In Yangon, upfront rents stretch tenants, small businesses

YANGON — As rents in the commercial capital rise, the illegal but common practice of landlords demanding six months’ or even a year’s rent upfront is stretching Yangon’s residential and business tenants to breaking point.

Mr Soe Win Maung runs a roadside Shan noodle shop and stays with his wife in the top-floor loft of an old, three-storey building. The monthly rent is 160,000 kyats (S$165) and a payment of six months of rent comes up to 960,000 kyats.

“If we could pay our rent on a monthly basis, it would be fine. Currently, we can’t afford to pay (the lump sum), so we have to share the apartment with another family. We don’t want to share our apartment, but there is no choice,” he said.

The Urban Rent Control Act of 1960 states that a landlord is allowed to demand no more than a month’s deposit. But enforcement is lax, and with demand outstripping supply in Yangon as the economy opens up, landlords have the upper hand. A Real Estate Service Law currently being drafted may help, but it still has to wind its way through Parliament.

It is not only low-income groups who are suffering. For others, the situation presents a different dilemma.
Mr Ko Phone Kyaw, a white-collar employee, said paying lump-sum rents upfront upon signing the lease does not do tenants justice.

“When we rent an apartment, we cannot know immediately if the area is suitable for us by mere inspection. Hence, we need to stay for around a month or two (before coming to a decision), and if it isn’t, we can relocate,” he said. But, under the current system, tenants lose what they have paid if they decide to move out earlier.

For owners of small businesses, upfront rents can form a hefty proportion of their business investment. “When I started a travel agency as an entrepreneur back in 2014, I got into trouble when renting office space. Here (in Yangon), it is very expensive to rent an apartment as an office, and also to pay the rent in a lump sum. Seventy per cent of the investment in my business went to rental expenditure when we submitted our 12 months of rent in advance,” said Mr Ko Phone Kyaw.

Some landlords ask for lump-sum payments even from existing tenants, adding to the difficulty of running a business, said Mr Ko Pouk Si, owner of a restaurant in Kyauktada township.

“My restaurant is located on the ground floor and the rental rate is K1 million per month, but we need to pay 12 months’ rent in advance. The owners are asking for an extra 11 million kyats in the next year (for the remaining 11 months ahead). We cannot go on running the restaurant with the current practice,” he said.

The government needs to start enforcing the Urban Rent Control Act, said Mr Tin Than Oo, a legal and business consultant.

“A long time ago, before independence (from the British), the then-Rangoon Municipal Committee had a panel to supervise the rental market and deal with rental issues with the Urban Rent Control Act. But later (after independence), there was no supervising body, and they (the administration) are not effective in implementing the Act. That is why people are facing these types of problems nowadays,” he said.

The Myanmar Real Estate Services Association (MRESA) would also like to see the property sector properly regulated, said MRESA secretary Moh Moh Aung.

“First, we need an effective law for the real estate sector. We don’t have an existing law (to oversee the industry). And we need to be in a healthy economy because this situation (of paying rent in a lump sum) … is totally dependent on the businesses. Good economy and a sound legal framework, (and then) no one will be plagued by (such measures),” she said.

The Commission for the Assessment of Legal Affairs and Special Issues, chaired by former speaker Thura U Shwe Mann, is in the process of drafting a Real Estate Service Law. But given the time-consuming parliamentary procedures, disgruntled tenants in Yangon will have to continue to stomach lump-sum payments a little longer.

Source: Today

NB: The best way to find information on this website is to key in your search terms into the Search Box in the top right corner of this web page. E.g. of search terms would be “property research report”, ”condominium law”, "Puma Energy", “MOGE”, “yangon new town”,"MECTEL", "hydropower", etc.