HBA: Legal ownership rests with the landlord

Direct racial discrimination takes place if someone treats you less favourably than they should treat, or would treat another person because of race eg. Landlord or Council rents accommodation to a person or a chosen ethnicity.

Indirect racial discrimination takes place when a Landlord or a Council  introduces a rule or policy that discriminates against people from other racial  group, without being able to show that the rule or policy is justified eg. Introduce preference and quotas.

The National House Buyers Association (HBA) response to Housing and Local Government Ministry’s press release on July 31st regarding ‘Law against racist landlords which is to be tabled (in Parliament) next year’.

HBA takes note of the Housing Minister’s (representing the Ministry of Housing & Local Government) attempt to table a law pertaining to the regulation of landlords and tenants via the Residential Tenancy Act (“RTA”) which is purportedly to be tabled in Parliament in early 2021 with special focus on curbing ‘racist’ practices by certain landlords.

Before we proceed to comment on the purported aim of the RTA, we would like to state that the relationship between a landlord and tenant is at its heart a purely contractual one and should not be violated by terms and conditions which are detrimental to one party or both parties by a 3rd party which includes this RTA and the relevant Ministry.

Renting a house or apartment or condominium or any form of housing accommodation is markedly different from purchasing a house from a developer or an individual owner.

Irrespective of the term of the tenancy whether for a short or long duration, the housing accommodation remains that of the owner/ landlord. Occupancy per se does not pass on legal ownership to the tenant.

The legal ownership remains with the owner/ landlord and any damages to the house or any detrimental activity conducted by the tenant in the house, for example, such as running a drug operation or a brothel has serious repercussions to the owner/ landlord. Should the RTA include terms which restrict the landlord’s rights to reject a potential tenant or evict an existing tenant who is carrying such criminal activities under the banner of ‘non- discrimination’, is the Housing Ministry ready to be legally responsible to the affected landlord?

The reason we are asking is that there are instances of criminal activities carried out by criminals who are renting from our local landlords. Such criminal activities are only apparent after the tenant has secured the premises for rent. Such criminal activities are being carried out by tenants who are locals and foreigners. If a local landlord finds out that the foreign tenant is running a brothel in the rented house and evicts such tenant, would this landlord be deemed as ‘racist’? How is the Ministry to differentiate and determine such a subjective element?

This is a case of the landlord says one thing and the tenant says another thing. The landlord or potential landlord as the legal owner of the house has every legal right and human right to rent out his/her property to a person who he/she deems as the best tenant.

Does the ministry have the manpower to enforce compliance?

How is the Ministry to determine whether a potential tenant is rejected based on skin colour? Is the Ministry only to rely on the complaints of the disgruntled rejected potential tenant? Will the Minister and those under her charge accompany potential tenants to meet potential landlords to ensure that the landlords do not practice racist discrimination? Will the Ministry compensate the affected landlord if the said landlord is forced to rent to a tenant against his/ her better judgment simply to avoid being a racist under the RTA if the said tenant later defaults in rental payment, absconds with the landlord’s furniture and/or fixtures without warning, unreasonably refuses entry to the landlord although the landlord has the legal right to evict, carries out illegal activities in the house?

In recent years, housing loan financiers have also inserted as a term of the housing loan agreement that the borrower i.e. the owner/ landlord cannot use the house for any illegal or criminal activities. A landlord that minutely/ carefully chooses a tenant to ensure the tenant is not a criminal is also abiding by the terms of his/ her housing loan agreement with the financier. Would the Ministry deem such a landlord as being ‘racist’ when the said landlord is merely ensuring that his/her property is being rented to responsible tenants and not to criminals?

Standardised terms and conditions in a Tenancy Agreement and legal recourse in Residential Tenancy Tribunal under the proposed RTA?

For years the practice has been to enter into a tenancy agreement which lays down the rights, obligations and remedies available to both the landlord and the tenant which covers the minimal factors such as tenure of occupancy, rental rate, deposit sum, termination, right of the tenant to quiet enjoyment, right of the landlord to be compensated for any damages (less fair wear and tear) to the house. A prudent landlord and tenant would ensure that the tenancy is evidenced in writing rather than merely leaving it with a handshake.

However, no agreement whether written or verbal is perfect. There will be disputes between a landlord and a tenant. Under normal circumstances, the

terms of the tenancy agreement will have a recourse or remedy. There could be instances when the tenancy agreement may be lacking in such recourse or the parties are being stubborn in refusing to abide by the terms of the tenancy agreement. Therefore, HBA is supportive should the RTA enhance on such remedies or recourse for both the landlord and the tenant especially if there is a specialised Residential Tenancy Tribunal to be set up to settle disputes between a landlord and a tenant as going to Court of Law is more expensive.

