In Malaysia, tenancy matters involve multiple laws, including, National Land Code 1965, Contracts Act 1950, Specific Relief Act 1950 and Distress Act 1951. A tenant is defined as a person from whom a landlord claims rent to be due under any lease, sub-lease or agreement.[1]
Who can initiate the distress action?
To exercise the remedy of distress, a landlord-tenant relationship must be in place. Therefore, distress cannot be used in a licensing arrangement; a licensor cannot issue a warrant of distress against a license.[2] As noted in Perbadanan Pembangunan Bandar v Syabas Holdings Sdn Bhd [1990] 2 MLJ 116, Justice Lim Beng Choon stated:
“It is clear that before the right to distrain for rent upon a demise may arise under the common law, the relation of landlord and tenant must exist, both when the rent becomes due and when the distress is levied, and the rent must be in arrear. … If the relationship between the parties is not that of landlord and tenant but merely that of a licensor and licensee, payment made for the use of the premises is not rent and no right to distrain is conferred on the licensor..."
"Landlord" here includes any lessor, sub-lessor, or person entitled to receive rent under a lease or tenancy agreement, which may be written or oral. The rent eligible for distress must be contractual, representing an agreed amount for tenancy. Simply labeling a payment as "rent" does not make it so; rent must represent payment in exchange for a tenant’s use of the landlord's property.
This point was further emphasized by Justice Shankar in Hiap Lee (Cheong Leong & Sons) Sdn Bhd v Unicla Industries Sdn Bhd [1988] 1 CLJ 512, where he clarified that distress applies only to goods found on the premises covered by the lease agreement with arrears. A holdover tenant is deemed a trespasser and cannot be considered liable for rent under any lease or tenancy agreement. Thus, only the landlord can initiate the distress action against the tenant.
When can you initiate the distress action?
Section 5(3) of the Distress Act 1951 allows for a distrain for any arrears of rent upon satisfaction of two conditions, namely, either the tenant is still in occupation of the rented premises; or the goods of the tenant remain on the premises.
What is the limitation of distress action?
i. Landlord-Tenant Relationship: Distress is only available while a landlord-tenant relationship, once the tenancy is terminated, there can be no distress for rent for a period after the termination.[3]
ii. Effect on Tenancy: The distress proceeding does not automatically terminate the tenancy contract, and thus, a landlord may have a problem when a tenant defaults again. Since the distress action does not automatically terminate the tenancy contract, the rights to vacant possession is not a remedy to the landlord under this action.
iii. Rent Limitation: Only arrears of rent for 12 months preceding the application can be claimed under distress.[4]
iv. Uncertainty: There is no certainty that the arrears of rental can be satisfied with the movable property seized and sold.
v. No Double Rental: The landlord may not claim for double rental, as it is a penal sum, which does not fall under the clarification of rent for which the distress process is available under the Distress Act 1951.[5]
vi. Exempted Properties: Section 8 of the Distress Act 1951 exempted the tenant’s property under the following categories from seizure:-
(a) Items in use by a person at the time of seizure;
(b) Tools and equipment not in use, provided there is other movable property on the premises to cover the amount and costs;
(c) Essential clothing and bedding for the tenant and their family;
(d) Goods the tenant has for use in their usual trade or business;
(e) Goods belonging to guests at an inn;
(f) Goods under legal custody;
(g) Government property, property held by local authorities for public purposes, and any property the Minister designates as exempt from distress proceedings in the Gazette.
It is to note that the Court in RHB Trustees Bhd v Yongman Engineering Sdn Bhd (Yongnam Engineering & Construction (PTE) Ltd, pihak terkilan) [2023] MLJU 1317 ruled that items such as air-conditioner, CCTV and compressor are not fixtures, but movable properties and may be seized under the Distress Act 1951. Thus, so long the property does not fall under the definition of ‘fixture’, the property may be seized under section 7 of the Distress Act 1951, subject to the exemption provided under section 8 of the Distress Act 1951.
How to proceed with distress action?
The process for a distress action is outlined in Order 75 of the Rules of Court 2012 and may be summarised as follows:-
i. File an ex parte application for writ of distress by way of originating summons.
ii. To file together an affidavit in Form 184 containing the following details:-
(a) There is a valid tenancy agreement between the landlord and the tenant;
(b) The pertinent terms of the agreement;
(c) The failure of the tenant to pay the rental; and
(d) The amount due and payable to the landlord.
iii. Hearing of the ex parte application may be attended by the landlord’s solicitors. The Court may require the landlord to pay a cash sum as a deposit to cover any necessary fees and expenses.[6]
iv. Upon the grant of Writ of Distress in Form 186, the landlord may appoint a Court’s bailiff, which includes the Registrar, any clerk or other officer of the Court charged with performing the duties of a bailiff[7] to carry out the seizure.
v. A bailiff receives a warrant to seize movable property on the premises sufficient to cover the arrears of rental, his fees and expenses.
vi. The Court would set a date for the bailiff and the landlord’s solicitors to inspect the place. The bailiff, accompanied by private security (or any other authorities the Court may direct, depending on the State) then may enter the premises and seize the movable property. The bailiff must create an inventory and approximate valuation of the seized property.
vii. The bailiff to give the tenant or any person in the occupation of the premises or, posting it in some conspicuous place a notice of the seizure in Form 91 containing:-
a copy of inventory and approximate valuation;
the amount due under the warrant; and information that the property seized will be sold at a time and place to be named in the notice as agreed by the bailiff and the applicant, which must take place not less than 6 days from the date thereof.
viii. It is notable to note that the tenant may pay the amount of the rent arrears or obtains any order restraining such sale by way of a notice of application within 7 days of the seizure supported by an affidavit.
ix. If there is no such application by the tenant, the sale of the property seized from the premises by auction will proceed.
x. The proceeds of sale shall be first used to pay the bailiff’s fees and expenses, and thereafter it goes to satisfy the rental arrears and costs by the landlord and any remainder shall be returned to the tenant.
In summary, the Distress Act 1951 offers landlords a way to recover overdue rent by seizing tenants' property under specific conditions in a short period of time. The Act aims to balance landlords' rights to recover unpaid rent with protections for essential tenant property, ensuring the process is fair and within legal limits. Understanding these guidelines helps landlords use the remedy appropriately and in line with the law and avoid any further legal action taken against landlords.
[1] Section 2 of the Distress Act 1951
[2] Kandasami v Mohamed Mustafa [1983] 2 MLJ 85 at pp 88-89
[3] Daniell’s Law of Distress
[4] Section 5(1) of the Distress Act 1951
[5] Mari Boutique Sdn Bhd v Jaya Jusco Stores Bhd [2004] 1 MLJ 74
[6] Section 7 of the Distress Act 1951
[7] Order 1, rule 4 of the Rules of Court 2012
Authored by Radhia Syahira
Kindly note that this legal article does not, and is not intended to, constitute formal legal advice by the Firm, instead all information, content and materials available on this site are for general informational purposes only. If readers require further clarification or legal advice, please email office@kevinwuassociates.com
