Develop rental market to bridge affordability gap
> Landlord and tenant laws are needed to detail mandatory terms in tenancy agreement and handle disputes, in order for the rental market to grow in a sustainable manner
KUALA LUMPUR: Developing the rental market would bridge the affordability gap and relieve some of the pressure on the government to provide affordable housing, said Amir Toh Francis & Partners advocate and solicitor Ivan Chan.
Chan, who believes that developing the rental market would boost the overall housing sector, said that landlord and tenant laws are required in Malaysia to boost the rental market.
While countries such as New Zealand, Australia, Scotland and Canada have specific statutory frameworks on landlord-tenant relationships, there are none in Malaysia at present. There are no landlord-tenant provisions under the Housing Development Act.
“What we have is in the National Land Code, where they define what is the tenancy agreement – the duration, whether you can endorse or register a tenancy agreement or not, so on and so forth.
“But beyond that, it doesn’t talk about what happens if there is a dispute, it doesn’t have guidelines on what are the mandatory terms that must be set down in a tenancy agreement.
“This is because we don’t have any such laws and therefore, there is freedom to contract between the landlord and tenant; anything goes,” he said at the Affordable Housing Conference 2018 recently.
In Malaysia, landlord-tenant relationships are covered by the Law of Contract and Common Law. The tenancy agreement, which is governed by Law of Contract, is the only agreement that regulates the relationship between landlord and tenant. “Any dispute, issue, problem, you look only at the tenancy agreement and the terms and conditions may not favour either one of the parties because they don’t have equal bargaining rights. “The tenant may be at the mercy of the landlord and so on and so forth,” he said. “With freedom of contract, the party with stronger bargaining power would be able to impose or insist on the terms and conditions when drafting the tenancy agreement thus there is no mechanism to resolve any issues, problems or challenges that arise due to the contractual relationship. “If the parties are unable to resolve the issue, they would have to go to court, which would require them to spend time, effort and money on legal fees and resources. “But if we have a special mechanism to address disputes, then the landlord and tenant can just go to the tribunal, which is cheaper and more efficient. It is a more informal forum to discuss and resolve any dispute,” said Chan. According to him, disputes between landlords and tenants often arise due to inequality in bargaining power, where one party may be forced to accept terms and conditions that are unreasonable. The party with less bargaining power may not be as well protected in the tenancy agreement.
Some problems faced by tenants include slow refund of the deposit or withholding of the deposit while problems faced by landlords include unpaid rent and difficulty in evicting tenants.
As the tenancy agreement is not “consumer-friendly”, Chan recommends that the government study the Private Housing (Tenancies) (Scotland) Act 2016 and consider adopting some of the best practices when developing a Residential Tenancy Act for Malaysia.
He said Scotland’s law, which applies to the private sector residential rental market, seeks to protect the rights of both the landlord and tenant by ensuring that all parties are in compliance with the law.
“It provides certainty, is fair and just for both the landlord and tenant, so that they can have a happy relationship. We can adopt some of these best practices for the Malaysian situation, so that the rental market can be boosted,” he added.
With this mechanism, Chan said more people, who cannot afford to buy their first home yet, would consider the option of renting and this would in turn, help to reduce the supply-demand gap for affordable housing.