Mark (not his real name), an expatriate from England, bought a property in Damansara Perdana a couple of years ago. The agent who sold him the property also recommended a contractor to do the renovations.
Mark appointed the contractor and after approving the renovation costs, paid a deposit of RM50,000 via his real estate agent. As luck would have it, Mark was due to travel to England in the same week that he paid the deposit to his agent.
Assured by the agent that everything would be taken care of by him (the agent), Mark left the country. Upon his return a couple of weeks later, Mark discovered that no work had been carried out on his property and that his agent had absconded with the deposit.
More recently, Mark gave up his property in Damansara Perdana and decided to rent in another area nearby. He found a nice apartment and paid the 1-month advance rental and required deposits for it. He signed the tenancy agreement before moving in.
His landlord however dragged her feet in ratifying the tenancy agreement although she demanded full payment prior to him moving in. Barely 2 weeks into his stay at the new place, and the landlord requested that she be allowed to stay in the same unit.
Mark was naturally averse to this idea but the landlord was insistent. Mark is now moving out of that unit. The landlord is demanding a month’s rent.
Chris, another owner of a property in Mont Kiara, is a British citizen living in Jakarta. He bought his property in Mont Kiara via an agent and left it to her to find him a tenant.
The agent found him a tenant and collected all the deposits, which were banked into Chris’s account. 4 months later, no rental money from the 2ndmonth of the tenancy period has been banked into Chris’s account. His agent claims that the tenant had not been paying the rent but she has not done anything about it.
The tenant on the other hand, claims he has been paying the rent. An ordeal follows as Chris tries to recover his money.
In my short experience in the real estate business, I have come across many disturbing stories. Rogue agents, unreasonable landlords, and bad tenants lurk around in the market like sharks and prey on the trust of good people. A good number of victims that I have come across are foreigners. Thankfully though, such cases are the exception, and not the norm.
So, how do you protect yourself from this exception?
1. Screen Your Agent
It is very probable if you are looking to buy or sell property that you go through an agent. If you live overseas, you may fully rely on your real estate agent to find you a tenant and do the needful with regards to the tenancy.
A real estate agent can save you plenty of time but a rogue agent can cost you a lot too.
One of the best ways to avoid falling prey to sub-par agents is to request for referrals. Ask them if they can provide you with 3 satisfied clients in the area which they specialize in.
Call the referrals, and ask them about the agent. You could be very candid and say that you are going to appoint Mr. so-and-so as your agent and would like to know the quality of his service.
Another method is to find an agent via peer recommendation. Ask friends and family for good agents that they have dealt with. This is not only a very easy screening method, but it is also very effective.
2. Know When To Walk Away
In Mark’s case above, there were signs that his landlord was going to give him a hard time even before he signed the Offer to Rent. She made very difficult demands but Mark loved the property and wanted it.
Similarly a potential tenant, who drags his feet in paying you the initial deposits and advance rental, should trigger warning bells.
In many property transactions that have turned sour, I have noticed that there were warning signs. It can be in the form of ridiculous demands, fickleness, or plain rude behavior. Some of us may tend to overlook this in the excitement of concluding the transaction.
It will be wise to play on the side of caution if you notice any of these signs. Better to walk away from a bad deal than deal with it later. Trust me, it is time consuming and drains your energy.
3. Leave Nothing Unwritten
If you are purchasing a property, prior to signing the Sales and Purchase Agreement (SPA), you will be signing an Offer to Purchase (OP). If you are renting, you will sign an Offer to Rent (OR) before the actual Tenancy Agreement (TA). These documents are binding documents that will be prepared by your real estate agent.
Leave nothing to chance in these documents. If you are told that the property will be sold with 4 wall air-conditioners, ensure that it is written down in the OP. I have experienced a dispute where a property was to be sold with a particular wardrobe that the buyer liked. Unfortunately, this was not written down in the OP and the owner changed his mind about the wardrobe later. The buyer had no recourse.
Similarly, if you are renting a property, ensure that the furnishing it comes with is included in the OR. Explicitly state any special arrangements in the OR.
Before signing the TA, read it thoroughly. Look out for exit clauses and understand them. Ensure both parties sign it before you move in. It is within your rights to request changes to the TA. This is a matter of negotiation between you and the owner.
4. Focus On Prevention Not Cure
I tell this to all landlords when they ask me what recourse they have if a tenant does not pay rent or damages their property. Having an airtight agreement will protect you and come in very useful but going to court is a long drawn process.
Sometimes it is better to ensure that you get a good tenant from the start. There is no way to guarantee a tenant is going to be great, but just as you can screen your agents you can screen your potential tenant.
Get good lawyers who specialize in property transactions and have demonstrated ability to draw out SPAs in a timely manner. This will save you a lot of hassle and ensure that you do not forfeit your earnest deposit. I know of a property owner who is being sued for not executing the SPA in a timely manner. The delay was by the lawyer.
When purchasing a property, ask your agent to check with the vendor (seller) if they have all the necessary documentation to conclude the transaction before paying the earnest deposit. Missing documents can drag the transfer of title.
Most importantly, demand professionalism. Do not settle for less. The bad apples lack professionalism, integrity, and honesty. Avoid characters that exhibit a lack in any of these qualities.