The Bully Tenants Part 2...

If my first story hasn't put you off the renting business, you might consider this one.

Normally I find students more respectful. Typically 90% of them are and then you get that 1 out of 10 who is a real prick. Then they involved their parents and that's when you start to understand where they got it from.

My biggest problem with students is they treat the deposit as rent. So 2 months before they move out they stop paying rent and if you haven't been checking you will find out that they are moving out tomorrow and you are left with a pig dump and a huge electricity bill.

But I am more vigilant, and I sought to educate my student tenants about deposits. Because I know some of them will continue their study overseas where they deal with landlords and the law which gives no leeway. So be lenient with them today and they will get into trouble tomorrow.

I have a meter installed in every room to calculate the air-cond electricity usage so that it's fair for all the tenants. I had this tenant who rented a single room from me for just over a year. After six months, he seems to be not using his air-cond at all. Then one day when my contractor serviced all the air-conds, he told me the meter was broken. When I confronted him, he said he was not aware it was broken because he hardly turned on the air-cond. But what his housemates told me were different. His air-cond was indeed turned on every night. So it is obvious he has not been honest and the fact that every month he reported only a minor shift of his meter despite the meter not moving at all confirms that he has been trying to hide the fact his meter was broken.

So I had the enviable role of having to recalculate all the share of the electric bills again backdating 6 months. It's impossible to do it accurately and to be fair I discussed with him the methodology. But he tried to impose his method instead which was clearly in his favour, peppered with insults and rude words on me when I refused to accept them. I had no choice but to told him to leave. Then I had phone calls from his father, which was initially very cordial. However he started to impose his conditions and what he termed as win-win situation, actually is win for him only. I have to calculate his bills before I refund his deposit and to be nice, I actually refunded half of it so he can pay his new landlord. To chase and pressure me to release the other half, every single day both father or son will sms or call me, called me a liar, money sucker, uneducated, mother fucker and everything they were brought up with. They even claimed they have consulted a lawyer and have a strong case to sue me for the balance RM550 (RM370 after bills deducted)!

It's not always you come across such people but you'll definitely come across them if you are in the business of renting. I myself have had a fair share of these characters but to be fair, I've seen some very unreasonable landlords as well... more on that later...

The Bully Tenants

Many people want to get into the property market buying up luxurious apartments and renting them out to make money. But it is not always pleasant as you will also need to deal with tenants, humans... so they come in all types of characters. You may build in all kinds of terms and conditions into your tenancy agreement to protect yourself, but at the end of the day, removing your defaulting tenant is one thing... finding a new tenant is another.

I've had many law respecting and good tenants but I've also had my fair share of lousy tenants. I think respect is the most important thing. You need to respect your tenants, respect their privacy, their rights to have a peaceful stay... this includes making sure your property is fit for their stay. But the problem is, some tenants don't respect the landlord and the property. They think they are paying rent so they are the boss, you are the servant!

In one of the milder experiences, I had up until recently a Singaporean tenant. Same as dealing with some of my colleagues at work, some Singaporeans tend to think Malaysians are less superior than them so they can bully us. Especially this young chap who has a NUS degree and a cushy job at a consulting firm in KL. My rent has been paid whenever he likes... sometimes at the beginning of the month, sometimes at the end of the month, sometimes in the middle of the month and sometimes not at all. So it was hard to trace when he actually paid, it's for which month. So, at the end of the year in December when I only received 7 months of rent, I have to ask for the 4 unpaid months and December's rent to be paid before the 3rd. Luckily Singaporean with a cushy consulting job is rich, so he has no problems paying the 4 months overdue rent but the December one was late. And when I chased for the rent, he said he never agreed to pay by the 3rd so I wonder what the tenancy agreement is actually for... Probably feeling fed up with my persistent demand for my rent, he issued a 1 month notice and moved out.

There is no deposit to refund this guy. He had problems with the internet and after unsuccessfully calling the service provider's technical support he just gave up and left the bill unpaid. I was fortunate as I used to work for this service provider so I knew people. He blamed the service provider so my friend arranged for me to listen to his recorded conversation and I heard how he abused and shouted at the call center. So of course it's his fault because he never gave them a chance to fix the problem and I had to pay the bill.

After that I was kind enough, since he had an old sofa, I got him a new one. I did ask him first but he did not like the new sofa and he demanded for the old one back. Since it was a trade in, I said he could buy a new sofa and claim the cost from me. He did buy a sofa, threw my new sofa away and when he moved out, he took his sofa with him! Needless to say too, the apartment was dirty and he even broke a window.

I can go on and on with other experiences but that will make this article too long so I'll continue again next time...

