Renting out your property either it is residential properties or commercial property in Malaysia can be a great way to earn extra income, but being a landlord comes with its own set of challenges. From finding reliable tenants to navigating the legal requirements set out by the Landlord and Tenant Act Malaysia, there are several common mistakes that could end up costing you time, money, or even legal trouble. One of the key tools for protecting yourself is having a solid tenancy agreement, which clearly lays out the rules and expectations for both you and the tenant.

13 Mistakes Landlords Must Avoid

Here’s a look at 13 mistakes landlords make, especially considering new issues like illegal activities and how you can avoid them.

1. Not Conducting a Thorough Property Inspection at Move-In and Move-Out

Many landlords skip a detailed inspection when a tenant moves in or out, which can lead to disputes over damages later on. Without proper documentation, it’s hard to prove if any damage was caused during the tenancy. This can be especially problematic if a tenant engages in activities like crypto mining, which can put a heavy load on the electrical system and cause damage that might not be immediately visible.

Solution: Conduct a detailed inspection of the property before and after every tenancy. Take photos and videos, and have the tenant sign off on the condition of the property as part of the tenancy agreement. This makes it clear what damages, if any, were caused during their stay.

2. Not Using a Strong, Clear Tenancy Agreement

A weak or vague tenancy agreement is one of the biggest mistakes landlords make. A good tenancy agreement should clearly define the terms for rent, utilities, property maintenance, and what activities are allowed. With newer problems like tenants running illegal cryptocurrency mining operations, your tenancy agreement should also specify prohibited activities, especially those that require excessive electricity use or cause damage.

The Landlord and Tenant Act Malaysia provides a basic framework of rights and responsibilities, but your tenancy agreement should cover the specific rules for your property.

Solution: Work with a lawyer to draft a strong, clear tenancy agreement. Include distress act 1951 and specific clauses that prohibit illegal activities, such as cryptocurrency mining, and outline consequences for breaches of the agreement. Make sure that all expectations, like payment of utilities and property upkeep, are detailed.

3. Not Doing Proper Tenant Screening

One of the most common and costly mistakes landlords make is not screening tenants properly. Just finding someone who can pay rent isn’t enough. You also need to ensure they won’t misuse the property or engage in illegal activities, like crypto mining, which has become an issue in some cases. Mining cryptocurrency requires a lot of electricity and can damage the property’s electrical systems or lead to unpaid bills.

Solution: Use a thorough screening process that checks the tenant’s financial history, employment status, and rental background. In Malaysia, a good tenant screening service can help with this. Also, include clauses in the tenancy agreement that outline the tenant’s responsibility for utility bills and prohibit illegal activities.

4. Not Keeping Up with Market Research on Rent Prices

Setting the wrong rent can hurt your income. Many landlords either price their rent too high and struggle to find tenants, or price it too low and lose money. This is particularly relevant with rising electricity costs and issues like tenants using your property for crypto mining, which can drive up utility bills.

Solution: Do regular research to understand the rental market in your area. Make sure your rent covers not only the property’s value but also potential expenses like higher utility bills. If utilities are included in the rent, consider adding clauses in the tenancy agreement that limit usage or charge extra for overages.

5. Not Understanding the Landlord and Tenant Act Malaysia

The Landlord and Tenant Act Malaysia outlines basic rights and responsibilities for landlords and tenants, but many landlords don’t fully understand these rules. Failing to comply with the law can lead to legal disputes or penalties, especially if your tenant is engaging in illegal activities. For example, if your tenant uses the property for illegal purposes, such as stealing electricity for crypto mining, you could face serious consequences.

Solution: Educate yourself on the Landlord and Tenant Act Malaysia and ensure that your tenancy agreement complies with local laws. Stay informed about any updates to the Act, especially as the legal landscape evolves to address new challenges like cryptocurrency mining.

6. Not Performing Regular Inspections

Once tenants move in, some landlords take a hands-off approach, but failing to check in regularly can result in issues being overlooked. Regular inspections help you spot maintenance problems early and ensure that the tenant is following the rules set out in the tenancy agreement. This is especially important with modern risks like tenants using the property for crypto mining, which can go unnoticed if you’re not paying attention.

