How To Recover Your Outstanding Rental And Vacant Possession Under The Commercial Retail Tenancy Agreement? Here Are Some Available Resolutions For It!

Q1. What is can be deemed to be Commercial Retail Tenancy (“CRT”)?

Answer: 

It is a tenancy entered into for business/commercial purposes i.e. for the purpose of retailing, either products or service or both. Mostly it is applicable for shopping complex tenancy whereby the landlord will be structured as commercial entity, renting out the premise to collect rental substantially on retail business.

Q2. What are the common issues face by the landlord under Commercial Retail Tenancy Agreement (“CRTA”)?

Answer: 

The most common issues face by the landlords under CRTA are on the recovery of the outstanding rental and recovery of possession of the premise.

Q3. What are the available dispute resolutions for recovery of possession and recovery of the outstanding rental for CRTA?

Answer: 

The available dispute resolutions would be by way of Arbitration and Court proceeding. Usually, CRTA provides an Arbitration clause as a mean to resolve any dispute arises from the CRTA. On the other hand, any dispute arises can also be resolved by way of Court proceeding such as Writ of Summons and Writ of Distress.

Q4. What is distress application?

Answer: 

Distress application or Writ of Distress is a court order where the movable properties of the tenant within the rented premises will be seize and auction to recover the rental arrears owed by the tenant. It is one of remedies available for a landlord to recover its outstanding rental from the tenants.

Q5. Any limitation for distress application?

Answer: 

Yes. Pursuant to Section 5(1) of the Distress Act 1951, the landlord may only claim up to 12 months of the outstanding rentals.

Q6. How does the distress application work?

Answer: 

The procedure started with a letter of demand to the tenant for the arrears of rental. If the tenant still fails to pay, the landlord can proceed to issue the writ of distress. The writ of distress will direct the bailiff to enter into the premise and seize the movable properties of the tenant. After the properties being seized, the bailiff shall prepare an inventory list and an approximate valuation of the same. Thereafter, bailiff will serve on the tenant a notice of seizure and the inventory list with the time and place, which shall be after a minimum period of 6 days at least from the date of the notice. Upon the outstanding sum due under the writ of distress is fully recovered by the sale of the seized properties, any balance of the same will be returned to the tenant.

Q7. Can the landlord evict or expel the tenant who refuses to vacate the premise?

Answer: 

No. The landlord must file a civil suit against the tenant and obtain a Court order first in order to evict the tenant.

This was provided under Section 7(2) of the Specific Relief Act 1950 which provides that “Where a specific immovable property has been let under a tenancy, and that tenancy is determined or has come to an end, but the occupier continues to remain in occupation of the property or part thereof, the person entitled to the possession of the property shall not enforce his right to recover it against the occupier otherwise than by proceedings in the court.”

The landlord is not allowed to retake possession of the property except by way of Court order/proceedings. If the landlord proceeds to do such action without the Court order, that will tantamount to tort whereby the landlord will be held liable.

Q8. How to recover rental by way of court proceeding other than distress application?

Answer: 

Other than distress application, the rental can be recovered by way of writ of summons.

Q9. How does writ of summons work to recover the possession and outstanding rental of the premise?

Answer: 

In order for the landlord to claim the outstanding rents and possession of the premise from the tenant, the landlord may file a civil action in court to demand for the outstanding arrears of rental and also the possession of the premise. It is a common civil proceeding whereby the landlord will be named as the Plaintiff and the Tenant will be named as Defendant.

Civil action is started with the filing and service of the writ of summons and statement of claim on the Defendant. Upon being served, the Defendant is needed to enter appearance within 14 days from the writ is being served on him. After appearance entered, the Defendant then has 14 days to file its defence to the statement of claim.

Thereafter, the Plaintiff has 14 days to file a reply to the defence. The pleadings is closed upon the Plaintiff served the reply to defence. Upon the pleadings is close, the matter will be fixed for pre-trial case management where the Court will direct parties to prepare and file necessaries documents for Trial, and the Court will further fix dates for Trial.

Upon the Trial is done, the Court will direct both parties to file their submissions and submissions in reply (if any) for the matter. A decision will be delivered by the Court then.

Q10. What is the time limit to take any legal action against the debtor?

Answer: 

Section 6(1)(a) of the Limitation Act 1953 provides that the limitation period to take any legal action against the debtor is 6 years from the date of the default. Let say the debtor defaulted on 2.1.2021, hence the limitation period starts running from that date for 6 years!

Q11. Are there any possibilities to get a judgment against the debtor without having to go for Trial?

Answer: 

Yes. A judgment can be entered against the debtor without having to go for Trial by way of Summary Judgment application and Judgment in Default application.

Q12. What is Judgment in Default (“JID”)? 

Answer: 

Generally, Judgment in Default can be obtained by the Plaintiff (claimant) in a civil action when the writ is served on the Defendant (debtor), but the Defendant failed to enter appearance within the stipulated time pursuant to Order 13 of the Rules of Court 2012. When a JID is entered, there is no need to go for Trial.

Q13. What does it mean with Summary Judgment application?

Answer: 

Summary Judgment application is an application under Order 14 and/or Order 81 of the Rules of Court 2012 whereby the Court may conclude a claim and/or issue without having to go for a Trial. It is an application to expedite an action begun by a Writ of Summons with facts which are clear and straightforward. A summary judgment application is a procedure typically resorted to when the Defendant does not have any defence to the claim against him. Hence, it is a cost-effective and efficient way to resolve disputes.

However, there are requirements must be met under Order 14 and/or Order 81 of the Rules of Court 2012 for the Summary Judgment application to be allowed by the Honourable Court. Otherwise, the Summary Judgment application might be dismissed.

THIS FAQS ARE PREPARED AND PUBLISHED BY MESSRS GAN & ZUL, ADVOCATES & SOLICITORS, KUALA LUMPUR.-GENERAL DISPUTE RESOLUTION AND APPELLATE DIVISION-