HBA would suggest that the RTA incorporate the common terms already in use in most of the tenancy agreements in Malaysia with additions for better safeguarding of both the landlord and tenant. The RTA should strive to have standard terms and conditions for a tenancy agreement where the rights, duties and remedies are balanced between the landlord and tenant.

Balancing between the landlords’ economic and financial aspiration with tenants’ need
Landlords are a practical group. Most rent out their homes for economic reason as being a landlord is all that they do to earn a living. There are others who need the rental income to service the housing loan. Landlords, thus base their decision to rent to persons who can best support these economic or financial aspirations. Landlords, at least private landlords, are not running a charity for the homeless. Their choice of tenants are for the most part based on an economic viability profiling of the potential tenant.

Secondly, no landlord would want to be faced with the additional expenses of fixing a badly damaged property as the current rent deposit of 2 months and utility deposit of half month are inadequate in most cases. Therefore, most landlords would then screen potential tenants to ensure that the house is rented to responsible and trustworthy persons. Therefore, most landlords with houses would not wish to rent out their houses to be turned into for example a hostel for workers or any hostel whatsoever if there is the probability of the house being devalued in the long run. This is more likely for stratified properties namely the poor choice of tenants could devalue the property and turn the property into an urban slum area rife with crime. A devalued property is not a viable economic asset for landlords. In addition, the Ministry surely would wish to avoid turning any residential area into an urban slum where crime is rampant.

Tenants want peace of mind to the quiet enjoyment of the rental house. Landlords also want the peace of mind that the rental income comes on time and the property is relatively intact for future rental or sale. Where then is the element of racial discrimination?

Residential Tenancy Act (RTA) to address ‘racial discrimination’?

The esteemed Minister mentions that the RTA would address racist practices especially among low-cost housing. The question is whether low-cost houses should be rented out in the first place.

Low-cost housing is built for owner occupancy and not rental. The people entitled to purchase a low-cost house is within a certain low-income bracket. If a low-cost house is being rented, it means the owner should not have been eligible to purchase in the first place as his/ her income is above the low-income bracket. It means that the owner has another house to live in. It means there exists ‘system failure’ in ensuring only eligible low-income earners can purchase low-cost houses. The relevant authorities should instead strengthen the oversight of sale of low-cost houses to strictly low-income earners and only for owner self-occupation.

If the low-cost houses are being managed by the state or local authority as the landlord, we do not see any problems to avoid racial discrimination as the criteria for the tenants should be income eligibility. The RTA could then be targeted only for the low-income tenants and social landlords and not private landlords.

Pay due considerations where needed most

Rather than focus on irrelevant considerations, HBA proposes that the Minister addresses the real issues affecting housing problems in this country, especially in the urban areas.

  • Firstly, houses are expensive even those houses segmented within the affordable bracket – the Ministry is aware of this but actions are slow, if any;
  • Secondly, the cost of construction is levied heavily on the house buyer and not the developer – HBA urges the Minister to make the BTS 10:90 model compulsory at least for the affordable homes segment, thru our proposed ‘phase-in’ period starting 2021;
  • Thirdly but certainly not the last major problem is abandoned projects which as per the esteemed Minister’s Parliamentary statement last week, there are 281 private licensed housing developments certified as abandoned projects from 2009 until 30.6.2020. These 281 abandoned projects are equivalent to 73,959 housing units which affects 48,810 house buyers; and
  • Fourthly, what about those 175 unlicensed housing developers littered around
    Shouldn’t these major problems be the main focus to address and resolve the housing woes which are beleaguering Malaysians?

Meaningful legislation

Most people would look at renting until they can afford to buy a house. Rather than impose unreasonable terms to restrict a landlord’s legal and human rights to deal with his legal property, the RTA should strengthen the rights and remedies available to the landlord such as the rental deposit with an additional damages deposit of another two or three months rental to be paid upfront on top of the two-and-a-half rental deposit to secure any unpaid rental, eviction rights of the landlord against errant or criminal tenants, the rights and remedies available to the tenant, for example, the landlord’s duty to the upkeep of the property such as fixing any leaks or wiring issues, a tribunal to address any grievances brought by either the landlord or the tenant.

Last but not least, if there is seriousness in proceeding with the RTA, we suggest that close monitoring of landlords and tenants be carried out perhaps by a system to identify errant landlords and wayward tenants and making such information available to other landlords and potential tenants or rating landlords and tenants via a rating system to assist other landlords and potential tenants in their decision making before executing a tenancy agreement with any one landlord or potential tenant. Is the Ministry capable of undertaking the additional tasks?

This article is written by a Legal Advisor and volunteer (of Malay ethnic) of the National House Buyers Association (HBA), a non-governmental, non-political and not-for-profit Organisation manned purely by volunteers. 

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