Market-friendly approach needed for Residential Tenancy Act

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Intention is to improve the level of accessibility and affordability of rental homes

Tenants of various income levels will have distinct demands and preferences in terms of tenancy agreements.

Tenants of various income levels will have distinct demands and preferences in terms of tenancy agreements.

Contributed by Sulaiman Saheh

Back in 2018, as part of the National Housing Policy (2018–2025), a Residential Tenancy Act (RTA) was mooted as the means to protect and safeguard the benefit and welfare of both landlord and tenant when they enter a tenancy or rental agreement. 

The intention is to improve the level of accessibility and affordability of rental homes for the people as well as provide a more consolidated and legislated framework for such rental agreements to operate and be enforced. 

Though sprinkles of updates and news were heard over the years, the biggest development seen for the RTA formation was just back in January 2022 when the Ministry of Housing and Local Government (KPKT) had reached out to seek feedback from the public and stakeholders on the proposed RTA bill.

Following the one-month public consultation period and the results that had been released, many opinions were formed by various bodies and parties. Credit was given by many to the government’s continued effort to make the rental dream come true but criticisms and suggestions were also expressed on how the current proposal could be made better and fairer for all parties involved. 

A balance must be stuck

While having more regulations on the residential tenancy in practice, there must still be enough room for the market forces to manoeuvre and balance the level of demand and supply. 

It should be allowed to run on a free-market basis, where the parties involved can negotiate freely. By keeping intervention to the bare critical elements, the RTA should act more as a guideline to creating a safe and thriving rental market as opposed to being a prescriptive rulebook on how a rental market should operate.

With the RTA, it is hoped that landlords and tenants can negotiate between themselves and reach a rental agreement that is beneficial for both sides and will be supported by a Special Tribunal under the RTA should any problems or breach of contract arise within the tenancy period. But a read-through of the proposal provided during the survey period had stakeholders question how practical and beneficial would the RTA be. Matters that were brought forth and debated upon included the conditions set and keeping of deposits by the newly formed Comptroller of Residential Tenancy (CRT) agency, the standard tenancy agreement provided for all to use, rent control based on the data collected by the CRT, and the (in)ability for a one-sized RTA to fit all types of rental home agreements.

Further adding to the one size does not fit all points are the differing variables in levels of income, location of rental units, type of rental units and the nature of the property market itself by locality based on its demographic size and urbanisation rate. The rental market of Klang Valley would be different from the rental market of other states and such would need a different set of guidelines that is better catered to the specific area or state. The same would apply to luxury homes versus affordable homes that are not under any government schemes. Tenants of different income classes would have a different set of needs and preferences in tenancy arrangements that may also be affected by the nature of their work. And as a country that is looking to improve and grow its international presence as a second home, foreign tenants and landlords are also a key group to be considered and included in the RTA scope. This will then create a provision that is not just for the benefit and welfare of the rakyat but also to boost the rental market up to international standards.

Another point of debate with regards to the proposed provisions was the scope of the survey done in getting public feedback. Many have criticised that the survey conducted involved an insufficiently sized group and was not equal in proportion between tenants and landlords, and coverage on various demographic backgrounds and locations. 

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Not enough stakeholder engagement

Many wished there had been more engagements with other stakeholders and NGOs that are directly and indirectly involved in the residential rental market. Finding a balance between protecting both the tenant and landlord and not leaning more on one over the other is important to ensure that the RTA is workable in the long run. Should the act be in favour of one party over the others, those negatively affected would be discouraged from participating in the rental market and end up causing a divergent market. For such an act to work and be applicable nationwide, a wider spread of individuals of different races, age groups, income levels and states and other players within the rental market supply chain should be actively engaged.

On the governing side of the new act, a successful intervention (where necessary) is highly dependent on the ability and transparency of the authorised government agency involved in dealing with and solving all matters related to a tenancy agreement. Too many levels of bureaucracy will lead to unnecessary delays in approval periods and higher administrative costs which may end up being covered by the homeowners and tenants themselves. On the other hand, too shallow of a management may result in confusion in multi-functional departments and insufficient manpower in civil staff to handle the number of daily cases coming in and requiring quick, if not immediate response or approval. This is especially crucial for matters involving deposit funds since it has been proposed that the deposits will be kept by the agency and not the landlord.

Looking at the bigger picture, rules on matters such as eviction notice periods, provision of livable housing conditions, misuse of property for profit gains and breaching of contracts are beneficial and a safeguard to the homeowner and tenant in a rental agreement. But for other matters such as rental rates, the keeping and rates of deposits, and additional terms and criteria within the contract must be given room for individual negotiation and case-by-case consideration. For a market that runs on different dynamics and levels of rental activities depending upon its locality area, the RTA must be flexible enough to cater to such differences but still be sufficiently comprehensive in covering all possible legal loopholes and be enforceable with clarity to all, hence nurturing a more equitable, accessible and transparent residential rental market in the country.

Sulaiman Saheh is the director of research for global real estate consultancy Rahim & Co International Sdn Bhd.

Sulaiman Saheh is the director of research for global real estate consultancy Rahim & Co International Sdn Bhd.


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