Introduction

Recently, the Proposed Residential Tenancy Act (Proposed Act) has been mooted as Action Plan 2.3.1 of the National Housing Policy (2018-2025) which seeks to introduce a comprehensive law to safeguard the rights and interests of landlords and tenants. Similar legislation has been implemented in countries such as the United Kingdom, Australia, New Zealand, and Canada to ensure that both parties are protected and minimise housing discrimination. However, Malaysia is long overdue for its own version of a residential tenancy act which could specifically protect the property owners and tenants as existing regulations are insufficient and current processes to seek for remedy are impractical. Current legislations available for tenancy matters in Malaysia include Contracts Act 1950, Civil Law Act 1956, Distress Act 1951, Specific Relief Act 1950 and Case Law/Common Law. The processes to seek for remedy are lengthy and cost far more than the value of security deposits, limiting access to justice in the event of disputes, eviction or breaches of agreement between landlords and tenants.

Lately, The Ministry of Housing and Local Government (KPKT) has conducted engagement leading to the Regulatory Impact Statement (RIS) on the Proposed Research and Drafting of the Residential Tenancies Act. According to the RIS, the Proposed Act is based on the Residential Tenancies Act 2010 of New South Wales, Australia and is subject to the Malaysian legal system and local requirements. The Proposed Act will apply only to Peninsular Malaysia. Earlier, KPKT has been collecting feedback from the public and stakeholders on the proposed enactment of the Proposed Act via the Malaysian Productivity Corp’s website. the Proposed Act will be submitted to the Parliament in July 2022 and if it is passed, the Act will come into force in August 2023. A review will be conducted within 12 months before February 2028 to determine whether the Act is to be amended.

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Proposed Residential Tenancy Act

According to the RIS, a ‘residential property’ refers to ‘any premises used or intended for use solely for residential purposes and which is not used for trade, business, manufacturing or industrial purposes and such other type of accommodation as may be prescribed by the Minister from time to time to be a residential premise.’ The Proposed Act will exclude certain premises and agreements from its purview such as student hostels, worker accommodation provided by an employer as well as short-term rental agreements. However, the Proposed Act does not state whether it will apply to a Small Office Home Office (SOHO) and Rent-to-Own Schemes properties.

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Standard Tenancy Agreement

The Proposed Act aims to ensure specific clauses to protect the rights of landlords and tenants from gaps in existing laws to reduce unfair terms and conditions in the best interest of all involved by providing a standard tenancy agreement.

For example, Property owners must ensure that: –

1. i) the premises must be suitable for rental;
2. ii) the tenancy agreement must comply with the standard tenancy agreement given in the Proposed Act; and
3. iii) the notice must be given to the tenants the tenancy according to the notice period

Whereas Tenants must ensure that:

1. i) the premises shall not be sublet without the prior consent of the property owner;
2. ii) the notice must be given before vacation; and
3. iii) it is a statutory offence changing the keys of the rented premises without the consent of the property owner or without reasonable cause.

The Proposed Act also provides processes for administering and regulating small rentals, transfers of rentals to third parties and determination of the rental period if the premises are involved in an auction, sold by the property owner to the others or in the event of death of any party.

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Security Deposit

Furthermore, the Proposed Act provides the amount of security deposits comprising rental deposit and utilities deposit in respect of a tenancy of a residential property. It provides the amount for rental deposit which will be equal to two-months rents while utilities deposit will be equal to one-month rents. It also proposed that the property owners will be required to place the security deposits in an account established by the Controller. The security deposits will be returned to the tenant upon termination of the tenancy agreement if there are nothing to be set-off against the deposits. Therefore, security deposits are no longer in the property owners’ hands as both parties would have to go through the Controller which acts as an intermediary or mediator for claims or refunds.

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Special Tribunals and Statutory Offences

The Proposed Act also aims to establish special Tribunal to resource any disputes arising in relation to the residential tenancy agreement in an expeditious and cost-efficient manner. This special Tribunal will handle such disputes with a maximum sum of not more than RM250,000 and as seen with the Strata Management Tribunal. Furthermore, the Proposed Act also introduces some statutory offences which may overcome the problems that often encountered between property owners and tenants. For example, failing to provide a receipt upon receipt of the rent to the tenants, failing to provide duplicate copy of tenancy agreement to the tenant as soon as possible after the execution of both parties, vacating the premises in an unclean condition and so on. This will allow consistency of provisions in other statutes in force and avoid ambiguity as well as overlapping between provisions that require consequential amendment to other acts.

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Significant Changes

Interestingly, the Proposed Act seems to provide a provision that allows those with superior title to initiate proceedings for the recovery of the rented premises. Besides, the freedom of the property owner in entering tenancy agreement will be prejudiced as the property owners will not be allowed to choose their preference on the tenants, the tenants will all have an equal chance to rent an accommodation and not be prejudiced due to certain characteristics like one’s race, employment status, and gender orientation. Furthermore, a residential rental database will be created to collect and research relevant data (big data). Big data will assist the government to study the rental sector trends residence in Malaysia to amend, enhance and improve the policymaking and law enforcement in the future.

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Conclusion

In conclusion, the Proposed Act is a necessary step forward. It appears that it will drastically reduce the ambiguity in the law against residential tenancies as the property owners and tenants will have a specific legislation to refer before both parties enter into a tenancy agreement. The establishment of a special Tribunal will also save more cost and time for the parties who would like to seek for the remedies in the event of disputes regarding residential tenancies matters. The Proposed Act seems to be a comprehensive legislation which would overcome most of the problems that the property owners and tenants have been dealing with along these years. However, it is opined that the Proposed Act might limit the property owners’ legal and economic rights to manage or rent his property. Furthermore, the infringement by the government in the rental fee of residential properties which are essentially commercial matters driven largely by market forces might prejudice the free market and causing a huge impact on the society in the future. It is opined that the Proposed Act should aim to strike a balance between the freedom of contract and the protection of rights and interests of the property owners and tenants by providing minimum legal statutory standards and voiding highly unfair terms and conditions in the tenancy agreement.

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This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.

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About the Author

Vicky Yap Wei Zhee

Pupil-in-Chambers

Halim Hong & Quek 

vicky.yap@hhq.com.my