Can You Charge Your Tenant For Double Rent?

What happens if your tenant refuses to move out at the expiry of their tenancy agreement- can you charge your tenant for double rent? This matter was dealt with in the Federal Court case of Rohasassets Sdn Bhd v Weatherford (M) Sdn Bhd & Another.

Brief facts of the case

Rohasassets Sdn Bhd (‘Rohasassets’) let out two premises which it owns to Weatherford (M) and another company (‘Weatherford and Co’) in 2000 and 2003 respectively for ten years. Before the tenancy for both the premises expired, all parties came together to negotiate for the renewal of the tenancies 

However, the tenancies were not renewed. The negotiations went on even after the expiry of the tenancies and between that period:

1. Rohasassets constantly reminded Weatherford and Co to make payments (‘double rent’) for occupying the premises after the expiry of their tenancy agreement;
2. Weatherford and Co pleaded to Rohasassets to waive the double rent charge, especially in the event where the tenancies were renewed; and
3. Weatherford and Co even continued to pay rent to Rohasassets and Rohasassets took the rent (not the double rent) without any complaint. 

When the negotiations failed, Rohasassets terminated the tenancies and gave notices to Weatherford and Co to deliver vacant possession of the premises within a specific time. In spite of the notice, Weatherford and Co took an additional one month to vacate the premises. In total:

1. Weatherford and Co held 3 separate premises past the notice period; 
2. The premises were held over for 30 months, 31 months and 9 months respectively; and
3. The time period was calculated from the moment the tenancy expired until Weatherford and Co delivered vacant possession of the premises to Rohasassets.

Rohasassets’ claim

Rohasassets claim for double rent for the said holding period above against Weatherford and Co. Their claim was premised on section 28(4)(a) of the Civil Law Act and on the terms of the tenancy agreements. In this regard, Rohasassets claimed that:

1. Weatherford and Co were considered as tenants “holding over” within section 28(4)(a) of the Act;
2. Based on the same section of the Act, the court does not have the discretion to refuse double award when a tenant is holding over a premise; and
3. Weatherford and Co do not need to show wilful conduct to delay the delivery of vacant possession or refusal to surrender the premises in order to render them liable to double rent. 

Weatherford and Co’s claim

Weatherford and Co argued otherwise, stating that: 

1. The word “holding over” only refers to wrongful holding over to cases where the landlord consented pending negotiations for fresh tenancies; and
2. Rohasassets must prove wilful conduct to delay the delivery of vacant possession or refusal to surrender the premises on the part of Weatherford and Co.

The decision of the courts

The High Court, Court of Appeal and the Federal Court all held in favor of Weatherford and Co.

The Federal Court’s rationale

In coming to its decision, the Federal Court held that:

1. The court is not concerned with the conduct on the part of the tenant (i.e. whether the tenant wilfully delay the delivery of vacant possession or refuse to surrender the premise);
2. While there are myriad of Federal Court cases with a diversity of opinion on whether the conduct of the tenant should be taken into account before a tenant could exercise his option to charge double rent, none of it reflects the intention of the legislation i.e. the Act. Under the Act, what matters is the reason for the holding over of a property by the tenant.
3. A tenant is liable to pay double rent if a landlord:
   1. Decides to charge double rent;
   2. Does not consent to tenant holding over; 
   3. Has asked the tenant to vacate the premises but the tenant refused to do so; and
   4. As mentioned above, it does not have a reasonable excuse for holding over of the premises.

Based of the facts, the court held that Rohasassets is only entitled to charge a months worth of double rent (the period whereby it took Weatherford and Co to vacate the premises after the notice to vacate was issued) and nothing more because:

1. Weatherford and Co holding over was with the knowledge and approval of Rohasassets (pending the finality of their negotiation);
2. Rohasassets did not make it clear to Weatherford and Co that it did not wish to renew the tenancy agreements nor did it made it clear that it wanted Weatherford to immediately give up possession of the premises after the expiry of the tenancies; 
3. Rohasassets agreed to negotiate a renewal of the tenancies when it could just outright refuse to negotiate; 
4. Rohasassets did not make it clear that it would not allow Weatherford and Co to continue holding over without paying double rent. This was seen when Weatherford and Co (as mentioned above) continue to pay rent to Rohasassets and Rohasassets choose to accept the payment without fuss and did not issue any notice to quit until after the negotiations between them failed. 

In conclusion: Yes you can charge your tenant for double rent if they refuse to move out after the expiry and the notice to vacate has been given to them- the court will not intervene unless you have no proper justification to do so.

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