The residential tenancy market in Malaysia can expect new regulations designed to spur growth in the market and protect the interests of landlords and tenants . The proposed Residential Tenancy Act is presently slated for implementation within the next 2 years.
Modelled after similar acts in Australia, the Malaysian tenancy act will see the formation of a tribunal to solve disputes between landlords and tenants. Racial discrimination in property leasing is also expected to be addressed via this new act.
Noorihan Abd Halim, senior principal assistant director of the National Housing Department, said that the act will assist the ministry to determine affordable rent based on location. This is in line with the government’s efforts to help the younger generation transition from studying to working as well as the B40 and M40 before they are able to purchase a home.
“Right now, we do not have a standard in determining whether the houses that are up for rent are affordable or not,” she said.
This is particularly timely as the rental market is laden with grey areas and lacking data necessary in the regulation and implementation of effective policies within the industry. All against the backdrop of house prices having risen to the point of unaffordability for the regular Malaysians. While the government is trying to mediate the supply-demand mismatch issue, the rental market needs a more robust environment.
Australian Act as reference
Noorihan mentioned that the proposed Act will study the standards and benchmark used in a broadly similar Act in New South Wales and Victoria, Australia but will be tailored to local context suitability.
Australia enacted its Residential Tenancy Act (RTA) in 1997 In addition to a Tenants’ Union Act, a body that specializes in providing legal advice service on tenancy and occupancy issues. This ensures tenants’ rights are upheld and that rental housing is fair.
The Australian Act has two types of agreements – an occupancy agreement and a tenancy agreement.
The occupancy agreement do not contain standard terms, so the tenants’ rights and obligations depend on the terms they sign, though the terms must be consistent with certain Occupancy Principles.
Meanwhile, a tenancy agreement has 100 terms and conditions that apply to them automatically, even if tenants are not aware of them and have not signed them. These are called Standard Residential Tenancy Terms, outlining tenants’ responsibilities on the rented property as well as landlords’ rights.
In Malaysia, it’s a norm to ask for rental deposits, usually 1 month’s rental in advance with 2 months’ security deposit plus utilities deposit. In Australia, damages are covered by a bond paid by tenants and it cannot worth more than 4 weeks’ rent. Bond lodgement and refund processes are regulated under the RTA.
The rental market ecosystem and affordability in Malaysia
In the context of affordability, to move into a rented room or house in Kuala Lumpur could mean that tenants have to fork out at least a 4-figure fund. There are many ways to make rental affordable especially for young workers and professionals coming into the city, like establishing a temporary rented dorm right in the middle of the city – something that DBKL has already been doing. The micro-housing scheme would cost a tenant as low as RM100.
This concept has subsequently been manipulated by landlords who renovate such units with partitions to create a dorm-like accommodation with bunk beds, charging monthly rent up to RM400 – RM500 per head.
In retrospect, the current rental market in Malaysia is highly unregulated one with poor monitoring verging on being broken; exploitation of the country’s young rife
Establishing a law specifically to regulate the house rental market in Malaysia is expected to be the first step in resolving many of the issues plaguing the market such as affordability vs. locality and landlord vs. tenant. With the regulation expected to be implemented in 2 years, the rental market is expected to be a lot healthier which may improve the appeal of residential property investment along the way.
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Featured image from iMoney