Commercial Lease in Malaysia: What Landlords and Tenants Must Get Right Before Signing

A Malaysian commercial lease is either a registrable lease or an exempt tenancy, and which one it is decides whether it binds a buyer of the property, how much stamp duty is payable, and how a landlord recovers unpaid rent. Under the National Land Code 1965, a term exceeding three years must be granted as a registered lease; three years or less is a "tenancy exempt from registration" and is not registered against the title. Both are contracts under the Contracts Act 1950, but the practical consequences of getting the term, the stamp duty and the default clauses wrong are different for each, and this is where most commercial lease disputes in Malaysia actually start.

Most business owners treat a commercial lease as a formality once the rent and the term are agreed, and the document only gets read closely once something has gone wrong — a tenant stops paying, a landlord wants the unit back for a bigger tenant, or a sale of the building leaves both parties unsure whether the lease survives. This guide covers what a Malaysian commercial lease or tenancy agreement must contain, how stamp duty is calculated, and what actually happens when rent stops coming in.

Is this a "lease" or a "tenancy", and does it matter?

It matters because only one of them is registered against the land title. Section 221 of the National Land Code 1965 (Act 828, Revised 2020) lets a registered proprietor grant a lease for a term exceeding three years, which is then registered as a dealing against the title under Part Eighteen of the Code. Section 223 covers tenancies not exceeding three years, which do not go through that registration process — the Code calls this a "tenancy exempt from registration" (defined in section 213(1)). A registered lease binds a subsequent purchaser of the property because it is on the title; an unregistered tenancy binds the original landlord as a matter of contract, but a buyer who is unaware of it may not be bound in the same way. For any commercial tenant taking a term close to three years, or negotiating renewal options that could push the effective occupation past three years, this distinction is worth confirming before signing, not after a sale of the building.

What must the lease or tenancy agreement actually cover?

Beyond rent and term, a commercial lease that protects both sides needs to fix the following in writing — leaving any of them to "standard practice" is where disputes start.

Two adjacent questions usually come up at the same point in this process: see option to purchase vs right of first refusal and sale-and-leaseback in malaysia for how each is handled.

How much stamp duty applies, and who pays it?

A tenancy or lease agreement is chargeable with ad valorem stamp duty under the Stamp Act 1949, calculated on the annual rent (or average annual rent over the term, where rent steps up) and the length of the term. The rate is charged per RM250 (or part of RM250) of annual rent: RM1 for a term of one year or less, RM3 for more than one year up to three years, RM5 for more than three years up to five years, and RM7 for a term exceeding five years or of no definite term. As a worked example, a unit let at RM1,800 a month (RM21,600 a year) on a two-year term falls in the "more than one year up to three years" band, so duty is charged at RM3 per RM250 of the annual rent: RM21,600 divided by RM250 is 86.4, rounded up to 87 parts, giving RM261.

Who pays it is not left to the parties by default. Section 33 of the Stamp Act 1949, read with item 8 of the Third Schedule, places the duty on the lessee for the lease or agreement for lease, and on the lessor for the counterpart. Landlord and tenant can and often do deal with the cost between themselves in the lease, but that is a contractual arrangement sitting on top of the statutory allocation, not a substitute for it.

Commercial tenancies used to carry a nil band on the first RM2,400 of annual rent. That band was removed when the Finance Act 2024 (Act 862) amended the First Schedule with effect from 1 January 2025, so duty is now calculated on the whole of the annual rent rather than on the excess over RM2,400. Unstamped or late-stamped instruments are not admissible in evidence in Malaysian courts unless the duty and any penalty under section 47A are paid first (section 52), which matters if the lease ever has to be enforced.

What happens if the tenant stops paying rent?

