Novation Lease Agreement for Malaysia

Novation Lease Agreement Template for Malaysia

A comprehensive legal document governed by Malaysian law that facilitates the transfer of lease rights and obligations from an existing tenant to a new tenant, with the landlord's consent. This agreement is structured in accordance with the Malaysian Contracts Act 1950 and National Land Code 1965, ensuring proper transfer of both benefits and liabilities under the original lease. It includes detailed provisions for the release of the original tenant, assumption of obligations by the new tenant, and continued binding effect of the original lease terms, while addressing practical aspects such as security deposits, outstanding payments, and property condition.

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What is a Novation Lease Agreement?

The Novation Lease Agreement is a crucial document used in Malaysian property transactions when an existing tenant needs to transfer their lease obligations to a new tenant. This situation commonly arises during business acquisitions, corporate restructuring, or when a tenant needs to exit a lease early but has found a replacement tenant. The document ensures compliance with Malaysian legal requirements, particularly the Contracts Act 1950 and National Land Code 1965, while protecting all parties' interests. It comprehensively addresses the transfer of rights, obligations, and practical matters such as security deposits and outstanding liabilities. The agreement is essential for maintaining legal continuity of the lease while changing one of the principal parties, requiring careful consideration of both legal and commercial aspects under Malaysian law.

What sections should be included in a Novation Lease Agreement?

1. Parties: Identifies the original lessor, original lessee, and new lessee (incoming party)

2. Background: Recitals explaining the existing lease arrangement, reason for novation, and intention of all parties

3. Definitions: Defines key terms including Original Lease, Effective Date, Property, and other relevant terms

4. Novation: Core clause effecting the transfer of rights and obligations from original lessee to new lessee

5. Release of Original Lessee: Formal release of original lessee from obligations under the lease

6. Assumption by New Lessee: New lessee's assumption of all obligations and liabilities under the lease

7. Lessor's Consent: Express consent of lessor to the novation and continuing obligations

8. Representations and Warranties: Statements of fact and promises by all parties regarding their capacity and authority

9. Effective Date and Term: Specifies when the novation takes effect and confirms remaining lease term

10. Costs and Stamp Duty: Allocation of costs including stamp duty and registration fees

11. Governing Law: Confirms Malaysian law as governing law and jurisdiction

12. Execution: Signature blocks for all three parties with attestation requirements

What sections are optional to include in a Novation Lease Agreement?

1. Security Deposit Transfer: Required when there is an existing security deposit to be transferred or replaced

2. Outstanding Amounts: Include when there are any rent arrears or other outstanding payments to be addressed

3. Renovation and Fixtures: Needed when dealing with improvements made by original lessee

4. Assignment of Warranties: Required when transferring warranties for fixtures or improvements

5. Subtenants: Include if there are existing subtenants to be addressed

6. Break Clause: Optional provision allowing early termination rights

7. Insurance Transfer: Required when existing insurance policies need to be transferred or replaced

What schedules should be included in a Novation Lease Agreement?

1. Schedule 1 - Property Details: Detailed description of the leased property including address and title particulars

2. Schedule 2 - Original Lease: Copy or key terms of the original lease agreement being novated

3. Schedule 3 - Rent and Payment Terms: Current rent amount, payment dates, and review provisions

4. Schedule 4 - Condition Report: Current condition of the property at time of novation

5. Schedule 5 - Outstanding Matters: List of any pending obligations, repairs, or payments

6. Appendix A - Required Consents: Copies of any third-party consents required for the novation

7. Appendix B - Property Plans: Floor plans and location maps of the leased property

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Malaysia

Publisher

Genie AI

Document Type

Financing Agreement

Cost

Free to use
Relevant Industries

Real Estate

Commercial Property

Retail

Manufacturing

Industrial

Office Space

Hospitality

Healthcare

Education

Logistics

Warehousing

Relevant Teams

Legal

Real Estate

Facilities Management

Operations

Finance

Compliance

Property Management

Asset Management

Contract Administration

Corporate Services

Relevant Roles

Legal Counsel

Property Manager

Facilities Manager

Real Estate Director

Commercial Lease Manager

Asset Manager

Compliance Officer

Contract Administrator

Real Estate Attorney

Chief Financial Officer

Operations Director

Property Development Manager

Tenant Relations Manager

Corporate Real Estate Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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