Property consulting firm Jones Lang LaSalle (Thailand) Ltd (JLL) said that the new residential leasing law , effective on May 1, will make it more challenging for landlords to handle tenants who violate any of the agreed-upon terms and conditions of a binding contract.
One of the new regulations that has concerned lessors most is the restriction on a rent deposit. At present, most lessors ask for a rent deposit equivalent to two months’ rent while the new law limits a rent deposit to one month’s rent, which will assure that the lessor will receive the final month’s rent when the lessee vacates at the end of the lease contract. However, some lessees fail to pay rent for more than one month or, in a worse case, neither pay rent nor move out after the leasing contract expires. As a result, a lower deposit will mean a higher risk for the lessor.
There are also other restrictions that worry lessors. For example, the new law does not allow the leasing contract to include any term that allows the lessor to confiscate the rent and security deposits, or obstruct the tenant’s access to the leased property. Without those terms, a question arises: How will the lessor handle a lessee who fails to pay rents and or utility bills, or do move out upon the contract expiry? In this case, the lessor should seek advice from a legal specialist who can advise measures that could be taken to handle such an unprincipled lessee legally.
JLL does not expect lessors to raise rents in response to higher risk that they have to take when the new law takes effect. With fierce competition in the leasing market, particularly in Bangkok where more and more condos are put up for rent, it is unlikely that the lessor would be able to raise rents. The best thing they could do is to screen prospective tenants more cautiously, Bunthoon Damrongrak, head of Residentail of JLL said.
Though the new law will be applicable to individual investors or business entities that lease at least five property units in one building or more to individuals for residential use, JLL does not expect investors to be restrained from purchasing up to five condos as a buy-to-let investment. While the new law will have no impact on rents, decisions to buy condos as an investment depend more on rental returns or capital gain and upside prospect of the units.