New Rent Law Could Stabilize Garment Sector, Says Expert

Feb. 16, 2017, 12:16 p.m.

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Prime Minister Hun Sen and opposition leader Sam Rainsy announced publically in February this year that they were committed to working together on a new rent law that would limit the ability of landlords to increase rental fees between contract periods for lower income workers.

As the Cambodian property investment market continues to expand, adding more high-rise condominiums to an ever-developing skyline, the construction sector has become a backbone of the Kingdom’s economy that attracts investment from across the region. But as the ASEAN integration opens up at the end of this year, with the promise of deeper market integration, the race to attract foreign investors to individual markets appears to be accelerating.

Matthew Rendall, Partner at Soksiphana & Associates, suggests that “given the importance of the garment sector to the national economy, stability of this work force is important. To have rent increases each time the minimum wage is raised will only likely lead to further industrial action, calling for further wage rises. Rent controls would hopefully help towards calming industrial relations.”

Rendall notes the new law does not appear dissimilar to protective measures that have previously been enacted in other countries around the world, including the UK.

The final draft of the new rent law was slated to go before the National Assembly by the end of last month, officials from the bipartisan working group said on Thursday 18 June. The draft version of the rent law, released in mid-June, pronounced a clear ambit to promote a balance between the rights of tenants and landlords, as directly stated in Article 1 of the draft law.Pha Lina, Post Property

Some commentators from the real estate sector have since challenged the draft rent law on the basis that it appears to give low wage renters the ability  to arbitrarily escape rental contracts without notice, disproportionately damaging landlords’ interests.

Opposition party leader Sam Rainsy, and various other commentators, believe the new rent law shall promote the defacto use of long-term rental contracts across the Cambodian low-rate rental market, which will in-turn protect both landlords and tenants.

According to the draft version of the rent law, landlords and tenants must agree to no less than a two-year contract, during which period the landlord can only end the contract on the basis of two consecutive failures to pay rent, or a notable misuse of that property.

“It is important, though,” says Rendall, “as with all laws, and particularly this one, to consult with the stakeholders and those who will be impacted by the law – primarily, the workers and the low cost housing landlords – to ensure the reality of the law once enacted and in practice can adequately address the issues of concern for both parties.”

Pha Lina, Post Property

Whether or not the new rent law will have a restricted ambit in regards to rental rates, applying only to the low-cost rental sector or the rental market at large, has also been a point of contention among commentators since the draft law’s release.

“Outside of low income rental sector though,” Rendall suggests that for determining the value of property, “market forces are probably the best guide; otherwise there is a risk that the growing Cambodian property development sector may be adversely affected.”

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Note: All photos used in this article belong to Pha Lina of the Phnom Penh Post.