Lease Agreement in Malaysia

A lease is a letting of land or a building for a term exceeding three years, and it is registrable against the title under the National Land Code. Registration is what makes the lease bind a later owner of the property, which is the main reason long term occupiers ask for one.

What makes a lease different from a tenancy

The dividing line is the length of the term. A term not exceeding three years is a tenancy exempt from registration. A term exceeding three years is a lease, which is created by a registrable instrument in the prescribed statutory form, Form 15A, and entered on the register.

A registered lease is an interest in the land itself, not only a contract between the parties. If the owner sells, the buyer takes the property subject to the registered lease. That security is worth having if you are investing in fit out, plant or a long term business location.

Leases are also subject to statutory maximum terms and, where the title carries a restriction in interest, to state authority consent.

When a lease is the right document

• Long term commercial premises where the tenant is spending money on fit out
• Factory, warehouse and industrial land occupation
• Agricultural land taken for a planting or operating cycle longer than three years
• Land taken for towers, signage, solar installations or car parks under a long term arrangement
• Any arrangement where the occupier needs protection against a change of ownership

What we do for you

1. Conduct a land search to confirm ownership, tenure, encumbrances and any restriction in interest
2. Advise whether the arrangement should be documented as a lease or a tenancy
3. Draft or review the lease, including rent review, renewal, assignment, repair and reinstatement
4. Obtain state authority consent where the title requires it, and any chargee's consent
5. Attend to stamping and present the lease for registration

Points that decide the value of a lease

• How the rent is reviewed, and whether the mechanism is workable
• Renewal rights, and whether they are an option or merely an agreement to negotiate
• Who bears structural repair, and who bears the cost of statutory compliance works
• What must be reinstated at the end of the term, which can be a substantial hidden cost
• Whether the tenant may assign or sublet, and on what conditions
• What happens if the chargee bank enforces its security

Common mistakes

• Documenting a long term arrangement as a tenancy, so it is never registered and does not bind a buyer
• Failing to obtain the chargee's consent where the land is charged to a bank
• Overlooking a restriction in interest that requires state authority consent before the lease can be registered
• Agreeing a reinstatement obligation without pricing what it will cost at the end of the term
• Relying on a renewal clause that gives no enforceable right at all

Frequently asked questions

What is the difference between a lease and a tenancy in Malaysia?

A term not exceeding three years is a tenancy and is not registrable. A term exceeding three years is a lease, created by a registrable instrument and entered on the title. A registered lease binds a subsequent owner of the land.

Does a lease have to be registered?

A lease is registrable and should be registered. Until it is, the occupier relies on contractual rights against the current owner only, and is exposed if the property changes hands.

Can a lease be granted over part of a property?

Yes, a lease may be granted over the whole or a part of the land, subject to the requirements of the National Land Code and any plan requirements for the part concerned. We advise on this before drafting.

Do I need the bank's consent to grant a lease?

Where the land is charged to a bank, the chargee's consent is normally required, and granting a lease without it can breach the charge. This is checked at the land search stage.

Is stamp duty payable on a lease?

Yes, duty is assessed on leases, and the assessment depends on the rent and the length of the term. We attend to adjudication and stamping before presenting the lease for registration.

Related services

• Tenancy Agreement
• Land Search
• Caveat of Property
• Sale and Purchase Agreement
• Memorandum of Transfer (MOT)
• Loan Agreement
• Discharge of Charge
• Property Transfer & Transaction
• Foreigners Buying Property
• Property Lawyer Malaysia

This page is general information about property law procedure in Peninsular Malaysia and is not legal advice for any particular situation. How a matter is handled depends on the title, the state and the facts, and Sabah and Sarawak have their own separate land legislation. Speak to a lawyer about your own circumstances.