Real Estate Matters | The new laws and how they affect you – Part 3
Juliet Risdon
This is the final article in the series looking at the revisions to the laws and how they affect you. 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
This week we look at the second and third revisions that concern notarization and arbitration.
LEASE AGREEMENT SIGNATURES MUST BE NOTARIZED
What is it ?
Both the Tenant and the Landlord must have their signatures notarized on all Lease Agreements.
What’s the purpose / intent of the new law ?
We assume that the motivation of the Government with this revision is to avoid rental scams in any shape or form.
The government has also mentioned the payment of rental income tax as a motivation for the introduction of this measure. However, were this the case, they surely would have followed the much simpler model of requiring all leases to be registered rather than notarized in order to be legally valid.
An un-registered lease would be worthless, and therefore in both parties interests to ensure registration. In addition, hefty fines for non-registered leases would also discourage tax avoidance.
Interestingly, one of the reasons cited by government officials for the low rate of rental income tax disclosure was ‘a low level of awareness’ amongst Landlords.
What does this mean for you ?
Despite a massive outcry, this measure is unlikely to have any major effect on either party, at least for the present time.
Whilst the revision calls for signatures to be notarized, the job of the notary is simply to check that the signature itself is consistent with that shown on a recognized document such as a passport or ID (Although not on a Hong Kong ID since they do not show a person signature).
The consequence for not notarizing a lease agreement is that the agreement is invalid, according to Article 212 of Civil Code. As a Tenant this is an additional step in the rental process, and is of course an additional cost both in time and money. The lease agreement will become effective once the signatures of both parties are notarized.As a Landlord this will also mean an extra step in the process, an added expense and potentially a slower turnaround on vacant property. However, once again there is a way to address this issue quickly and efficiently with a minimal cost through your agent or lawyer.
What are the positives, negatives & other thoughts on the law
On the positive side, this measure may discourage fraudulent contractual activity, and if the government feels that this is the major problem with the Macau housing market, then this is one way to address it.
The largest potential negative of this policy is a withdrawal of the supply from the market.
Many owners are reluctant to become Landlords, they simply do not want the hassle of dealing with Tenants.
Combining this policy with the previous one, the incentive for owners to become Landlords seems to have been diminished. However, frankly this is only the case if owners are given bad advice.
The new revisions should offer a higher degree of confidence to Tenants and may therefore help that side of the market, which in turn will offer those owners who have been well advised and prepared an increased opportunity.
THE ESTABLISHMENT OF A RENTAL LEASE ARBITRATION CENTRE
What is it ?
The introduction of an Arbitration mechanism to solve Lease Agreement disputes provided that both the Landlord and Tenant agree to the Arbitration process.
What’s the purpose / intent of the new law ?
The law courts are swamped, and with cases piling up any easing of the situation is good for all parties concerned.
An Arbitration centre will prove less costly and much faster than pursuing the current legal process. The intention is exactly that; Offering Landlords and Tenants a way to resolve disputes quickly and cost effectively.
What does this mean for you ?
For both Tenants and Landlords, this Arbitration service should be an invaluable resource.
Placing a dispute in the hands of Arbitration should mean that both parties benefit equally at the outset of a dispute, having a neutral party to offer accurate and enforceable guidelines to bring an end to most disputes.
What are the positives, negatives & other thoughts on the law
The motivation of the centre should be to resolve issues as quickly and efficiently as possible, and therefore as decisions on issues are made with this outcome in mind.
The positives of such a centre are numerous and obvious, and the establishment of this centre is fantastic news for all. Of course, both parties must agree to the arbitration process, and this would usually be done long before any dispute arises.
Conclusion
We have covered the three main areas of revision in this newspaper article, and hope that it helps to clarify the new laws for you whether you are a Tenant or a Landlord.
There has been a lot of criticism of these revisions prior to their being passed, but now they are due to come into effect the question.
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.
www.JMLProperty.com
info@JMLProperty.com
