Winning options for landlords & tenants

Lawyer Chris Tan explains how landlords and tenants can emerge winners despite difficulties in rental payment during the prolonged lockdown in Malaysia.

Text and Photography by Jan Yong

Amid the continuing nation wide Movement Control Order (“MCO”) in Malaysia in its various iterations, more and more tenants, both commercial and residential are finding it hard to pay their monthly rentals. Tenants of offices, shopping malls lots and shoplots are especially hard hit as many are in the non-essential sectors, thus having to endure closures or limited opening hours. Even residential tenants are finding it harder as the lockdown wears on. Either they have lost their jobs, or have had their salaries cut or contracts not renewed, it’s tough going for a majority of the population.

On the part of the landlords, they have to deal with non-payment or delay of rentals. Even if their tenants move out, they have difficulty finding new tenants due to the property oversupply situation on top of having to make do with lower rentals which can’t even fully pay their property loans.

But now is the time to make sacrifices and compromises for the good of everyone so everyone can survive this unprecedented crisis, lawyer Chris Tan expresses his sentiments. “The key to resolving this seeming deadlock is to renegotiate the tenancy contract,” he opines.

Apart from government incentives where landlords are given tax deductions if they grant at least 30% rental reduction*, the other options for commercial landlords, according to the founder of Chur Associates, include:

1. Loan moratorium from banks upon the landlord’s request but perhaps this could be granted on condition that the landlord reduces the rental to their tenants;

2. Government to intervene to allow EPF withdrawal for landlords to service their loan payments. This could come in handy should the banks decline the loan moratorium requested by the landlord.

From the residential landlord’s perspective, the best option is of course for both landlord and tenant to sit down to renegotiate the rental contract. Similar to commercial tenancies, if a conditional moratorium is allowed to be imposed by banks, then both parties would benefit.

“It’s not a foolproof method to ensure landlords pass on the benefit to tenants but the banks could always ask the landlords to make a declaration that they will give a discount to their tenants upon taking up the moratorium. This is similar to the owner occupation declaration that a loan applicant has to sign in the case of a housing bank loan. The tax returns of the landlord can also be used as proof that a discount was given. Again, an EPF withdrawal, if allowed by the government, would be beneficial for the residential landlord,” explains Tan.

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