Where We Are Now

As the prices of properties in Malaysia continue to rise, leaving many unable to afford their own homes, the Government has been encouraging the renting of accommodation as a short term solution to tackling the lack of affordable housing for all levels of the community. To that end, a clear process to the tenancy of residential properties and the laws applicable to it would help to advance this goal.

Unlike countries such as the United Kingdom, Canada and Australia, Malaysia does not have a specific piece of legislation governing the tenancies of residential properties (or any properties for that matter) and the relationship between the landlords and tenants of such tenancies. The laws applicable to tenancies are found across various statutes, the notable ones being the National Land Code (Revised 2020), the Contracts Act 1950, the Civil Law Act 1956, the Distress Act 1951 and the Specific Relief Act 1950, and in the various case laws in which, by interpreting and applying the existing legislations to tenancy disputes, the courts formed the rules and principles which govern the duties and liabilities of landlords and tenants. These laws address the issues arising from tenancies on a piecemeal basis and form a patchy framework where the rights and obligations of landlords and tenants may not be consistently applied.

The Proposed Solution and the Stakeholders' Views

The Ministry of Housing and Local Government recognized the fractured nature of the laws applicable to tenancies of properties and prepared a Regulatory Impact Statement in which a proposal has been made for the drafting and passing of a Residential Tenancies Act (“RTA”) which is intended to regulate the tenancy of residential properties and address issues which may arise from such tenancy arrangements. The proposed RTA will be based on the Residential Tenancies Act of New South Wales, Australia.

The more significant proposed provisions of the RTA include:-

1. a standard template tenancy agreement
2. security deposits will be deposited with and managed by the Comptroller of Residential Tenancy
3. rental control
4. setting up of a tribunal to handle disputes between landlords and tenants and any compound applicable.

Various parties have expressed their views on the proposed RTA, including the National Homebuyers Association (“NBA”) and the Malaysian Real Estate and Housing Developers' Association (“REHDA”) . The NBA questioned the sampling of the survey carried out which was used to support the need for government intervention via the RTA to regulate landlord-tenant relations – pointing out that the survey was carried out on 3,119 respondents, which is not proportionate to the population of Malaysia, and that the respondents consist of more tenants than landlords. The NBA also highlighted that the parameters of the sampling were unclear. For example, it is not clear whether the respondents represent a cross-section of the T20, M40 and B40¹ economic groups and the various racial groups of Malaysia, whether the survey includes stakeholders in both rural and urban areas, whether the respondents' educational background were considered. The NBA is of the opinion that there is no need for government intervention in landlord-tenant relations and with the RTA, the government is interfering in the market economy which would drive investors away.

REHDA's take is that while they recognize that the RTA may be useful in resolving disputes between the parties involved in residential tenancy matters, it remains strongly against government's intervention in what should have been a private agreement between two parties. REHDA's opinion is that such intervention may only be necessary if the landlord and the tenant are not on equal footing, for example, where the tenant is from the B40 group. As such, REHDA proposed for the RTA to apply only to residential tenancies where the monthly rent is below RM750 a month.

Another main concern is the depositing of security deposits with a third party, which is not a viable arrangement as there will be delays when another bureaucratic step is required for the parties to obtain refunds or claim for damages. This would especially affect landlords who have claims for damages as they will need the funds expeditiously to carry out the necessary repairs immediately in order for them to put the premises up for rent again in the market.

There are also objections that the RTA contains provisions that control the amount of security deposits, utilities deposits and rent, including limiting the number of rent increases and the sum of increment. Sentiments have been expressed that these should be left to market forces, as the circumstances of each tenancy is a combination of various factors for example the type of premises, its condition, the location of the premises, whether there are fixtures and fittings involved etc. There cannot be a one-size-fits-all in tenancy arrangements nor a standard template which is able to cater to all the variables in the different tenancy arrangements.

Judging from the responses, it would seem that the proposers of the RTA lack the depth of understanding of the problems faced by landlords and tenants and the provisions proposed did not address the correct points of concern. It would seem that stakeholders do not welcome intervention in terms of the economic aspects of a tenancy arrangement, for instance matters related to rent, deposits and rental period. On the other hand, with the current piecemeal legislations that address tenancy issues, the rights and obligations of parties to a tenancy arrangement are confusing, and such confusion is a recipe for inconsistent application and treatment towards parties in dispute. Due to that, a consolidated legislation targeted at tenancies, especially residential tenancies, is required.It is a tricky piece of legislation to draft as it needs to balance the needs and concerns of both landlords and tenants, which are many a time conflicting. Protection has to be given to both parties against errant counterparties but at the same time, the legislation should inhibit free market as little as possible. There is also a need to take into account the public policy of ensuring the right to adequate housing. Perhaps more research and better sampling than what had been done in the current survey needs to be carried out to understand the core issues plaguing the rent market. The opinions of all stakeholders, including landlords, tenants, agents, management bodies of strata properties, utilities companies etc. and their representative bodies should also be sought by calling all parties affected for a comprehensive discussion to form synchronised solutions.

The Way Forward

The RTA may be required but there has to be a clear vision as to the problems it targets to resolve and its provisions and contents would need to be tailored to that purpose.

Zain & Co. acknowledges Lee Chea Shinh (Associate) for her contributions to this article. For further information or any related inquiries, please contact our Partner:  Zainal Azlan Abdul Kadir

¹Based on the Household Income & Basic Amenities Survey Report released by the Department of Statistics Malaysia from time to time which classifies Malaysians based on their household income into lower-income group (B40) representing 40% of Malaysians, middle-income group (M40 ) representing 40% of Malaysians and upper-income group (T20) representing 20% of Malaysians.