Malaysia Real Estate Law - Landlord/Tenant

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REAL ESTATE LAW - Landlord / Tenant

Related Topics : Agricultural Law . Buy / Sell a House . Commercial Real Estate . Condemnation . Landlord / Tenant . Mortgage Matters . Zoning

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WHAT IS RENT-CONTROLLED PREMISES ?

Generally, Rent-controlled premises(or '"Controlled premises" as described in the Control of Rent Act 1966) refer to those buildings completed before 1 February 1948 [s. 4(2) of the Act].

These rent-controlled premises are loosely described as 'the pre-war buildings' since they were buildings existing just after the Second World War [1941-1945].

According to the statistics available (NST 28 Nov. 1996 and 30 Jan 1997), the total number of prewar buildings affected by the Control of Rent Act 1966 (the Act) is estimated at 38,822. They are scattered all over the states in Malaysia. Penang has recorded with the highest number of rent-controlled premises in Malaysia at 12,609 while Sabah has the lowest record of rent-controlled premises of only 181. The other States records were Johore 5,659, Perak 5,531, Malacca 4,135, Federal Territory 2,500, Negeri Sembilan 2.003, Pahang 1.441, Terengganu 1,192, Kelantan 692, Selangor 431 Kedah-Perlis 306 and Sarawak 2,143.

WHAT IS THE LAW RELATING TO THE CONTROL OF RENT IN WEST MALAYSIA ?

The Control of Rent Act 1966 (the Act). It is a short statute consisting of only 12 sections and is intended to be a piece of legislation aimed at de-controlling all the rent-controlled premises by 31st December 1999. However, it is not the first piece of legislation introducing the control of rent of premises in Malaysia. There were other pieces of legislation enacted earlier on.

See (1) the Control of Rent Ordinance 1956, (2) the Control of Rent (Application to Kelantan) Enactment 1964, (3) the Control of Rent (Application to Perlis) Enactment 1961 and (4) the Control of Rent (Application to Terengganu) Enactment 1960. All were being repealed by s. 27 of the 1996 Act when it came into force on 1st January 1967.

The Act is to be repealed after having been in force for 30 years or so (1967-1997) when the Control of Rent (Repeal) Act 1997 (the Repeal Act) comes into force on 1st September 1997.[ss. 1(2) and 2 of the Repeal Act]

WHY WAS REPEAL ACT BEING INTRODUCED ?

The explanatory statement in the relevant Bill of Parliament gives the following reasons:

With the passage of time, the Act, which was originally enacted in 1966 to regulate and control the rental of privately-owned buildings built (on or) before 31 January 1948 owing to the shortage of housing during the post-war period, has since outlived its usefulness.

On the contrary, it has lent itself to abuse with the further subletting of the controlled premises by the tenants at the expense of the landlords.

It is now felt that the time has come for the Act to cease to operate, and for the landlords to be able to recover possession of the controlled premises for purposes of development.

However, to alleviate the immediate need for alternative housing consequent upon the repeal and to facilitate adjustments by tenants to payment of rental at market rates, a transitional period is provided for.

At the end of the transitional period, landlords are entitled to recover vacant possession of the premises.

A cursory perusal of the Repeal Act reveals that it is enacted for the purpose of repealing the Control of Rent Act 1966 with effective from 1st September 1997.

A transitional period of two years and four months (1997-1999) is introduced, in order to avoid producing a "traumatic" social effect. The transitional period has expired on 31st December 1999. The rent-control premises had ceased to be rent-controlled property after the repeal of the Act effective 31st December 1999 and they will be treated as any other ordinary buildings and governed by the ordinary law of landlord and tenant.

Upon the repeal of the Act, all tenants (or sub-tenant or joint tenants) who are in actual and lawful occupation of the premises was permitted to continue to occupy the premises until 31st December 1999. Therefore such tenancies are no longer be in force.

With effect from 1st January 2000, the parties concerned are at liberty to enter into any fresh tenancy at any rental according to the market rate to be determined at the absolute discretion of the landlord. The ordinary law of landlord and tenant under the National Land Code will then apply in the event of their entering into a fresh tenancy.

