We take a look at the top questions Malaysian homeowners and property investors might have about listing their residential units on short term rental accommodation platforms to earn passive income.
Short term rentals have been a lifesaver for many property owners and landlords in the past few years. Online platforms such as Airbnb which allows property owners to book or lease out their homes as short-term accommodation can be a great source of revenue, especially now that travel is booming again post MCO. According to Airbnb, more than 60% of new Airbnb hosts in Malaysia in H1 2021 comprised millennials aged between 25 and 40!
Before you jump onto the short term rental bandwagon, you might want to educate yourself on the related laws and know-hows as Airbnb regulation is not the same throughout the various states in Malaysia.
1. Is Airbnb legal throughout Malaysia?
There are actually no specific laws in Malaysia in regard to Airbnb. However, the legality of Airbnb is explained by the Urban Wellbeing, Housing and Local Government Ministry, where Airbnb is said to be an online transaction and is an agreement between a host and a traveller.
This means that Airbnb in the rental context is just an agreement between two parties who connected via a site and have mutually conformed to let out/rent the property for several days. Nevertheless, although there are no Federal laws acting upon Airbnb, it is currently being regulated by the local government in each individual state.
Strict Airbnb ruling in Sabah
For instance, in 2017 the state government in Sabah confirmed that the operation of Airbnb units in residential buildings in the state is illegal. The main reason behind the Airbnb ban in Sabah is to safeguard the hotel industry from the rapid growth of short term rental accommodations.
Airbnb is (considered) a business, but if an apartment is built as residential property, it cannot be used for commercial purposes. Kota Kinabalu City Hall has taken the right step to ban Airbnb. – Datuk Pang Yuk Ming, Former Sabah Assistant Tourism, Culture and Environment Minister –
However, the Sabah state government has since then drafted some guidelines for Airbnb hosts. Owners of properties on lands zoned for commercial or commercial mixed-use only are allowed to rent out their units as short term rentals but they must first apply and seek approval for a lodging house license to operate. The hosts must also comply with fire safety requirements.
Penang – State gov introduced new STRA Guidelines in 2023
Earlier this year, Penang Local Government, Housing, Town and Country Planning Committee Chairman Jagdeep Singh Deo announced that the Committee has initiated two guidelines to regulate short-term stays in Penang – one for residential high-rises and the other, for landed properties. Both guidelines have been approved by the state executive council on March 8, 2023.
Some of the conditions in the guidelines include:
- For stratified projects classified under ‘residential zone’, approval must first be obtained from the joint management body (JMB) or management corporation (MC) through the annual general meeting (AGM). Service apartments classified under ‘commercial zone’ must also comply with the term.
- Owners or operators of stratified premises/units will be required to register with the local authorities.
- The maximum annual rental period is 180 days.
- The operational days for every rental transaction are limited to three days. Any additional days requires approval from the relevant JMB or MC.
- The number of tenants in one premise or unit is controlled according to the size of the particular premise.
- The premise owner/operator is required to produce annual statements and a STA operation report to the JMB or MC. The JMB or MC will then submit the reports to the Commissioner of Buildings (COB) with the Yearly Meeting Report in hand.
“After complying with all the terms in the guidelines, and if approval is given (for the residential or commercial unit), the short-term stay must not be more than three days in a row. And it must also not be more than 180 days in a year,” he said.
Prior to this, operations of short-term accommodation in Penang only need to get approvals from the respective building’s JMB and MC. The management would need to conduct an annual general meeting (AGM) to seek approvals from the unit owners, where 75% of residents must provide their approvals.
No specific law in Klang Valley
Selangor and Kuala Lumpur have not outrightly banned Airbnb, but some local authorities have come with new ways to regulate short term rentals in Malaysia. DBKL for instance encourages property owners to register their residential properties online. With thousands of condominiums scattered across all of Klang Valley, DBKL has delegated its powers to residential managements when it comes to short term rental regulations. Thus, whether or not you are allowed to lease your unit on Airbnb is up to your JMB or MC – who might enforce by-laws.
