Stop Drafting Tenancy Agreements: The New Rule Every Malaysian Property Agent Must Obey
For years, it was common practice: a tenant pays an agent a token fee (e.g., RM200) to “prepare the tenancy agreement” for a modest rental. That shortcut is now expressly against the rules for all registered estate agents.
The Official Directive: Notification 3/2024
On 1 March 2024, the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEP/LPEPH) issued Notification 3/2024 – Preparation of Tenancy Agreement. The directive reminds registered estate agents that tenancy agreements are legal documents, and that preparing or drafting them for clients amounts to the unauthorised practice of law.
The Board cites Section 37 of the Legal Profession Act 1976 (LPA) and warns of disciplinary action for non-compliance. The Malaysian Bar has also highlighted the directive, underscoring its importance for both the legal and real estate professions.
Bottom line: preparing tenancy agreements is not within an estate agent’s permitted scope of work.
The Legal Risk: It’s More Than Just a Board Rule
Beyond the Board’s directive, Section 37 of the Legal Profession Act 1976 makes it a criminal offence for an unauthorised person to prepare legal instruments relating to immovable property for a fee or reward.
The Act states:
“[An unauthorised person who] draws or prepares any document or instrument relating to any immovable property or to any legal proceedings or to any trust… shall, unless he proves that the act was not done for or in expectation of any fee, gain or reward, be guilty of an offence.”
Estate agents are not advocates & solicitors. Charging a fee to draft a tenancy agreement — clearly a document “relating to… immovable property” — risks breaching Section 37(2).
The Three-Fold Risk of “Just Using a Template”
- Regulatory risk – Ignoring Notification 3/2024 can trigger disciplinary action by BOVAEP.
- Legal risk – Drafting for a fee or reward can fall foul of LPA s.37(2), which carries penalties.
- Liability risk – Generic templates often omit or misstate key protections (repairs, deposits, termination/renewal). Agents who prepare them open themselves to client disputes and claims.
Solving the Cost Dilemma — Compliantly
It’s true that a lawyer-drafted tenancy agreement often costs RM1,000–RM2,000, which feels high for lower-rent units. The old RM200 “agent-prepared” workaround is no longer an option. Instead, agents should:
- Facilitate, don’t draft. Collect the commercial particulars (names, IC/passport numbers, rental figure, deposit, term, address) and pass them on. Do not insert or draft legal clauses.
- Lawyer review (cost-controlled). Encourage clients to draft their own basic terms if they wish, and then engage a lawyer to review and perfect the agreement at a lower fee than full drafting.
- Coordinate stamping. Ensure that once the agreement is finalised, it is stamped at LHDN/IRB. Under the Stamp Act 1949, s.52(1), an instrument chargeable with duty that is not duly stamped is inadmissible in evidence, though the courts can order stamping with a penalty.
What You Must Do Now
- Stop immediately. Do not charge any fee to prepare tenancy agreements.
- Refer out. Advise clients that TA preparation should be handled by a qualified lawyer.
- Support, don’t draft. Coordinate timelines, particulars, and stamping — without venturing into legal drafting.
FAQ
- Is my old agent-drafted TA invalid?
Not necessarily. Validity and admissibility are different. But going forward, drafting for a fee conflicts with Notification 3/2024 and risks LPA s.37(2) issues. - Must every TA be prepared by a lawyer?
Parties (landlord/tenant) may draft their own agreement without involving a lawyer. But the safest course is always a lawyer-prepared or lawyer-reviewed tenancy agreement. - Is stamping necessary?
Yes. For court use, unstamped tenancy agreements are inadmissible until duly stamped. Courts can order stamping with penalty before admitting them under Stamp Act s.52(1).