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Tenancy Agreement without Stamping in Malaysia

Tenancy Agreement is not legally binding unless it is stamped. The stamping process is a requirement under the Stamp Act 1949 for certain documents, including tenancy agreements, to be legally enforceable in the eyes of the law.

Legal Consequences of Not Stamping

• If a Tenancy Agreement is not stamped, it will still technically exist between the parties (i.e., Landlord and Tenant), but it might be difficult to enforce in court if there is a dispute.
• The landlord may not be able to use the tenancy agreement as evidence in court for matters like eviction, unpaid rent, or any other legal claim relating to the tenancy.

Stamping Process

• Stamp Duty: The Stamp Duty on a Tenancy Agreement is calculated based on the rental amount and the duration of the tenancy.
• When it comes to rental properties, stamp duty is calculated based on the monthly rental and the duration of the tenancy. As of January 1, 2025, the Tenancy Agreement Stamp Duty increased in 2025. The new rates for stamp duty on rental agreements are as follows:

Stamp duty is calculated based on every RM250.00 or part thereof, depending on the average rent and other considerations for the entire year.

• Where to Stamp: The agreement can be stamped at the Inland Revenue Board (LHDN), either online (via the e-stamping system) or in person at an LHDN office.

Consequences of Not Stamping (in Practical Terms)

• Non-payment of Stamp Duty: If the agreement is not stamped within 30 days of execution, the agreement will be considered invalid for enforcement in court. If stamp duty is paid late, there may be penalties or fines.
• Non-enforceability in Court: Without a stamped agreement, the landlord cannot enforce the contract legally in the event of a breach. For example, if a tenant refuses to vacate the property after the lease expires, or if there are disputes regarding the security deposit or unpaid rent, the landlord might not be able to use the tenancy agreement as evidence in a legal dispute.

Exceptions

• Informal Agreements: In some cases, landlords and tenants may informally agree to a tenancy without a formal written agreement. While this is common, it poses risks for both parties, especially when disputes arise. In such cases, it can be difficult to prove the terms of the agreement.
• Small-Scale or Short-Term Leases: If the rental arrangement is for a very short period (e.g., a month-to-month lease or a room rental agreement), some people might choose not to stamp the agreement, but again, this carries the risk of unenforceability.

Practical Advice

• Always Stamp the Agreement: For legal protection and clarity, it’s always advisable to stamp the tenancy agreement, regardless of the rental amount or lease duration. This ensures that the agreement can be enforced in case of disputes.
• Ensure Both Parties Have a Copy: Both the landlord and tenant should have a signed, stamped copy of the agreement.