This article first appeared in City & Country, The Edge Malaysia Weekly on February 17, 2025 - February 23, 2025

The proposed Residential Tenancy Act (RTA) has received mixed feedback since it was announced by the Ministry of Housing and Local Government (KPKT) in 2018 as part of the National Housing Policy (2018-2025).

It has drawn much interest as it will impact many parties. Depending on whether you are a landlord or a tenant, there are different concerns. Landlords are worried about interference with the rental rate and their freedom to choose tenants, while tenants are concerned about the possible invasion of privacy, particularly over their financial situation.

KPKT minister Nga Kor Ming was reported as saying last November that engagement sessions on the proposed Act with state governments and stakeholders had begun that month and were expected to be concluded by the end of the first quarter of this year.

According to him, the public consultation on the drafting of the proposed Act in 2022 showed the need to reassess all aspects of the bill and to restructure the follow-up actions in the drafting process. Nga hopes the new legislation will invigorate the rental sector, making it more competitive and providing the residential leasing industry with improved governance, without compromising on the rights and interests of all parties involved.

City & Country spoke to property experts on the need for such legislation.

CBRE | WTW Malaysia adviser Foo Gee Jen, who was involved in the workshop and other earlier rounds of discussion on the proposed Act in 2018, believes its enactment is a positive move that will instil confidence and certainty in investors. In addition, it will help promote property investment and make Malaysia more investor-friendly.

He says such legislation is long overdue as the younger generation prefers to be asset-light and to rent instead. He stresses, however, that it should apply solely to residential properties for long-term rental and not to commercially run entities such as properties for short-term rental and student and workers’ accommodation.

“Sometimes, you need specific laws to govern the rental market because certain issues are very petty. They involve very small claims and we should not drain our legal resources [over them]. It is the right move to have a template for a tenancy agreement so that everybody knows the standard terms they must follow and the process for claims and other matters,” says Foo, adding that a Residential Tenancies Tribunal will be established under the Act.

See Kok Loong, executive director of Metro Homes Realty Bhd, also believes it is high time for the enactment of the RTA. He says it is necessary to address the shortcomings of the current system and will ensure that both landlords and tenants are treated fairly and equitably.

“By providing a clear legal framework, efficient dispute resolution through a tenancy tribunal and balanced protections, the RTA will create a more stable, transparent and healthy rental market for everyone.”

He believes it will balance rights and responsibilities, clearly laying out the obligations of both parties. It should provide accessible dispute resolution, such as the establishment of a tribunal or mediation service to resolve conflicts efficiently, but also should avoid overregulation, with excessive restrictions such as rent controls.

“The RTA should also promote transparency by using standardised agreements and clear guidelines for rent increases, deposits and evictions. This reduces costs, speeds up the rental process and ensures fairness for both landlords and tenants. By eliminating the need for expensive legal reviews, it makes renting more accessible and efficient.

“Also, a tenancy tribunal is essential. It provides a cost-effective and efficient way to resolve disputes without the need for lengthy and expensive court processes. This benefits both landlords and tenants by ensuring quick and fair resolutions,” says See.

He points out, however, that the anti-discrimination clause is tricky. While discrimination based on factors such as race, religion and gender is unacceptable, landlords should have the right to choose tenants based on objective criteria such as income, rental history and creditworthiness. A balanced approach is needed to protect against unfair discrimination while allowing landlords to screen tenants based on legitimate factors such as financial stability and rental history.

Tan Kian Aun, president of the Malaysian Institute of Estate Agents (MIEA), says the RTA is necessary because of the high number of disagreements and disputes as well as the misunderstandings and confusion between landlords and tenants over tenancy agreements.

“Most of the time, both parties fail to understand their roles and responsibilities because most terms and conditions are not standardised, and most of them fail to read or understand them. Therefore, the RTA will allow for the standardisation of all essential roles and responsibilities of landlords and tenants to ensure that both parties are aware of and understand each other’s responsibilities and play their part in a clear manner. With an Act in place, landlords and tenants will have to pay more attention to the law,” he says.

Tan adds that the Act should also provide some flexibility to landlords and tenants.

“There should be a standard or essential clause (similar to HDA Schedule G and H), with provisions to allow both parties to insert certain clauses by mutual agreement. However, the additional clauses may not be subject to the jurisdiction of the RTA.”

The Housing Development (Control and Licensing) Act 1966 (HDA) prescribes the terms of the sale and purchase agreement. Schedule G under the HDA is for a housing accommodation sold using individual titles, while Schedule H is for a housing project in a subdivided building in the form of a parcel of a building or land intended for subdivision into parcels.

