The proposed Residential Tenancy Act (RTA) by the Ministry of Housing and Local Government (KPKT) will hurt the rental market, according to the Malaysian Real Estate and Housing Developers’ Association acting president, Datuk NK Tong.

Tong said some proposals in the Act should be carefully reviewed and reconsidered; otherwise, the impact on the industry could be negative.

While several points in the proposed Act’s Regulatory Impact Statement may be useful in resolving disputes between parties involved in residential tenancy matters, he said the association is also concerned about some of the Act’s proposals.

“The unintended consequence of layering unnecessary complexity is that rents may trend upwards as landlords factor in any additional burden that they have,” he said.

Among the main concerns highlighted by Rehda is that the RTA should be applicable only in specific circumstances.

“In principle, we strongly oppose the government’s intervention in what should have been a private agreement between two parties. However, there may be situations where the tenant is at a disadvantage compared to the landlord, thus requiring a higher level of protection. For instance, if the tenant is from the B40 group, thus the landlord and the tenant are not on equal footing.

“As such, Rehda proposes that the RTA should only apply to residential tenancies where the monthly rent is below RM750 a month, which according to the data provided in the Regulatory Impact Statement, is considered the cut-off point for classification as falling within the low and low-middle monthly rent range,” he said.

The second concern is the security deposit placement with a government agency.

Tong said that such placements will open up the possibility of delays such as refunds and claims for damages due to the additional layers of bureaucracy.

“Additionally, KPKT’s intention to utilise the interest earned from the deposits to fund the administration of the RTA including to defray the costs of managing the proposed Tenant Landlord Database is misguided, as the cost should only be defrayed from taxes collected through the nation’s taxation system,” he said.

According to Tong, interest earned on deposits should rightfully remain the depositor’s property.

The third point of concern is the amount of security and utility deposits that the tenant must pay.

Tong said that the draft RTA proposes a security deposit of two months’ rent and a utility deposit of one month’s rent.

Rehda believes that the number of deposits to be collected should be determined by market forces and agreement between landlord and tenant.

There is no such thing as a one-size-fits-all scenario when it comes to tenancy arrangements, Tong said.

“In some cases, collecting only two months’ deposit will leave the landlord exposed to losses due to the lengthy process of collecting rental, calling a breach, and the legal process involved in evicting a defaulting tenant, all of which can take up to three months at the very least,” he said.

The fourth point of concern is rent control.

Tong said that Rehda is strongly opposed to any form of rent control, including the proposed restriction to limit the number of rent increases and the magnitude of rent increases.

He said that all rental levels and renewals should be determined solely by market forces.

“As there may be different requirements and demands on the property from tenants, it is only fair to leave the rental rate to be determined between the landlord and the tenant. Further, capping rent control will only retard property investment and ultimately negatively impact economic growth,” Tong said.

The last concern is prohibiting the landlord from claiming unexpired term rent.

The proposal to disallow the landlord to claim the rent of unexpired term in the event of breach by the tenant is unjust, Tong said.

“A defaulting tenant should not be given protection since the landlord is the one who will suffer when a tenant is in breach,” he explained.

Rehda, according to Tong, supports the government’s initiative to protect tenants but believes that existing laws are sufficient.

However, if it is enacted, the Act must help to ease the process for any disputes that arise, rather than adding lengthy procedures and making it more difficult to reach a resolution, he said.

“Rehda recognises the intention behind the proposed RTA which among others aim to facilitate some issues that arise in the market. However, such an Act should take into account that not all tenants and landlords have the same needs and capabilities, and require different levels of protection particularly tenants from the B40 group.

“We also support the creation of a residential tenancy agreement template but we hope that the template will still allow room for amendments should both landlord and tenant be agreeable. The ultimate goal should be to make any new legislation effective for the Rakyat.

“We reiterate that Rehda is always open for discussions and information exchange with the government and industry stakeholders to ensure that the housing and property sector remains sustainable, balanced, and inclusive for all,” Tong said.

Laws that currently impact the rights and responsibilities of tenants and landlords

Contracts Act 1950 – legislation to cover conflicts on the tenancy agreement

Civil Law Act 1956 – legislation to cover payment disputes

Distress Act 1951 – legislation covering matters of eviction

Specific Relief Act 1950 – prohibits landlords from evicting tenants or making the property inaccessible to tenants without a court order

Common Law/Case Law – an overarching framework covering rental disputes

Source: NewStraitsTimes,  March 2, 2022

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