Expat Clause

Lately I increasingly find that expat tenants are asking for an exit clause in the name of "Expat Clause" which states that should they be transferred to another country, lose their work permit or for whatever valid personal reasons that they cannot continue with the tenancy, they would like to be freed from the tenancy without penalty and have their deposits refunded in full.

This is obviously a risk we landlords have to take, not from the loss of the rental, as we can find new tenants but rather from the disproportionate commission paid to the estate agency. I have asked every agency and none of them were prepared to refund even part of the commission if the tenant executes the Expat Clause.

So, it is important when drafting the agreement, to insist that the Expat Clause can only be exercised in the second year of the tenancy and requires proof of the change in circumstances as well as sufficient notice (usually 2-3 months) to terminate the tenancy.

Some tenants insist that the Expat Clause can be exercised even within the 1st year as they may have only a conditional work permit of less than a year or they are on a shorter than 1 year assignment in this country which may or may not be extended. In my experience, if the tenant insist on this then it is most likely you are facing a shorter than 1 year term. So, you should not pay the agency a full commission.

Unfortunately, in this market glut, some desperate landlords are willing to accept whatever terms just to secure a tenant. While it must be accepted that foreigners have circumstances that they may have to leave the country earlier, if it is less than a full 1 year tenure, they should pay a slightly higher premium for the shorter term contract.

I propose that this premium should be spelled out in the contract and deducted from the deposit rather than raising the rental amount because agencies tend to receive their commission based on 1 month rent. For example, the clause should read something like this:

If the Tenant terminates this Tenancy for whatever reasons, the following percentage shall be deducted from the Deposit:

After fulfilling more than 12 months term: 0%
After fulfilling more than 10 months but less than 12 months term: 20%
After fulfilling more than 8 months but less than 10 months term: 40%
After fulfilling more than 6 months but less than 8 months term: 60%
Fulfilled less than 6 months term: 100%

What say you?

Block Purchase

With everything nowadays hitting RM1million per transaction, even those tiny little studio units, I am wondering if anyone is interested to buy a small block of about 50 condominiums in the heart of Bukit Bintang. The block consists of 30% 1000sf 2-bedroom units and 70% 650sf 1-bedroom units. The 1-bedroom units work out to be around RM650k each, fully furnished which is a price one cannot find in the city center anymore.

Moreover, the building is freehold and fully tenanted en-bloc to a MNC for a 5-year contract beginning this year. The yield works out to just about 4% per annum on average, with yearly rental increments built into the contract over the 5 years.

Each unit has its own individual title, so it is possible to sell each of them separately or en-bloc in the future.

If interested, get in touch la... sinleongng@yahoo.com

Homes for Living, Not for Profits

This image from a video footage taken off malaysiakini says it all. This is what happens when investors start to dabble in people's housing. I have known some people who has bought entire rows or floors off low or middle cost flats and then sells or rents it off with a decent yield. This is not only unethical, it puts us property investors all in a bad light. The problem is then, the government who knows nothing about properties start to impose all sorts of blanket rulings to curb speculations affecting even those high end properties that we invest in. 

So, invest ethically so that we can continue investing...