with seven stops, the HSR line involves a double track on standard gauge to move trains that can run at speeds of more than 300kph. At least 60 four-car trains worth around RM5 billion are required to service this line.

Earlier, the daily had reported that the construction works on the project could kick off in early 2018 on a budget of about RM60 billion to RM65 billion. This was based on the current estimated cost of US$10 million (RM38.8 billion) per kilometre for the systems and track works. The civil works portion is estimated to cost three times more. We understand that MyHSR Corp Sdn Bhd, the project delivery vehicle representing Malaysia, issued a request for a proposal for technical advisory services a fortnight ago. The deadline to submit bids is early next month. This was to be quickly followed by the signing of a memorandum of understanding, which is set to be inked by the middle of this year.

Based on the above, there appears to be more efforts to push through the Kuala Lumpur HSR, signifying more rail-related projects in the offing. However, more details on the project components would likely only be revealed once the procurement process starts. For now, the immediate spotlight would be on the second phase of mass rapid transit 2 and third light rail transit (LRT 3) projects. We expect more contracts to be dished out within the next one to two quarters for the former, including eight more viaduct packages that are likely to cost over RM1 billion each.

Similarly, we expect investor interest to reignite on the LRT 3 project once the project delivery partner agreement is firmed up. Contracts are tipped to roll out towards the latter part of the second half of 2016. For construction or construction-related stocks within our universe, we remain “buy” on Gamuda Bhd, IJM Corp Bhd, Hock Seng Lee Bhd, KKB Engineering Bhd, Sarawak Cable Bhd, Kimlun Corp Bhd, Ikhmas Jaya Group Bhd, Econpile Holdings Bhd, Sunway Bhd and Malaysian Resources Corp Bhd. We also envisage multi-year benefits for the building materials sub-segment (Lafarge Malaysia Bhd, Ann Joo Resources Bhd) once these projects take off the ground.

— AmInvestment Bank Bhd, April 25

Does renovation boost the value of your property?

CONGRATULATIONS! So you have finally sealed the deal on your new home. Now, how much should you spend on renovations before moving in?

Truth be told, hacking at and tearing down walls of a newly-bought property are a norm these days, be it a brand new or lived-in unit.

How extensive the renovations should be would rest on the new owner’s investment objective; why he or she bought the property in the first place. Unless the intention is to flip the unit as quickly as possible, do expect owners to invest in some form of renovation works, or at least fit-outs for especially the high-rise units, which face renovation restrictions and limitations.

Space utilisation is very individualistic and personal. Not only do needs and wants vary from family to family, diverse views are common within a family. Understanding this, some developers have been known to walk the extra mile by offering customers varied layout options of the plan – that is, before construction work starts. Unfortunately, such customisation options could and would develop into a pretty nightmarish experience for both the developer and the buyer in mass housing.

Such a delightful service is only doable if a developer is building a handful and only very high-end detached homes.

Consider this – the wiring in the hall of a house. Buyer A wants a total of 12 power points in specific spots. Buyer B next door, meanwhile, wants 20 power points. Then, Buyer C down the road opts for 18 power points. And this is just the wiring in the hall alone!

Any slip in the plan reading of any of the units potentially has a far-reaching impact – on both developer and owner. Remedial works are not only expensive but time-consuming. Imagine the red faces and stress levels! This is definitely not a route that developers should take for mass housing. Should you come across such a “USP” (Unique Selling Point) being marketed for mass housing, do not get excited.

Back to renovations: how much should one spend? It is interesting as to how many home owners simply assume that whatever they splurge on renovations would be and should be reflected in the value of the property. How wrong can that be!

I was scouting for a two-storey link home in Kuala Lumpur in the early 1990s. Two units on the same road, separated by one unit in the centre, happened to be on the market.

The first house was elaborately renovated, with the built-up on the 24 ft by 75 ft plot maximised. I still recall how during the viewing the owner went on and on as to how much he had invested in the renovations. How the walls had been pushed outwards to the brim to create a lot more built-up space occupied by plentiful fit-outs.

Hopping over to view the second house, I found in it renovations that were far more modere. Yes, the built-up space (and fit-outs) was less than the first house but the trade-off was found in an abundance of natural lighting and a more airy feel to the house. Something I appreciated.

Strangely, this less-renovated house was priced at about 8% higher than the “bigger” house and it was non-negotiable.

No prize for guessing right – the decision was obvious and made immediately – I paid more for a less-renovated house!

It was simple arithmetic; I disliked what I saw at the “bigger” house. Buying this unit would have meant the need for a substantial budget to hack at the renovations, cart away the debris and make good the areas. The process would have been costly, time-consuming and required a lot of input on my end. In contrast, I liked what I saw in the second house and only minimal work was required – change the sanitary fittings and give the house a new coat of paint. It was a no brainer.

Lesson learnt: Invest in renovations because they work for you. The money spent does not necessarily enhance the value of a real estate.

- Au Foong Yee -