Safeguarding landlords’ interest

Landlords with bad tenants have limited legal means in Malaysia to rectify their plight. A survey among landlords undertaken by online portal Hi5er Club found a lack of regulations on the relationship between landlords and tenants. Thus, the suggestion for a landlords association to provide land owners greater legal clout, a tenant screening database, landlord insurance and more resources in dealing with bad tenants.

Lawyer Chris Tan of Kuala Lumpur-based legal firm Chur Associates initiated the Hi5er Club following The Edge Investment Forum on Real Estate 2009 in April this year during which he mooted the formation of a landlords association.

The online portal’s first project was to gather information and feedback from landlords online.

Sharing his findings with City & Country, Tan says the general feedback is that Malaysia is ready for a landlords association but that landlords are reluctant to provide funding. Thus, there is a need to minimise costs, such as having an online platform, which Tan will implement soon.

“I will be starting an online landlords association in a month’s time,” says Tan, who has been actively involved in property-related issues. He was recently appointed a director of the International Real Estate Federation (Fiabci) and is the first Asian president of Fiabci’s young members committee.

The survey data revealed that there is a lack of regulations on the relationship between landlords and tenants. This is because Malaysia does not have laws that deal specifically with issues faced by landlords. Although there is a provision in Section 7(2) of the Specific Relief Act 1950 which provides that landlords can enforce their right to recover their property through court services, the problem lies in the length of time before eviction, which can sometimes take up to 270 days.

Moreover, a great deal of responsibility lies with the property owner. “We have adopted the Commonwealth legal system, which says that possession is nine-tenths of the law. This means that the onus for action lies with the landlord,” says Tan. So, while the proprietor is running around trying to get an eviction, the tenant continues to occupy the premises.

The presence of a landlords association, he says, will safeguard landlords’ interest through combined lobbying power. A collective voice will be enough to influence or change laws that affect their livelihood. For example, in the UK, the National Landlords Association has effectively lobbied for change in nearly 50 Acts of Parliament and 70 statutory instruments.

More importantly, such an association in Malaysia could play a prominent role in creating a Landlord and Tenant Act, Tan says. “A compilation of Malaysia’s tenancy laws into a single statutory act would be advantageous for a recognised landlords association involved in the process to ensure landlords’ interest are preserved and represented.

“Through the landlords association, a comprehensive tenants screening database can be developed. Details of tenants and their past records can help members screen potential tenants before leasing or renting their premises,” Tan continues.

Moreover, association members would be able to introduce and garner support for a landlord insurance scheme. This will protect landlords when tenants default on their payments or cause damage to the premises, Tan suggests. “Unfortunately, Malaysia does not provide such insurance unlike other countries but a collective voice could change that,” says Tan. Also, members can pool their resources and share information and advice.

Hindrance
However, the main hindrance to the setting up of a landlords association is the lack of willingness by landlords to share information that could be used by a competitor.

Tan also did a comparison on how some other countries dealt with landlord-tenant issues and found Malaysia wanting.

He found the UK system relatively inefficient but their landlord associations provide much protection to negate such inefficiencies. They have an established insurance scheme and pro-landlord laws. The bulk of their lobbying power came about when the regional landlords associations united to form the National Landlords Association. Tan recommends that Malaysia skip the regional route and create a national body from the start.

Singapore does not have a landlords association but this is circumvented by its efficient and effective legal system as well as its established mediation or alternative dispute resolution (ADR) scheme. This system, Tan says, is a plausible alternative to having a landlords association but recommends that it should be one pillar in the litigation system, with a landlords association offering support.

Canada and Australia have systems which vary from state to state but have several commonalities. They include an ADR system with compulsory court referral for mediation, and legislation defining the relationship between landlord and tenant. Moreover, Canada has an efficient court system using a form-based method whereby a landlord fills up a document after which the tenant is soon evicted.

Both Canada and Australia have established state-level landlords associations, which act as a strong support base for landlords. They also offer insurance protection, tenant screening processes and general information systems. All these aspects lead to these countries having much shorter eviction periods compared to the others and Malaysia.

“In the long term, a landlords association would elevate Malaysian property and make it more attractive to investors, as an association would provide more regulation in handling various landlord issues,” says Tan.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 769, Aug 24-30, 2009.