Last week we looked at what was and was not revised in the new laws. The main areas revised concern:
- The right to terminate an agreement
- The recognition of signatures of the Tenant and Landlord
- The establishment of an arbitration centre for lease agreement related disputes
- Two revisions were not passed, both concerned with the concept of ‘Rent Control’ and the establishment of an index by which rent increases can be governed
- This week we look at the revisions in greater detail
1. THREE YEAR TENANCY CONTRACTS
What are they ?
There has always been an awful lot of confusion regarding tenancy law and the minimum rental period.
Currently it is perceived incorrectly that the minimum term of a contract is two years.
According to the current regulations (Under ‘Tenancy Law’) there is no such thing as a minimum term, but there is a maximum term of no more than 30 years.
However, a landlord does not have the right to terminate an agreement unless it has run for a minimum of two years. The terminology here is ‘unilateral’ termination.
In other words, a one year agreement is legal, but if it is to terminate after that one year, both parties must agree. The terminology here is ‘mutual’ termination.
The tenant then has the legal right to remain in the premises for a further year either under a new agreement or under the same terms and conditions as the old one if a new agreement is not reached.
The landlord does not have the right to terminate the agreement within this time frame.
Simply put, the revision to the Civil Code means that the 2 year term will be revised to 3 years.
What’s the purpose / intent of the new law?
The government is hoping to offer tenants a little more certainty and security than they have at present by assuring them of this minimum term.
What does this mean for you ?
As a tenant, there will be the additional security of knowing that you are in your apartment for a minimum of three years rather than two.
As a landlord, you will now typically start with a three year lease agreement instead of the traditional two years or shorter.
What are the positives, negatives & other thoughts on the law
On the face of it, this would seem to be a victory for tenants and a potential inconvenience for landlords. It is certainly positive in offering tenants more security once they are in an apartment.
However, the negative consequences of this law may create the effect of raising rental prices as Landlords now want to look further into the future to cover costs.
Thanks to a multitude of reasons there is a shortage of quality housing in Macau, and this measure may serve to deter Landlords from renting, not encourage them.
There are also some unanswered and yet very important questions that must be addressed.
Possibly the most important of these is that under the revised law the landlord is unable to terminate a lease agreement within 3 years. At the same time, the Landlord remains liable under Macau Law if they rent a premise to someone not legally entitled to remain in Macau.
With approximately 150,000 foreigners working here and work permits being renewed for as little as 12 months, the landlord is in the precarious position of breaking the law for terminating an agreement and for not terminating an agreement should the tenant lose their work permit status in Macau.
This is why it is so important for an agent to understand the law and legal repercussions. It is possible to protect a Landlord without detriment to the Tenant, but the setting up of this protection must be done at the outset. Landlords who insist on not paying agents or lawyers to represent them may pay a very high price in the new environment.
Next Week: Final article discussing the revisions in more detail
Juliet Risdon is a Director of JML Property and a property investor.
Having been established in 1994, JML Property offers investment property & homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.