Solution: Schedule regular inspections with proper notice as required by law. During these inspections, ensure that everything is in good condition and that there’s no sign of unauthorized activities, such as tampering with electrical systems for illegal crypto mining.

7. Not Having the Right Insurance Coverage

Many landlords don’t realize that their basic property insurance may not cover damage caused by illegal activities or certain case law, such as cryptocurrency mining. This can lead to huge out-of-pocket expenses for electrical repairs, fire hazards, or high utility bills. Failing to have the right insurance can leave you vulnerable.

Solution: Review your insurance policy and make sure it covers potential risks, including damage from illegal activities or excessive utility use. Inquire about specific insurance plans for landlords in Malaysia that offer better protection. Make sure your tenancy agreement also holds tenants responsible for damage due to illegal activities.

8. Not Setting Clear Rules for Utility Usage

Many landlords include utilities like electricity and water in the rent without considering the risks. Tenants can abuse this if there aren’t clear rules, especially with energy-heavy activities like crypto mining, which requires large amounts of electricity. This could lead to skyrocketing utility bills.

Solution: In your tenancy agreement, set clear limits on utility usage. Consider setting a cap on how much electricity or water is included in the rent, and charge tenants for any usage beyond that limit. Alternatively, have tenants set up their own utility accounts so they’re responsible for the bills directly.

9. Failing to Budget for Maintenance Costs

Some landlords don’t plan ahead for maintenance costs, assuming their rental property will remain in good condition throughout the tenancy. This can lead to cash flow problems when repairs are needed. Property maintenance is a key responsibility for landlords under the Landlord and Tenant Act Malaysia, and ignoring it can lead to property damage or tenant dissatisfaction.

Solution: Set aside a portion of the rental income for maintenance. Regular upkeep of plumbing, electrical systems, and structural elements of the property ensures that small problems don’t turn into costly repairs.

10. Allowing Verbal Agreements

Some landlords rely on verbal agreements when renting their property, whether it’s about the amount of rent or rules about pets and repairs. This can lead to confusion or disputes later. A clear, written tenancy agreement is essential to prevent misunderstandings and to protect both you and your tenant under Malaysian law.

Solution: Always use a written tenancy agreement, no matter how trustworthy the tenant seems. This way, both parties know their rights and responsibilities, and the agreement can be referred to if disputes arise.

11. Not Clarifying Subletting Rules

Subletting can become a problem if tenants bring in others without your permission. This can cause overcrowding, additional wear and tear on the property, and potential issues if the subtenants are involved in illegal activities. Without clear rules in the tenancy agreement, you may find your property being used by people you’ve never met.

Solution: Clearly outline subletting rules in your tenancy agreement. Make it clear that subletting is not allowed without your written consent, and establish penalties for unauthorized subletting.

12. Ignoring Security Deposits and Rent Collection Procedures

Some landlords don’t enforce proper rent collection procedures or forget to collect a security deposit. This can lead to losses if tenants damage the property or leave without paying rent. The Landlord and Tenant Act Malaysia gives landlords certain rights regarding rent collection and deposit handling, so it’s important to have a clear process in place.

Solution: Always collect a security deposit and outline the rent collection process in your tenancy agreement. Consider using an automated system for collecting rent to ensure that payments are made on time.

13. Not Staying Up to Date with Legal Changes

The rental market and laws are always evolving. Many landlords fail to stay updated on the latest changes to the Landlord and Tenant Act Malaysia or local property regulations. Missing out on key updates can leave you exposed to legal risks or fines.

Solution: Stay informed about legal developments affecting landlords in Malaysia. Join local landlord associations or subscribe to legal updates so you can make sure your tenancy agreements and property management practices comply with the law.

Find your next property investment here!

Rent out property in Malaysia can be a great investment, but it’s important to avoid common mistakes. Make sure you use a strong tenancy agreement in Malaysia that covers all your bases, from prohibiting illegal activities to clearly outlining the rules for utilities and property maintenance. Stay updated on the Landlord and Tenant Act Malaysia to ensure you’re legally protected, and keep up with modern risks like illegal cryptocurrency mining.

By being proactive, following the law, and maintaining clear communication with your tenants, you can protect your property and make your rental experience smooth and profitable.

 

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