The proposed Residential Tenancy Act (RTA) has sparked concern and unease among various key stakeholders, including the Real Estate & Housing Developers' Association (Rehda), the Malaysian Institute of Estate Agents (MIEA), and the National House Buyers' Association (HBA), a consumer NGO that fights for and protects the interests of home buyers.

These organisations are concerned that the RTA will infringe on some of the constitutional rights of property owners or will be biassed in favour of one party over the other, and have responded by providing feedback and suggestions to the Ministry of Housing and Local Government (KPKT).

They hope that KPKT will be receptive and open-minded in considering valid, reasonable, and fair suggestions and will amend the proposed sections of the Act to take these suggestions into account, according to Henry Butcher Malaysia chief operating officer Tang Chee Meng.

There is currently no specific legislation in Malaysia that provides a legal framework for regulating the relationship between landlords and tenants, whether residential, commercial, or industrial premises. The legal responsibilities and rights of the landlord and tenant are spelt out in a tenancy agreement, which is usually written but can be oral. In the event of a dispute, common law, case law, civil law, contract law, and the relevant legislation governing distress and the eviction process is invoked.

Other countries, such as the United Kingdom, Australia, New Zealand, and Canada, have specific acts governing the legal relationships between landlords and tenants that provide some level of protection to both landlords and tenants. The Malaysian government determined that similar legislation was required.

The RTA, which will provide the legal framework to regulate dealings between property owners and tenants, was enacted during the previous Housing Minister's tenure. The current Minister of Housing then invited all stakeholders to study the proposals for a month (which ended on February 28, 2022) and provide their feedback and suggestions before the Act is tabled in Parliament for approval, most likely in the first quarter of 2022, to improve and make the legislation fairer and more effective.

The proposed RTA's main objectives, according to KPKT, are to provide a legal framework to protect homeowners' and tenants' rights, create a uniform template for residential tenancy agreements, establish a dispute-resolution institution, and resolve disputes between parties involved in residential-tenancy transactions. The following are the Act's primary goals:

a) To ensure that specific clauses are included to protect and preserve landlord and tenant rights from gaps in existing laws.

b) To provide a tenancy agreement template to reduce unfair terms and conditions in the best interests of all parties involved.

c) To establish procedures for administering and regulating small rentals, transferring rentals to third parties, and determining the rental period if the owner sells the premises, the premises are auctioned off, or any party dies.

d) To ensure that the rental accommodation is livable and that all parties sign the agreement only after the premises have been inspected. e) To establish the notice period that homeowners and tenants must provide so tenants are not forced to vacate early.

f) Establish a Special Tribunal to settle disputes between parties involved in residential rental transactions.

g) To provide a residential rental database for collecting and storing relevant data as big data that can aid in policymaking and law enforcement. The government also uses the data to study rental trends in the country's residential sector to develop relevant policies to ensure that the ecosystem of residential and legal rental transactions is improved regularly.

h) To ensure the coherence of provisions in other statutes currently in force and avoid creating an overlap between conditions necessitating a consequential amendment to other acts.

The RTA's implementation is proposed to be carried out by a Comptroller of Residential Tenancy (CRT), a new post to be created to ensure that residential rental transactions and the relationship between homeowners and tenants are efficiently managed, effective, and uniform in all Peninsular Malaysian states.

Tang said that the proposed 'rent control' under the Act and the tribunal's power to examine rental rates is a significant source of concern for most stakeholders. It will interfere with the functioning of a free market.

The Control of Rent Act 1966 was previously enacted to regulate and control the rental of privately-owned buildings built on or before 31 January 1948 due to a housing shortage during the post-war period. While it was a good move at the time of its implementation to ensure that rentals did not escalate unreasonably, the Act's continued implementation even after the market situation had stabilised.

"The country's economy has recovered, causing rents to remain artificially low. This was unfair to rent-controlled property owners and discouraged landlords from repairing and improving their properties. Some tenants took advantage of the situation and even profited by subletting rooms to others at market rates. When the Control of Rent Act was finally repealed in 1997, nearly 30 years later, there was a sigh of relief. While it is reasonable to prevent landlords from raising rents excessively, the government should not take on the role of setting rents," he said.

He said while it is unclear how the government will approach the issue of rent control, many factors influence and have an impact on rentals:

a) Rental rates for properties of the same type but in different locations will vary depending on how popular and convenient the area is or the public's perception of the class of neighbourhood in which the property is located.

b) Properties of the same type and in the same building on different floors or have different views or orientations may command different rental rates due to their individuality.

c) The same type of property in the exact location may command different rental prices due to differences in the extent of the renovation, condition, quality of furnishing, tenancy period, and rental terms.

d) Timing also plays a role in rent setting; for example, there may be a surge in demand for properties in a specific location due to a variety of factors, such as the recent opening of a new factory or university campus, which causes an increase in rental demand, or the start of service of an LRT/MRT line with a station nearby, which enhances the location.