Also, with the implementation of the RTA, Tan believes the tribunal will play a crucial part in mediating disputes or disagreements among stakeholders. Power should be granted to the tribunal so it can carry out its duties effectively.

Some of the proposals in the Act, such as controls on the number of rent increases and the quantum, are deemed unnecessary.

See advocates letting the market decide rental rates as rent control can discourage landlords from maintaining or renting out properties, leading to a reduced supply and market distortions.

“We should focus on making the rental market dynamic and transparent, allowing supply and demand to [find a balance]. The government’s role should be to ensure transparency by providing clear and accessible data on rental trends, average rates and vacancy rates. This helps both landlords and tenants make informed decisions,” he says.

Foo is also against rent control. “We [had] the Control of Rent Act to protect the interest of tenants back then due to the shortage of property. Now, the rental rate should be market-driven. Of course, I think it’s also good to regulate in terms of rental rate review,” he says. The Control of Rent Act 1966 [Act 363] was repealed on Sept 1, 1997.

“For example, within three years, the increased quantum should not be more than, say, a certain percentage. And the best thing to do is to link the quantum to the Napic (National Property Information Centre) index. If the property index for the last three years is 3%, the increase should not be more than double the index (meaning not more than 6%). Then, the final rate should be negotiated between the landlord and tenant (based on the condition of and furnishings in the unit). But we should not be going backwards by having another rent control Act.”

Towards this end, Foo emphasises the importance of a central data system for the rental market that is accessible to the public. Information in the system should include the rental range for a particular type of product in a location.

There should also be a central system that stores the records of tenants and landlords, he says, akin to that for credit reporting agency CTOS. The system will allow landlords and tenants to rate each other, allowing for evaluations to be done.

As for the anti-discrimination clause, Foo reiterates that the two main considerations should be the tenant’s capability to pay rent on time and ability to take care of the property, rather than factors such as race, gender and religion.

“Some listings state that the property is only for a certain race, which is discriminatory … you cannot do that for any reason. We shouldn’t generalise or stereotype people based on other factors; it should just be based on their credit (ability to pay rent on time and take good care of the property).”

Foo and See deem the proposal for the security deposit to be deposited with and managed by the Controller of Residential Tenancy as unnecessary. This proposal arose due to the concern that landlords might fail to return the deposit to tenants within a stipulated time after the tenancy ends.

Under the current system, the tenant has to pay a security deposit of two months’ rent and a utility deposit of either half a month or a month’s rent. These deposits are kept by the landlord.

Foo believes this money should not be used to run the tribunal. Instead, the government should set aside some funding for this purpose.

“Bear in mind that in some cases, landlords may be cash-strapped and need to use some of the money for repairs. So I believe it shouldn’t be deposited with the tribunal,” he says.

See regards this approach as inappropriate. “Given the government’s inefficiencies and red tape, such a system could lead to delays and hinder the proper functioning of the rental market.

“Instead, the deposits should be held in a trust account, managed either by a bank or a licensed trustee. This trust account would be legally bound to release the deposit back to the tenant within 14 days after the tenancy ends, provided there are no valid claims for damages or unpaid rent. Similarly, landlords would have access to the deposit within the same timeframe if justified claims are made. This approach ensures efficiency, transparency and fairness for both tenants and landlords, without overburdening the government or the rental market.”

Foo concurs, saying a penalty, such as an interest of 10% for each month of delay, can be imposed in the event the landlord fails to return the deposit within the stipulated time.

Independent building inspectors also have a role to play, Foo says, especially when it comes to the repair of damage when the tenancy ends. They can verify the damage and determine the cost of repairs to avoid disputes between the landlord and tenant.

Several other areas in relation to residential tenancy should be addressed, according to See. One is ensuring that the regulations on eviction protect both the tenant and the landlord. The tenant should not be evicted without valid reason and proper notice, and the landlord must be able to recover his or her property from the tenant in case of default in the payment of rental.

“There can also be incentives, such as tax breaks, for landlords who maintain high-quality rental properties. This encourages better property management and increases the supply of rental housing. Tenants should also be educated about their rights and responsibilities to reduce disputes and promote compliance. This can be done through public awareness campaigns and accessible resources,” highlights See.

While the RTA aims to create a regulatory framework for the residential tenancy market in Malaysia, a balance should be struck between the financial and regulatory aspects.

At the same time, the Act should provide flexibility, such as in rental rate increases and allowing additional clauses to be added to tenancy agreements. As Tan says, “Some of the terms and conditions should comply with the RTA to avoid any abuse. But the RTA should not be too rigid or restrictive as to allow for certain flexibility.”

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