The Iskandar Prophecy

Less than 6 months into my rant about Iskandar, the property market there seems to be heading that way...


http://themalaysianreserve.com/main/news/corporate-malaysia/6680-properties-in-iskandar-malaysia-facing-oversupply

Properties in Iskandar Malaysia ‘facing oversupply’

Monday, 29 September 2014 14:55 Kavithah Rakwan 0 Comments

Iskandar Malaysia, the main southern development corridor in Johor, is seeing the formation of a housing bubble as a result of Chinese developers that have been flooding the property market with masses of projects.

Kenanga Research property analyst, who refused to be named, said things are moving very slow at the corridor especially with houses which are selling above RM600,000.

“Things are moving rather slow, especially with those that are launched at higher prices. There is still demand for landed property and those priced within the range of RM400,000 to RM600,000.

However, the concern of oversupply involves at the area covered by the Chinese developers such as in Danga Bay which do not price the properties at a cheap rate and go about building around 10,000 units of condominiums in a small plot of land, said the analyst.

The analyst said the supply from the Chinese developers will keep coming in, looking at the way the land is sold to them, and if these developers could no longer hold on to the properties, they could end up selling them at a cheaper price.

Nonetheless, the analyst has some optimism on the upcoming infrastructures such as the rail transit system that could lead to a growth in demand depending on how it is planned.

RHB property analyst Loong Kok Wen said the formation of a bubble could be seen in Iskandar Malaysia, yet it could not be ascertained if prices will fall, which is dependent on the financial position of the Chinese developers.

“We could see a formation of a bubble as property agents are offered 5% to 8% of commission from the usual 2% to sell the property. The ones that are not doing so well are the high-rise properties in which there is oversupply by the Chinese developers, which has led to a supply glut.

“The increase in the toll rates and the increase in the minimum threshold for foreigners to purchase property in Malaysia are contrary to the initial objective, which is to attract demand from Singapore,” said Loong.

Loong, however, cautioned that it is not necessary property prices will fall as the ability of the Chinese developers to hold on to the property will be dependent on their financial strength.

Raine & Horne International Zaki & Partners Sdn Bhd associate director James Tan said the latest policies by the government and the cooling measures are restricting demand when supply is coming on-stream.

“The supply is coming onstream but who is going to occupy them? The situation is worrying. There is a high possibility of a housing bubble coming soon, but not within this year,” he said.

Malaysian Rating Corp Bhd’s property analyst Yap Lai Ken said despite seeing the slowdown in Iskandar Malaysia, there is no necessity for developers to lower prices as other incentives could be given, such as rebates and freebies, to attract demand.

The concern of Iskandar Malaysia developing a bubble could be seen by major property developer UEM Sunrise Bhd’s recent plan to restrategise in terms of product offering and location, to reduce dependency on its projects in Iskandar Malaysia and spread out risks.

UEM has more than 60% of its landbank in Iskandar Malaysia.

A local property developer who refused to be named said the decision by UEM to put on hold its projects in Iskandar Malaysia clearly reflects the negative sentiments that developers have on the corridor.

Meanwhile, analysts from research house fundsupermart.com said they see a slowdown in Iskandar Malaysia if there is an oversupply, coupled with the slew of government measures being implemented, interest rate hikes, low income growth, affordability and capital gain tax.

“For example, to curb property speculation, the Singapore government implemented measures such as increasing the buyer’s stamp duty, sales tax and initial down-payment. Prices actually moderated and then fell, as the Singapore URA Residential Prices Index fell 3.2% from September 2013 to June 2014.

“We could see the same trend happening in Malaysia. Therefore, in the mid to near term, we see limited upside potential and a lack of diversification for property investments,” the research house said.

The formation of a bubble in Iskandar Malaysia did not come unannounced as Kenanga Research did release a report in July this year warning that Iskandar Malaysia is losing its steam.

The report revealed that there were signs of oversupply in the property market with weaker absorption rate of 1.1 times in the first-quarter of 2014.

Do You Have Friends Like This?

They have been trying to buy a house for themselves for years and every time they go view a property, they complain it's expensive because last year, the price of the same property or in the same locality was cheaper. So they do this every year and every year the price doesn't come down.

They keep asking you to recommend a property and when you think you found them a good deal, they say it's expensive. And year on year, they keep looking and yet the price doesn't come down...

Then finally, they finally found and bought a property... which turned out to be really overpriced.

Do you have friends like this? I am asking because I have many such friends...

GST on Maintenance Fees

Apparently the exemption on GST for maintenance fees is only for low and medium costs apartments. But today's article in the Malaysian Insider says that is not so. Low and medium cost apartment dwellers or their owners will still have to pay GST as a result of the pass on effect from their vendors. Doesn't this bode even worse news for the "normal" and higher end condominiums? Not only will GST be imposed on their maintenance fees but they will also increase their GST as a result of higher costs from their vendors. 

