Expatriate Clause – TPC Practice Q1

Q.

What is “Expatriate” or “Diplomatic” Clause in a tenancy agreement? This was asked in 2017 Q1 in D11 Real Estate Agency Practice.

A.

The name can give us some clues. It has to be something about foreigner in the country who is renting, right? So, it is a clause in the tenancy agreement to protect the foreigner in case he has to leave the country due to uncertainty in his posting.

When a tenancy agreement is inserted a Diplomatic/Expatriate Clause, it means this foreigner tenant can terminate the contract anytime without having to perform the whole tenancy duration. Some landlords will never agree to this clause, so before you want to rent it out to a foreigner, make sure the agreement does not contain this clause. Simply put, as landlord, you cannot forfeit the security deposit if the tenant does not perform the contract. This clause, although as named as such, does not mean it is racist or discriminating foreigners from locals.

In fact, locals can also negotiate to have this clause inserted into the tenancy agreement. Take for example, you are promoted to Kuala Lumpur as a regional manager. However, you might get a sudden transfer back to home state or other places (overseas) without prior notice. So, you can also negotiate for this contingency to be inserted into the tenancy agreement. Usually, the rental amount will be reviewed for such inclusion.

https://estateagentexam.com/2017/07/diplomatic-clause-and-tenancy-agreement-q1.html/