WHAT ARE THE RIGHTS OF RECOVERY OF POSSESSION AFTER EXPIRY OF TRANSITIONAL PERIOD (S. 11) UNDER THE REPEAL ACT ?

All tenancies deemed to have been entered into between the landlords and tenants (September 1997-1999) had ceased to be in force. The landlords shall then have the right to vacant possession of the premises from the tenants without payment of any compensation, and shall also be entitled to any rental remaining unpaid from the tenants as at 31st December 1999. [ss.11(1)(a) and (b)]

Though a landlord is entitled to have the right to vacant possession of the premises as from 1st January 2000 onwards, the Repeal Act provides that he still has to serve on the tenant a notice to vacate the premises before the landlord exercises such right.

Section 11(2) provides as follows :

A landlord who wishes to exercise his right under para. (1)(a) (relating to the landlord's to vacant possession upon the expiry of the transitional period) shall serve on the tenant a notice to vacate the premises.

The notice to quit is to provide for a period of three months for the tenant to vacate the premises if the landlord wishes to exercise his right to vacant possession of the premises [s. 11(3)].

WHEN SHOULD THE LANDLORD GIVE THE NOTICE TO QUIT PROVIDING FOR A PERIOD OF THREE MONTHS FOR THE TENANT TO VACATE THE PREMISES IF THE LANDLORD WISHES TO EXERCISE TO EXERCISE HIS RIGHT TO VACANT POSSESSION AFTER 31ST DECEMBER 1999 ?

Whether it should be given after the transitional period 31st December 1999 or before the expiry of the transitional period - three months before 1st January 2000 - the Repeal Act is silent on this. It does not seem to provide any direct answer to this question, thereby giving rise to an ambiguity. It can be argued both ways, either for the landlord or for the tenant.

A plausible or reasonable interpretation of the relevant provisions would be: the landlord is entitled to serve the three months notice on the tenant some three months before the expiry of the transitional period. This will enable the landlord to exercise his right to vacant possession of the premises immediately upon the commencement of the new millennium, as envisaged by s. 11(1) of the Repeal Act. Such interpretation is more in accord with the spirit of the Repeal Act.

Such interpretation will not affect the length of the prescribed transitional period. The transitional period of 28 months is intact, and it is more than sufficient for the tenant to look for alternative accommodation. To give a further period of three months after the transitional period is redundant, apart from the fact that it is inconsistent with the intent of Ss 5 and 11(1) of the Repeal Act.

Three Months’ Notice To Be Served Before Expiry Of Transition Period

If the tenant is served with the three months’ notice before the expiry of the transitional period, the landlord will then be able to enter into a fresh tenancy with the tenant immediately after the transitional period i.e., with effect from 1 January 2000 (if both parties so wish), spelling out new terms and conditions obtaining in any ordinary tenancy agreement.

Such interpretation is consistent with the tenant’s statutory right to occupy the premises throughout the transitional period as well as the landlord’s right to vacant possession of the premises immediately upon the expiry of the transitional period. The interests of both the parties have not in any way been prejudiced.

A Practical Approach

Though a plausible or reasonable interpretation has been suggested above, the ambiguity is yet to be resolved. Perhaps, with a view to avoiding unnecessary dispute or litigation, the landlord may adopt a practical approach for the purpose of effecting an amicable settlement.

Fortunately, this is not an immediate problem. It needs only to be solved towards the end of this century which is more than two years from now. The landlord has ample time to ponder over the matter and toy with the idea of adopting a practical approach conducive to the interests of both parties. One practical approach that comes to mind is this:

To Inform The Tenant In Writing Well In Advance

First, the landlord may make it a point to inform the tenant in writing, well ahead of the expiry of the transitional period (at least three months before 1 January 2000), of the automatic cessation of the deemed tenancy on 31 December 1999 pursuant to s. 11(1) of the Repeal Act.

[Note: In fact, no formal notice of such cessation of the tenancy is required under the Repeal Act to be served on the tenant. The notice merely serves as a reminder; it is not a legal requirement.]

At the same time, indicate to the tenant in the letter that he has to vacate the premises in accordance with the said provision of the Repeal Act by the end of the century.

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Last Updated : Monday, 23 July 2001 - 04:25:49 PM EDT©1999-2000
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