Hi,

Hope someone can help me here.

We have been negotiating with a landlord to rent several floors of a commercial building he owns, and we came to an agreement.

However, he's not willing to sign a lease agreement, just a tenancy agreement (you know, 3+3+... kind). Lease agreement would have covered the whole period we wanted which is 18 years in one period, but the landlord objected because it will lock the building at the land office and can prevent them from refinancing or selling since it will be charged.

On the other hand, I have been advised by my solicitor that a regular tenancy contract will not work such a period and will be invalid, because the maximum is 9 years for that (3+3+3). Any more and it will be worthless. This however was disputed by another.

Since we are investing heavily into he renovation of the building, we need to have a solid agreement.

1- Is it true that a tenancy contract can only work for 9 years and it can be invalidated at court if it was done for 18 years (3+3+3+3+3+3)?
2- Any advice on what to do? or perhaps can clarify the conflicting information?

Thanks,

Sam

http://www.malaysianbar.org.my/index.php?o...doc_view&gid=40

http://www.malaysianbar.org.my/index2.php?...o_pdf=1&id=3284

Thank for the links.

It's a shame though they don't address the particular question. I still don't know if the tenancy agreements where they place (3+3+...) is a valid agreement that will preserve us within the property, that the owner (current or new one) cannot just ask that we vacate after a few years for him to take back the property and claim that the tenancy is no longer valid or that he doesn't agree to renew the property, ignoring the massive losses that we will be subject to thanks to the renovations we put in.

Do you have any specific comments on that?

Lease agreement is the only option for you based on what you describe. Doing a tenancy agreement the risk far outweighs the pros.

Can you please elaborate?

What is the risk in the tenancy agreement exactly? Is it really invalid for any period above 9 years (3 x 3 years)?

Thanks

Actually thanks, it was clarified by the lawyer I called and some research I made.


For others who may be in a simlar situation:

Main difference that was mentioned (lease is being registered in the land department vs Tenancy agreement which is not), actually means that the lease is registered on the property title and therefore the Lessee becomes a registered interest holder. Should the property be sold later on or repossessed by the bank, the tenant can be asked to vacate with disregard to the tenancy agreement, but not the lease!

Yes the tenant who was kicked out can get back at the original owner with a lawsuit for damages, but you all know that trying to recoup hundreds of thousands or millions in renovation costs at Malaysian courts, is a major headache and a huge risk when compared with simply the fact that as a Lessee with a proper registered lease contract, the sale would not be carried out without the new buyer being alerted to our presence and that he will have to maintain that lease.

So while tenancy contracts are sufficient for partially furnished units where very little is invested, it is a huge risk for a serviced apartments / budget hotel project being established in a commercial shoplot or office building. More than that actually, it paints a target on the project where the owner will be tempted to SPECIFICALLY sell the building at a premium with the premise that the new buyer will get a fully renovated building and an easy to vacate tenancy.

thanks for sharing the info..

OOOO i just online laptop. Good to know its been clarified.

This post has been edited by VOOSH: Apr 18 2016, 11:33 PM

Simple. In the tenancy just put a clause that the prospective/new purchaser will have to abide / be bound by this Agreement by continuing to rent the Demised Premise to the Tenant for a term as stipulated in Schedule....

According to the lawyers and my research, that is binding on the current owner, but unenforceable on the new owner.

Meaning that technically they can still buy the property with a regular S&P that doesn't reflect that (and you as the tenant will not be able to see it or may not even know that it was made) and the new owner will claim they signed no specific clause to honor the old tenancy and want you out within 60 days.

You have the power to sue the old owner for damages and his failure to honor that clause, sure, but you'll still have to vacate! So you lost the property, business and the income and MAYBE after a few years you will get back most of the cost of what you invested through damages when (or if) the court rules in your favor, which they can still dodge by declaring the company that owned the property bankrupt.

No thank you... not in a multi-million ringgit project.

No. The new purchaser still have to abide by the Tenancy Agreement. You must understand once a document has been signed by the parties, it is valid, binding and enforceable. If you want to be secure, just put a caveat on the title deed. Ask your lawyer for advise. Unless your lawyer don't know the law.

If a person gonna rent a building and make it into a hotel and invested a lot of money into Reno then lease agreement is still option as it is more secure. Also max years for tenancy is about 3 years. If one shot wanna do an agreement more than 3 years. Still falls under lease agreement.

This post has been edited by VOOSH: Apr 20 2016, 01:29 PM

To be honest, I don't know the law and the application of it but i just read up and learn because am interested rent out my property in future...

Unless the tenancy agreement is novated in favour of the tenant, the purchaser doesn't take note or need to abide by the tenancy agreement. the reason is simple because the purchaser is not a party to it.

Tenant may protect his interest by endorsing his claim on the registered document title of the Landlord/Owner (s.316).

From what i gather, as long as you have interest in land, you can lodge a caveat on the property. It may protect your interest but it will only last for 6 months and extension needs approval. Also, the wrongful lodgement of a caveat may attract sanction from courts.

Interesting though, never thought of caveating a property because a tenancy is under threat.

New buyer is not a party to an agreement you signed with the old owner, that's why it's not enforceable on him. You will be vacated and you will only get to sue the old owner. Discussed with several lawyers.
Caveat is the key ingredient that you get to take but it's still not 100% secure because you have to make sure you renew it every 6 years and still if the owner fights hard he can get the caveat lifted.