A commercial landlord in Peninsular Malaysia has a remedy that does not exist in most jurisdictions tenants are familiar with: distress. Under section 5(1) of the Distress Act 1951, a landlord — or an agent authorised in writing — may apply ex parte to a Judge or Registrar for a warrant of distress against the tenant’s movable property on the premises, to recover rent for a period not exceeding twelve completed months of the tenancy immediately preceding the date of the application. Distress can still be levied after the tenancy has ended, provided the tenant is still in occupation or the tenant’s goods are still on the premises (section 5(3)). If goods are removed with the intention of defeating the distress, a Judge may on the landlord’s application authorise the bailiff, within thirty days of the removal, to follow and seize them wherever they are found (section 21(1)).

Distress runs alongside, not instead of, the landlord’s contractual remedies: forfeiture and re-entry under the lease itself, and a claim for the balance of arrears and future loss as a straightforward breach of contract. Which remedy to use first is a commercial decision — distress is faster and does not require terminating the lease, while re-entry ends the tenancy and lets the landlord re-let the space, but forecloses the arrears claim against a tenant who has nothing left to seize.

Can the tenant assign the lease or sublet the premises?

Only if the lease says so. Malaysian commercial leases are typically silent on assignment by default, which under general contract principles means the tenant needs the landlord’s consent to hand the space to someone else. Most commercial leases instead spell out a qualified consent standard — consent "not to be unreasonably withheld" — and set out what the landlord can require before agreeing: proof of the incoming tenant’s financial standing, a matching deposit, and a deed of assignment or sub-tenancy registered with the landlord. A lease silent on subletting, or one that gives the landlord absolute discretion, is a common point of renegotiation once a tenant wants to exit early through an assignment rather than a costly early termination.

Frequently Asked Questions

Does a commercial tenancy under three years need to be registered?

No. Section 223 of the National Land Code (Act 828) is the power to grant a tenancy not exceeding three years, and section 213(1) defines that as a "tenancy exempt from registration" — it is not entered against the land title. It is still a binding contract between landlord and tenant.

Who pays stamp duty on a commercial lease in Malaysia?

The Act fixes it. Section 33 of the Stamp Act 1949, read with item 8 of the Third Schedule, places the duty on the lessee for the lease or agreement for lease, and on the lessor for the counterpart. Parties frequently allocate the cost differently in the lease itself, but that is a contractual arrangement between them rather than a change to the statutory position.

Can a landlord seize a tenant’s goods for unpaid rent without going to court?

No. Distress under the Distress Act 1951 requires a warrant from the court; a landlord cannot lawfully seize a tenant’s property without one, and self-help re-entry that breaches the peace carries its own legal risk.

What happens to a commercial lease if the building is sold?

A registered lease (over three years) is on the title and generally binds the purchaser. An unregistered tenancy of three years or less is a matter of contract with the original landlord, so whether it survives a sale should be addressed expressly in the sale and purchase agreement and, ideally, in the tenancy itself.

How long does it take to document a commercial lease properly?

A straightforward renewal or single-unit lease can be documented in one to two weeks once the commercial terms are agreed. Leases with rent step-ups, assignment rights, or multiple units typically take longer because the drafting has to anticipate scenarios the parties have not yet discussed.

Getting the lease documented properly

A lease that is silent on assignment, vague on repair obligations, or wrong on the registration and stamp duty position costs the most at the two moments it matters — when a tenant defaults, or when the property is sold. Legal That Works advises Malaysian landlords and tenants on commercial lease, tenancy and sublet agreements, from structuring the term and rent mechanics through to registration, stamp duty and default provisions. If you are negotiating a commercial lease now, get the term, renewal and default clauses reviewed before signing rather than after a dispute starts.

This article is for general information only and does not constitute legal advice. Every transaction and every set of facts is different. Obtain specific advice from a qualified adviser before acting on any part of it.

Related guides

• Option to Purchase vs Right of First Refusal

• Sale-and-Leaseback in Malaysia

• Perfection of Transfer for Companies

• EPU Approval for Property Sale and Purchase

• Stamp Duty on a Development Agreement in Malaysia

• Privatisation Agreement and Extension of Term