Tang said that as a result, rather than having a government body set standard rental rates for everyone to follow, rentals should be left to market forces.

He said the prudent thing to do is to include a clause in the standard Tenancy Agreement that prohibits landlords from increasing rents arbitrarily or by unreasonable amounts, as well as a mechanism for rent adjustment upon tenancy renewal, e.g. specifying that the new rental will be based on prevailing market rental rates but subject to a certain percentage cap, as is commonly practised for commercial tenancies.

If there is a disagreement about what is considered to be the fair prevailing market rental rate, the government may appoint the RTA to act as an arbitrator.

Tang said another point of contention among stakeholders is the right of property owners to select their tenants.

The RTA seeks to prohibit discrimination through legislation, and while this is a noble goal, it has some shortcomings in practise. A Muslim landlord, for example, maybe hesitant to rent his property to a tenant of a different faith due to differences in lifestyle and food consumption habits.

"As a Muslim, he may object to non-halal food or beverages being consumed on his property. Some landlords may not mind renting out their properties to tenants of various nationalities. Nonetheless, some would prefer to rent only to Malaysians due to cultural differences. There could also be a situation where the landlord is a single female who still lives in the house and would prefer to rent out the rooms to only female tenants. Some landlords prefer to rent out their properties to professionals rather than blue-collar or menial workers because they believe, rightly or wrongly, that this group of people will be more house proud and will take better care of the property, as well as being less likely to default on a rental payment due to their stronger financial position.

"A class A tenant may even be willing to accept a lower rent or more favourable rental terms from the landlord. If the RTA passes anti-discrimination legislation, it will take away the property owner's ability to select the tenant with whom they are most comfortable," he said.

One of the proposals in the RTA would be to deposit the security and utility deposits collected from tenants with the CRT rather than the landlord, as is currently the practise. The CRT would also be authorised to manage security deposits collected from tenants to reduce landlord-tenant conflicts. The security deposit will be returned to the tenant with no deductions for expenses when the tenancy ends. The tribunal will resolve any disagreements. In effect, the security deposit will no longer be kept by the landlords, as is currently the case, but will instead be placed in an account managed by the CRT.

"Landlords will lose out on the interest they could earn by depositing funds in their bank account. In theory, this is not a bad idea because the CRT is a neutral party and would return the deposits to the tenant once the landlord confirmed that the property was returned to him in acceptable condition. There is no need to set aside funds for repairs. However, with so many cases to be handled by the CRT, there is concern that the CRT's office will take a long time to process and refund the deposits. This must be thoroughly researched and the processes streamlined by the authorities to ensure that the refund of security deposits can be completed smoothly and quickly with minimal paperwork.

"If a tenant opts for early termination, the RTA proposes that landlords will be unable to collect the tenant's rental due for the tenancy's unexpired term. Because the tenant has violated the terms of the tenancy agreement, this proposal appears to be unfair to the landlord, who may lose months of rental if he cannot quickly find a replacement tenant. There must be some deterrent in place to prevent the tenant from simply walking out of the tenancy whenever he feels like it,"Tang said.

Meanwhile, the RTA's proposal to develop a standard template for residential tenancy agreements could benefit. It will ensure that essential clauses are included and reasonably worded, similar to standard sale and purchase agreements for purchasing houses from licenced real estate developers. However, because no two properties or tenancies are alike, there must be some flexibility to accommodate different situations, such as whether the house is rented fully, semi-furnished, or unfurnished, or whether the house is rented to a Malaysian or an expatriate, in which case the tenancy agreement usually includes an "expatriate" clause, he said.

While their primary position is that enacting a specific law to regulate residential tenancies is unnecessary, Rehda has stated that if a law is to be enacted, it must be kept in mind that there is no one-size-fits-all solution. REHDA has proposed that the RTA only apply to residential tenancies where the monthly rent is less than RM750 per month so that those in the B40 group can benefit from the RTA's provisions.

The HBA, on the other hand, felt that the sampling of the survey conducted by the Housing Ministry to develop the RTA proposals was insufficient because it only included respondents living in the Klang Valley and did not include other states or demographic groups, and thus does not provide a true and balanced picture of the situation. The survey also had more tenants – 2,015 people – than landlords – and there is concern that the proposals are skewed more towards the interests of tenants.

"To summarise, we believe that the government should not rush into enacting the RTA without conducting additional research, consulting with stakeholders, and fine-tuning the Act's provisions. The current situation is not that serious because landlord-tenant disputes can be resolved using existing laws and processes. It is a major point of contention whether a specific Act needs to be rushed through and enacted to address the situation. Finally, if a law is to be enacted, the government must ensure that the law is fair and balanced and that it is not biased in any way toward one party at the expense of the other," Tang said.