[AskGuru] – My Agent Requested An 'Agent Disbursement Fee' For A House I Want To Rent. Is This Legit?

Q: I’ve been renting a place for many years. My rental agreement ended recently, and I went looking for another house and, thankfully, found one that’s right for me. Furnished unit, good condition, good location, got public transport, malls, etc. So, I told the agent that I’d rent the house for a monthly rent of RM 1,500.

But then the agent asked for a very high downpayment, including an “agent disbursement fee”— RM1,620 with SST! The total downpayment, including deposits, utility deposits, agreements, etc., was nearly RM10,000!

Can someone tell me what the agent disbursement fee with SST is? I’ve not heard of it before. Is this a new rent practice in Malaysia? Please help and advise.

Been there, rented that – but never heard of an “agent disbursement fee”? You’re not alone. As a seasoned renter, you probably already know the fees involved, such as security deposit, advance rent, utility deposit, maybe a finder’s fee for the agent – but an “agent disbursement fee”? This new term has left you rightfully bewildered. So, is it a legitimate cost of renting a house in Malaysia?

We asked two professional real estate agents, Chan Ai Cheng, Immediate Past President of Malaysia Institute of Estate Agents (MIEA), and Tan Kian Aun, current President of MIEA, about it.

What is an “agent disbursement fee”?

Chan explained that the agent disbursement fee of RM1,620 referenced in the message seems to be derived from one month’s rental of RM1,500 plus 8% SST, totalling RM1,620. She also clarified that the terminology itself is not something that is found in the act, rules, standards, or circulars governing the profession.

“It appears to refer to professional agent fees for securing a property for a tenant. In a real estate transaction, the client is the person who appoints the agent and is responsible for the payment of fees. According to Malaysian Estate Agency Standards, there is only one “client” in each transaction, which is usually the seller or landlord, though in certain cases, it could be the buyer or tenant,” Chan explained.

She added, “In Malaysia, it is not common practice for buyers or tenants to be the “client” who pays the professional agent fee for securing a property. However, there are exceptions. For instance, I know of investors who offer professional fees to agents for sourcing profitable investment properties, making them the “client” instead of the seller or landlord.”

As for tenancy professional fees, these are governed by The Board Valuers Appraisers and Estate Agents Rules (BOVAEP) (Seventh Schedule of Rule 48) Rule 48, Seventh Schedule, which outlines the appropriate fees and practices in such transactions.

According to Tan, sometimes the agent may charge additional claims for administrative matters such as travelling, photocopies, documentation, advertisement, and so on. The schedule provides that registered agents are allowed to charge the client for these matters.

The standard estate agency fees and rent deposits

The minimum agent fee for rentals is a month’s rent. For tenancies of less than one year, the fee may be calculated on a pro-rata basis. The scale below does not apply to serviced offices, apartments, or any other similar premises.

Source: The Board of Valuers, Appraisers, Estate Agents and Property Managers

So, the best thing to do is to question the real estate agent about any fee that is outside the usual required rent deposits, which are the security deposit, utility deposit, and first month’s rent.

For example, if it’s a 2+2+1 rent deposit, it means:

2 months’ rent (Security Deposit)

+ 1 month’s rent (Utility Deposit)

+ 1 month’s rent (First month’s rent paid in advance before the rental period begins)

That’s not all. Then, there’s stamp duty for rental agreements. A proper tenancy agreement should be stamped by Lembaga Hasil Dalam Negeri Malaysia (LHDN) for it to become a valid legal document. The stamp duty for a tenancy agreement in Malaysia is calculated as below.

Additionally, there’s the administration fee for a tenancy agreement in Malaysia, and it is calculated as below:

• RM100 for a monthly rental of RM1,000 and below

• RM150 for a monthly rental of RM1,001 to RM2000

• RM200 for a monthly rental of RM2,001 to RM3000

• RM250 for a monthly rental of RM3,001 to RM4000

• RM300 for a monthly rental of RM4,001 and above

How to report a questionable property agent?

Chan pointed out that an agent cannot collect fees from both the landlord and tenant in a single transaction.

“The Rule 89 of Rules 1986 clearly outlines that the same agent should not charge both parties in a single transaction. However, in a co-agency situation, the listing agent can charge his client (Landlord), and the closing agent can charge his client (tenant) their professional fees,” Chan shared.

Tan chimes in that if an agent charges an unreasonable fee, renters may report it to the BOVAEP at complaint@lppeh.gov.my.

“However, before that, it is advisable to ask and clarify with the agents what the breakdown of the agent fees is and what its purpose is,” Tan pointed out.

BOVAEP is the regulatory body responsible for overseeing the conduct of real estate agents, probationary agents, and real estate negotiators in Malaysia. It has the authority to investigate and take action against any violations.

A good guide for renters

The rule of thumb is that if something feels off, don’t hesitate to walk away and find another agent who prioritises clarity and fair practices. To protect yourself from questionable rental practices, Chan and Tan provided the following guidelines for renters.

1. Research the market: Familiarise yourself with local rental rates to ensure you pay a fair rate.

2. Verify the agent’s credentials: Always ensure the agent is registered/certified with BOVAEP. You can easily check this at search.lppeh.gov.my. In any event of misconduct of a registered agent, you may refer to BOVAEP. If you deal with non-registered (illegal) agents, it is difficult to trace and locate them.

3. Confirm with the agency: It’s also wise to contact the agency directly to confirm the agent’s affiliation and standing.

4. Keep records: Document all communications with the agent, including emails and messages.

5. Request official documentation: Payments should be made into the agency’s client account and accompanied by an official receipt, using only the agency’s official forms. Do not deposit money into the agent’s personal bank account.

6. Clarify rent terms upfront: Ensure that all key terms of the tenancy, including any special conditions, are agreed upon in advance. Contrary to popular belief, there is no standard tenancy agreement in Malaysia. While templates are common, it’s advisable to seek proper advice to fully understand the agreement’s provisions.

7. Read agreements thoroughly: Take your time to review the Agreement to Rent and the subsequent Tenancy Agreement, and understand all terms and conditions. Ensure that the Tenancy Agreement is executed and agreed upon.

8. Verify ownership: Conduct simple due diligence to confirm the tenancy agreement with the rightful owner(s) is signed.

9. Avoid cash transactions: Bank transfers or cheques are safer as they provide a clear payment record.

10. Be wary of unusually low rent prices: If a deal seems too good to be true, it probably is. Scammers often use attractive offers to lure victims, and/or may advertise properties they don’t have access to. If something doesn’t feel right, trust your instincts and investigate further.

11. Inspect the property: Always visit the property in person before making any payments. Ensure any special conditions, such as additional furniture or appliances, are agreed upon upfront. You could also prepare a property condition report and an inventory checklist.

12. Ask questions: Don’t hesitate to clarify any doubts about the property or rental terms.

Renting a property can be stressful, but knowing the standard practice saves you from unnecessary headaches and expenses. Always ask for clarity on any fees and don’t rush into agreements without fully understanding the costs involved.

Stay informed, stay cautious, and don’t hesitate to stand up for your rights as a tenant!