Flat residents have to pay GST for maintenance despite exemption

BY JENNIFER GOMEZ

Published: 11 December 2014

Low- and low-medium-cost apartment residents will still be burdened with higher maintenance costs when the goods and services tax (GST) kicks in, a registered property manager said today.

This is contrary to the tax exempt supply list in which management fees for these apartments is listed.

Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia (PEPS) advisor Wong Kok Soo said that these residents would still be exposed to GST passed on to them from the services provided by the likes of technicians and repairmen. Only goods and services on the zero-rated supply list can claim from Customs the GST incurred through payments to service providers, known as input tax. 

"So the net effect is (low- and low-medium cost housing) residents will be paying 6% of their maintenance charges to the government as tax," Wong said at a press conference in Petaling Jaya today.

This meant that there would be no relief to the lower income group, despite their residential developments being listed under the exempt supply list.

"The government thinks that they have relieved those living in low- and low-medium-cost stratified units and therefore they should be happy.

"But the reality is they are now forced to increase their maintenance collection by 6% because they have to pay higher bills to the service providers for maintenance," he said.

National House Buyers Association (HBA) honorary secretary Chang Kim Loong said that the scenario has turned out to be unfortunate for low- and low-medium-cost apartment dwellers.

"There is obviously lack of thought in the planning of GST and some were very ill-advised and didn't understand the entire concept of giving exemptions," he said.

Chang said that HBA, PEPS, the Royal Institution of Surveyors Malaysia (RISM) and the Malaysian Institute of Professional Property Managers (MIPPM) had sent a petition to Prime Minister and Finance Minister Datuk Seri Najib Razak earlier this month pointing out the problems with the low- and low-medium-cost stratified apartments.

These property industry groups want the government to exempt all categories of stratified properties from GST on management fees.

In the petition, they said it was unfair for other categories of stratified developments to be subjected to GST under the standard rated tax supply.

Other than low- and low-medium-cost stratified developments, those living in other categories of strata property would have to pay GST on their maintenance fees.

Under this standard-rated scheme, one can claim refund of GST input tax (imposed by service providers) from Customs.

But Wong said it was unfair to have to pay GST on their maintenance fees as they were contributing their own monies to maintain, upkeep, refurbish, upgrade and safeguard their own common property.

Wong pointed out that the Joint Management Body (JMB) or the Management Corporation (MC) is formed as a voluntary body by owners to maintain and upkeep common property with monies collected from property owners.

He added that the Income Tax Department recognised maintenance collection in strata developments as mutual income and not subject to income tax.

"So why are they subject to GST," he asked.

According to Wong, the GST Act lists JMB and MC as carrying out a business, despite it was not for pecuniary profit.

Wong said the effect of higher maintenance costs would mean that levels of maintenance, especially for the lower category of strata developments, would decline due to lack of funds.

He added that for strata developments, there is always insufficient collection of maintenance fees, giving the example of medium-cost apartments where the collection rate is only 40% to 60%.

However, GST needs to be paid based on 100% billing and not actual collection.

In their petition to the prime minister, the coalition wants all categories of strata properties to be put under the zero-rated list, noting that this would require an amendment to the GST Act, as the law currently states that only essential goods are categorised under zero-rated tax supply. – December 11, 2014.

- See more at: http://www.themalaysianinsider.com/malaysia/article/flat-residents-have-to-pay-gst-for-maintenance-despite-exemption#sthash.TUJNbbsU.dpuf

Is the Rental Market Slowing?

There appears to be a lot more vacancies in at least 2 of my apartments lately. Some people have been calling me to view my units and I found out they were already staying there. I asked them why they wanted to move, then came various answers... one wanted a bigger unit, one said owner is selling his apartment so he has to move and at least two were very direct - they wanted cheaper rent. But I suspect all of them, not just these two are shopping around for a better price and they may use the price to pressure their landlords into dropping their rent. 

So how much cheaper? They are currently paying about RM3,000/month for their single bedroom units. They can opt for smaller studio units which are asking about RM2,500 to RM2,700 but when I asked what is their budget, they said RM2,000. So I had to apologize that I do not have any units to meet their budget. One of them said it's OK, he will be viewing a few units tomorrow offering that price. I said good luck. 

They may be calling my bluff but I still think landlords are now competing for that small pool of tenants. There will always be desperate ones. The fact is, there will be even more condo units entering the market next year and this pool of tenants are not increasing. So, will holding power hold out till the situation recovers and rent goes back up again? 

The short term rental market however is doing roaring business in this holiday period. Perhaps it is time to revisit this. For the short term serviced apartment 1 week to 1 month stays, Somerset in Bukit Ceylon is running over 90% occupancy since August and Invito opposite recently have to take down their promotional rate in order to cope with demand.