indepth

Landlord protect thyself!

Chris Tan

Malaysia does not have a Tenancy Act and many of the current laws related to rental and tenancy that we have adopted are basically pro-tenants, said Chur Associates founder and managing partner Chris Tan.

Although you may be the landlord and own the land or property, the tenant has the right to stay in your property even when you do not want him to.

“That’s why you can’t evict your tenant as you like even if your tenant did not pay on time,” Tan told the audience at EdgeProp.my’s Talk on “Are you destroying your investment in Real Estate?” on Oct 20 at Nippon Paint Malaysia’s Forward Coatings Expo in Shah Alam. The talk was organised by EdgeProp.my in partnership with Nippon Paint Malaysia.

In his presentation entitled “When tenants are king! | Navigating the landmines”, he highlighted the five nightmare situations that are commonly faced by landlords in Malaysia:

1. Non-payment of arrears or rent

2. Runaway tenant

3. Overstayed tenant

4. Improper use of property or nuisance tenant

5. Bad maintenance by tenant.

To illustrate Malaysia’s pro-tenant environment, Tan said a landlord cannot break the locks and enter into the unit that he or she owns even when the tenant has not paid rent for months and has gone missing leaving the unit empty.

“You know your tenant has run away without paying you but you have no right to go into your own unit because it is against the law,” Tan explained.

On the other hand, Tan also warned: “Do not think that if the tenant pay on time, it is good enough. The tenant can be a good paymaster but not a good property caretaker. They pay on time, so that the landlord will not bother to visit. However, when they vacate the premise, the landlord will discover to their shock the condition of the place. But again, there is only very limited action that the landlord can take to get compensated.”

Indeed, being a landlord in Malaysia can be challenging. However, while the existing legal environment may not be in the landlord’s favour, Tan offered some solutions and steps to protect some of their rights.

So how do you prevent “nightmares” in an environment where the tenants are “king”?

Prevention is always better than cure hence, Tan suggests that the first thing to do is to screen the potential tenant by doing an internet search.

“Another tip is to not take the first offer that you receive. Do not take the highest offer either. You need to look a bit deeper to study your tenant’s profile. The first offer and the highest offer are not necessarily the best,” Tan shared.

He cited an example, comparing a potential tenant who offers RM500 less rental but owns a business with 100 branches and a tenant who offers RM500 more but is only starting a new business — the landlord should therefore consider the offer of the tenant with a more established business. Hence, the decision when choosing a tenant is not solely based on the rental offer.

Cost of renting out a property

Tan also advised landlords to determine the cost that they will incur in renting out a property.

“Many a landlord determines the rental based on the market rate. However, the market price may not cover the entire cost of maintaining the property. There is no one-size-fits-all solution,” he shared.

He listed out a few items that will make up the cost of letting for landlords. Among the costs and expenses they should consider include the service charge (if it is a strata property), sinking fund, wear and tear, vacancy and holding cost, bank instalment or interest payments, agent commission and fees as well as restoration costs.

It is also crucial for landlords and tenants to have a proper tenancy agreement that is understood and signed by both parties.

“A tenancy agreement can help prevent nightmares for the landlord. You have to read and understand the tenancy agreement. You have to understand every word in the agreement for a reason. To understand the tenancy agreement before signing is the first step in protecting your rights as a landlord,” said Tan.

It is also important to ask for sufficient security especially in a time and age when more and more new tenancy models are appearing due to the type of properties being developed in the market today. “There are new rental products appearing. You can rent only a bed, a couch and even just a working desk, so rentals are more complicated today,” he adds.

“There is no standard tenancy agreement. All the ‘standard’ terms and conditions are actually the norm and the norm is just a guideline. An agreement should be drawn up on a case by case basis,” he elaborated.

However, it is best to leave it to the experts. “Of course, you can do it yourself, but since you have already invested so much into the property, you might as well spend a bit more and let the professionals handle it”.

Landlords’ association

Another way landlords can protect their rights better, said Tan is for them to group together to set up a landlords’ association.

“There are many reasons for setting up a landlords association. Landlords can share information among themselves and establish a tenants database. With the database and acting as a group, landlords can also lobby for better regulations to protect themselves.

“When landlords act in a group and in one voice, they can even negotiate with an insurance company to insure tenancy agreements to make your investments even more valuable,” Tan

offered.

This story first appeared in the EdgeProp.my pullout on Oct 26, 2018. You can access back issues here.

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