The Rental Housing Market Development and Regulation Act (租賃住宅市場發展及管理條例) came into effect on June 27.
With this new law in place, the government is to use a range of tax concessions, including reductions or exemptions from the land value, housing and income taxes levied on income from rent, to encourage residential property owners to place their rentable properties under the management of professional business operators or lease them to such operators, who can then sublease them to tenants.
The government is also to pay subsidies for insurance and repairs to landlords whose properties are used for social housing, as well as subsidize the rent of disadvantaged people who live in social housing.
In rental housing contracts or leases, landlords who offer premises for rent are called lessors, while tenants who pay rent to live in them are called lessees.
In Taiwan, there are often news reports about landlords getting into arguments over problems to do with repairs, early termination of leases or unpaid rent.
This atmosphere increases the tendency for people to be insecure and uncertain about contractual counterparts who they do not know well, so rental relations are generally lukewarm and can easily become hostile.
When people call my notary office to have their leases notarized, it is usually, in the case of landlords, because they are afraid that tenants will owe them rent and not pay up; that they will stay in the premises after the lease expires and refuse to leave, which can devalue the property; that they will damage the furniture; and so on.
As for tenants, they often worry that their landlords will not return their security deposit when the lease expires.
It is better if, when the two parties sign a lease, they can first agree on the points that they must each abide by and append terms concerning compensation for damage. It is also advisable for them to first get the lease notarized so that if and when a dispute arises, the terms of the lease can be enforced through a court of law, including the rent, payment of any penalties for breach of contract and the tenant’s duty to return the property when the lease expires.
By notarizing the lease, they can effectively avoid or reduce any future litigation costs.
However, notarizing leases is not only done to have a last line of defense when there is a breakdown in contractual relations. It is also hoped that, when the lease is first drawn up, both parties will devote enough time to discussing the finer details to prevent their relations from eventually breaking down, resulting in unfortunate disputes.
Many disputes arise because the details of the lease are drawn up carelessly, without thorough understanding.
For example, this could involve which items of equipment are appended to the property and who is responsible for their repair.
In the past, most leases only agreed to a default arrangement under which the landlord is responsible for repairing “natural wear and tear.”
However, the two parties to the lease often have different ideas about what constitutes “natural wear and tear” and what is “human damage,” giving rise to endless arguments.
It would be better if, when handing over the property and signing the lease, both parties discuss each item of equipment, whether it should be repaired, when disposable supplies should be replenished and who is responsible for their purchase.
The cost of repairs should be estimated and the cost bearer should be specified. How the lessee should fulfill their duty to maintain the equipment should be agreed upon, as well as how the equipment should be used, who is responsible for its repair and so on.
A detailed agreement should be drawn up concerning these items.
Other issues that should be agreed upon include whether the lessee can sublease the property, whether the lease can be terminated before its expiration date or whether a specific payment must be made in case of early termination.
If, at the time of signing, these details can be appended and confirmed in black and white, and implemented thereafter, then as long as the signatories are reasonable, it should prevent, or at least reduce, future disputes.
The new law only applies to leases for rental housing, meaning apartments and houses that are rented for residential use. It does not cover leases for property used for business purposes. A landlord could be identified as being a “business operator-type landlord.”
This category is not limited to companies: If an individual landlord is a “professional landlord,” who rents property for a living and repeatedly engages in rental activities, they would be included in this category.
Arrangements of this kind are already covered by the regulations of the Consumer Protection Act (消費者保護法), including the Mandatory and Prohibitory Provisions of the Standardized Contract for Tenancy (房屋租賃定型化契約應記載及不得記載事項), which came into effect on Jan. 1 last year and specifies the items that can and cannot be included in property leases.
Even if a landlord does not belong to the above category, the lease would still be regulated by another list of mandatory and prohibited provisions specifically for leases for residential properties, which was published by the Ministry of the Interior on June 27.
These regulations stipulate that landlords cannot demand security deposits in excess of two months’ rent, nor can they forbid lessees to declare their rent payments when filing their taxes or to transfer their household registrations to the rented premises.
Aside from this, the sample residential lease agreement published by the government requires landlords to fill out a form including items such as floor area, building number, whether there are other rights — such as hypothec — and whether there is a foreclosure registration, which has to be confirmed by consulting case transcripts.
The items to be appended to the lease now include a “confirmation form for the current status of the leased premises,” including whether there are any leaks, whether it was built using radioactive reinforcing bars or is an inauspicious house where there has been a suicide or homicide.
The items also include a detailed itemized table of responsibility for repairs and an agreement for subleasing, if the lessor allows it.
This means that landlords are more duty-bound to disclose information about rental properties. The new lease is also more detailed and thorough than those available at stationery stores and the Ministry of the Interior’s previous version.
It is hoped that these more detailed agreements will help to prevent disputes between lessors and lessees. It shows how determined the authorities are to prevent rental disputes and consolidate rental relations.
The standard agreement can be downloaded from the ministry’s Department of Land Administration Web site.
The Rental Housing Market Development and Regulation Act was enacted in the hope that the involvement of a professional rental housing service business would reduce the costs and burdens borne by landlords.
For rental housing service businesses to repair and manage rented property would require immense personnel costs on their part. Some critics say that these personnel costs would have to be paid for somehow, so this policy could prompt landlords to increase their rent.
However, with respect to the rent charged for social housing, the regulations stipulate that rental housing service businesses must submit information about the rent for review, and they can only rent the property out after the government audits the monthly rental fee.
Furthermore, authorities have set an upper limit for rent. For example, the maximum rent for social housing in Taipei is NT$18,000 per month, and rental housing service businesses are required to sublet at the price that is stated in the original owner’s original lease.
Due to this, rental housing service businesses or landlords who rent out social housing have no opportunity to increase rent or make a profit from subleasing.
Through economies of scale, rental housing service businesses should be able to cut management and repair costs, and provide more efficient rental management services.
The new law intends to fortify the rental system, thus creating a win-win situation for lessors, lessees and rental housing service businesses. As such, it is a welcome initiative.
When notarizing leases over the years, I have observed government incentives for offering property for rent as social housing gradually taking effect, so that many landlords who meet the conditions for social housing are at last able to provide it.
It also makes it easier for older people living alone, who have tended to be overlooked, to be cared for by social workers, while rental businesses provide repair services for their homes.
Considering that the price of housing in towns and cities has doubled and redoubled over the years, the government should uphold the right of abode by at least ensuring that each person has a little space in which to stay.
If the government can go one step further by providing sufficient resources for every tenant to live in a decent environment, it would make society more harmonious.
However, the scales of justice have two sides. The law must also provide safeguards so that landlords can to rent out their properties with peace of mind. It must safeguard their rights.
To uphold the rights and interests of all concerned is a test of the wisdom of the government, rental housing service business operators and legislators.
As for rental agreements, both parties would be well advised to pay sufficient attention to detail, so that the terms of the lease are fair and reasonable, and both sides are be willing to abide by it, thus avoiding future disputes.
Lai Ching-yu is a notary public affiliated with the Taipei District Court.
Translated by Julian Clegg
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