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2. Strata by-laws or House Rules may prevent certain tenancies
Before we dive into this part, let’s look at what by-laws are. Just like how there are major laws that apply to all Malaysian residents, by-laws are the minor laws that apply to smaller groups of people. These are usually made by your Local Council or Majlis Perbandaran or even the corporation you belong to. Similarly, your condominium management may also have a set of by-laws that all residents are to follow.
For example, your strata building by-laws may state that if you don’t pay your maintenance fees for more than 3 months, your access card will be barred. Or if you park in someone else’s parking lot, the management will clamp your car. In the same way, your JMB or MC can propose and enforce by-laws that prohibit rentals that disrupt the peace or security of the building. This can include tenants that are noisy, dirty, inconsiderate and so on.
3. Landmark ruling by Malaysian court now allows condos to ban short-term rentals
In October 2020, the Federal Court ruled that management corporations (MCs) and joint management bodies (JMBs) could ban short-term rentals through their own house rules. The landmark decision was made during the case of Innab Salil & Ors vs Verve Suites Mont Kiara Management Corp. According to media reports, the property owner, Innab Salil owned several units in Verve Suites and on multiple occasions, his house guests had misused the common facilities at the property and caused nuisance to the building’s residents.
Various complaints led to the MC passing a new House Rule – prohibiting the use of residential units in Verve Suites for business including short-term rentals. The resolution was approved by a majority vote of 96-4 by the residents present during an extraordinary general meeting (EGM).
MORE: Sublet Agreement In Malaysia – What You Should Know
4. What property owners should do before exploring Airbnb
As management bodies can now create by-laws to curb short-term rentals, it is advised that property owners who are thinking of renting out their units on Airbnb check with their JMB or MC beforehand. Do keep in mind that the Federal Court’s decision also applies to landed strata schemes such as townhouses and landed gated and guarded homes.
Meanwhile, investors who are looking to purchase residential units for the purpose of short term rental accommodations must conduct the necessary due diligence beforehand. This includes speaking to existing residents in a residential building to determine what the current living environment is like – What is the ratio of long term residents to short-term tenants in the building? Have there been complaints about Airbnb guests?
Do take note that you cannot get away with an absent or less than diligent management body. If residents of a condominium, apartment or serviced residence are unhappy over how the management is dealing with unruly Airbnb guests, they can info their local authority such as DBKL. The local authority can then instruct the JMB or MC to conduct an EGM on the matter and to get residents to vote on a new House Rule.
5. Is the Malaysian government working on regulating short term accommodations?
In 2019, a public consultation was held by the Malaysian Productivity Council (MPC) to obtain public opinion on the regulation of short term residential accommodation (STRA) in Malaysia. MPC had developed a draft STRA guideline based on existing legal laws as well as input from key stakeholders; policymakers and regulators. The guidelines covered issues such as licensing, nightcaps, building safety, maximum occupancy, nuisance control and taxes and fees that property owners should pay for revenue obtained from Airbnb, etc. Based on what we can find online, the STRA guidelines were supposed to be finalised in December 2019. However, things took a backseat when the Covid-19 pandemic broke out in March 2020.
Update on STRA Guidelines
In Feb 2023, Local Government Development or KPKT Minister Nga Kor Ming said that his ministry is working on the STRA Guidelines. Nga Kor Ming clarified that while homestay activities are under the jurisdiction of state governments, matters related to tourism falls under the federal government’s jurisdiction. Since regulatory activities involve the role of local authorities, KPKT through the Town and Country Planning Department (PLANMalaysia) is working on the STRA guide. We will update this section accordingly once any new news on the STRA Guide is released.
In the meantime, we would encourage new short term rental hosts to refer to the respective platform guidelines to ensure that that they are hosting responsibly. Alternatively for more tips, you can join these FB groups catered for Airbnb hosts:
Check out Is your rental property suitable for Airbnb & how can hosts earn good money?
*This article was originally published as Your Majlis Perbandaran can fine you for turning your house into an Airbnb and is written by Matdura.S
Edited by Reena Kaur Bhatt