GEORGE TOWN: Excessive government interference in a free market can stifle growth, especially when it comes to urban development, say some property experts and investors.

       While some aspects of the Residential Tenancy Act will protect both landlords and tenants, a few may yield unintended backlashes that will stifle growth.

       Henry Butcher Penang executive vice-president Shawn Ong said for one, any attempt to control how rental amounts are set or raised may cause landlords to lose the means to fulfil their duties to keep their properties in good maintenance, leading to whole swaths of homes to eventually be in a state of disrepair.

       “It is a free market now. To be able to attract desirable tenants, landlords sometimes give attractive rentals on the first tenancy agreement that is much lower than the market rate, and when the tenancy is renewed, the rental amounts revert to the market rate.

       “If there was a cap on the percentage of rental amount that can be raised, landlords cannot get enough rental income to fulfil their duties while earning a decent income off the property.

       “This can lead to properties in whole neighbourhoods being in a state of disrepair,” he observed yesterday.

       Henry Butcher has been a property consultancy in Malaysia for over three decades.

       Ong referenced the repeal of rent control in 1997, which was fully enforced by the early 2000s in Malaysia.

       Enacted by the pre-Independence British government, rent control laws were meant to control the raise of rental but it eventually led to landlords earning so little that property investment became unattractive.

       It also led to the evolution of the unsavoury practice of “tea money”, in which tenants needed to pay a large initial fee that circumvents the legal constricts of rent control to earn the privilege of renting at low rates.

       Ong said another unfair intent of the Residential Tenancy Act is the possibility of preventing landlords from refusing to accept a tenant willing to pay the asking rate on grounds such as gender, creed, age or job nature.

       He stressed that property owners should be given the right to accept tenants that they deem suitable.

       “It is unfair to dictate who the landlord can or cannot rent out to. It is their individual right to choose,” he added.

       There are, however, other aspects of the RTA that Ong feels would provide win-win protection and benefit to both tenant and landlord.

       One is the possibility that landlords cannot evict tenants without a court order.

       “This is fair and it is actually the current market practice.

       “If there is a stubborn tenant who has breached the contract, landlords do make police reports first and seek aid from the authorities to regain possession of the property.”

       Another crucial element in the RTA may be the need for landlords to transfer security deposits paid by tenants into a central depository account maintained by the government, which is done in many developed countries.

       “This will protect both landlords and tenants.

       “If there is any undue damage to the property, the landlord has the right to deduct the cost of repairs from the security deposit.

       “There are some tenants who want their landlords to deduct their final monthly rental payments from the security deposits, which will mean that the landlords will have trouble seeking compensation for undue damage.

       “At the same time, tenants will always be assured that their security deposits will be returned to them at the end of their tenancy agreements,” Ong added.