New rent law could stabilize garment sector, says expert

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Since the raise in minimum wage, rental prices for low income dwellings have steadily risen. Pha Lina

New rent law could stabilize garment sector, says expert

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 control law that would limit the ability of landlords to increase rental fees between contract periods for lower income workers.

This agreement came in light of continuing unrest among low-income workers throughout 2014, particularly in the garment sector, as three minimum wage increases introduced since 2013 have been met with consecutive rent hikes by landlords targeting low-cost renters, effectively diminishing the benefits of the wage increases.

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The new rent law could protect tenants and their families. Pha Lina

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, June 18.

The draft version of the 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.

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

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Outside of a rental home near a garment factory. Pha Lina

Opposition party leader Sam Rainsy and various other commentators believe the new 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 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.”

Whether or not the new 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.

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Government officials are currently seeking a new rent law to stabilize prices. Pha Lina

“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.” James Whitehead is the content director for realestate.com.kh

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