To Act or Not to Act: The Proposed Residential Tenancy Act

Did you know that Malaysia is one of the last countries in the common law jurisdiction that still lacks a Residential Tenancy Act?

What does this mean?

Well, traditionally, when you become a tenant, the terms of the lease or the tenancy agreement is the be all and end all. The agreement stipulates the rights, obligations and terms governing both parties, and barring any term amounting to an illegality, nothing else can govern the relationship between the tenant and the landlord.

As with all agreements and contracts, the Contracts Act 1950 becomes the authoritative piece of legislation. But because of the very nature of tenancy disputes, the following other acts also apply: Civil Law Act 1956 (for disagreements over payment), the Distress Act 1951 (for non-payment of rent and eviction), the Specific Relief Act 1950 (for court orders to evict a tenant or prevent that tenant access), and also a plethora of legal precedents, customs and conventions.

Now for years, lawyers and politicians in our country has been calling for Malaysia to keep up with other common jurisdictions such as the UK (which has the Landlord and Tenant Act 1985) or Singapore (which has a similar Residential Tenancies Act) by having our own Residential Tenancy Act.

This is needed to prevent the 3 main abuses by landlords (raising the rent very quickly and suddenly, refusing to release the security deposit, and terminating the tenancy without giving the tenant adequate notice) and the main 3 main breaches of terms by tenants (not paying the rent on time, renovating or damaging the house, and sub-letting out the house without landlord’s permission).

So when the Deputy Local Government Development Minister Akmal Nasrullah Mohd Nasir announced in March last year that a Residential Tenancy Act was in the works, many of us breathed a sigh of relief that there will soon be a cohesive body of law that will govern all rental property disputes and issues. Back then, he estimated that the Act will be tabled in Parliament next year. If this still stands, this means we will see the Act tabled as a bill during the June-July or the October-November-December meetings of Parliament later this year.

So if you are a landlord or a tenant, you can expect the following things to change (based on the 2022 report by the Ministry of Housing and Local Government)  :

1. It is likely that a template tenancy agreement will be introduced nationwide. This is be to prevent landlords forcing tenants to sign up to tenancy agreements with unfair terms and abusive conditions. For instance, extremely short notice periods, and stringent terms that make it hard for the tenant to get their security deposits back. It remains to be seen if such templates will only exist as a guide/recommended terms or if they will be mandatory.

2. An online database of tenants and tenancies may be introduced, to help govt better regulate rental price trends in certain areas. This may see the reintroduction of rent control in particularly pricey neighborhoods with poor tenants.

3. The creation of a Tenancy Dispute Tribunal. In case of disputes between homeowner and developer/vendor, the Tribunal for Homebuyers Claims is a suitable avenue for parties to settle their grievances. But no such mechanism exists for tenants and landlords. Of course, there are the civil courts. For major tenancy disputes involving commercial lots such as shopping mall tenants, the aggrieved party will usually be prepared to spend a large sum of money to litigate. But for the everyday residential tenant, the high legal fees and court costs will persuade them to cut their losses and let an abusive landlord trample over their rights. So a Tenancy Dispute Tribunal is necessary.

4. The creation of a Controller of Residential Tenancy who will play a similar role to his existing counterpart for homeowners, the Controller of Housing. He would also be empowered to hold, withhold, disburse and manage security deposits, one of the main sources of tenancy disputes.

5. The creation of a standardized process for the increment of regulating (to some degree) the increment of rent, and other details such as how long must an eviction notice be, how an eviction is whether a tenancy or lease can be transferred.

6. Regular inspection of tenanted properties to ensure that the landlord keeps the property in a good condition, so that the tenants do not suffer. Likewise, inspectors must also ensure that tenants do not make their rented homes too dirty/unkempt. Fines may be issued if warnings to remedy this go unheeded.

Not all are in favor of this proposed Residential Tenancy Act because it is seen as curtailing the freedom and liberty of landlords and tenants to set their own terms. Indeed the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) had stated that a Residential Tenancy Act is unnecessary, as our current system is sufficient.

But regardless of whether you think a Residential Tenancy Act is necessary or not, it is certainly coming soon. So if you are a homeowner who is renting out your property, or a tenant who is leasing or renting your current, you must stay aware of the coming changes.