If you’re a property investor, you would have come across advertisements or agents telling you that you can easily earn 8% to 12% per annum off your property through Airbnb.
But are you committing a crime?
Is Airbnb legal in Malaysia?
Short-term rental platforms like Airbnb have revolutionised the property game in recent years throughout the World by introducing an entirely new channel of investment for homeowners beyond long-term tenancy and capital appreciation.
For Malaysia, in 2017, guest arrival year-on-year growth hit an average of 137%, making us the fastest growing country in all Asian markets. Today, it isn’t uncommon to see profits upwards of 7% for Airbnb units, especially in “hot” areas such as those around KL City Centre and Changkat, Bukit Bintang.
Too good to be true?
If you have clicked on a property ad on Facebook promising you good returns on your investment, chances are that you have property agents cold-calling you with lucrative promises of Airbnb if you purchase their properties.
While short-term rentals can potentially offer you much higher returns than long-term tenancy, it’s important to note that running a rental like Airbnb requires time and effort on your part.
First of all, you would need to get your place “Airbnb ready”, which means to fully decorate and equip it with everything a guest would need, such as kitchen appliances, good quality linen and amenities like shampoo, soap and tissues.
Once your listing is up and running, there are enquiries to reply to, guest check-ins to handle, special requests to cater for, and most of all, the tedious cleaning in between stays.
If, however, you have a full-time job and/or a family to take care of, then your other option would be to engage a professional operator, removing all your hassles for a management fee, which can range from 20% to 30%.
Another thing to take note of is that short-term rental platforms like Airbnb are very dependant on ratings and reviews from guests. Starting a fresh listing without ratings would usually require you to compete at low prices and increased efforts to please guests in the beginning.
Done right, over a few months, you would potentially have a smooth system and a good base of ratings and reviews, allowing you to charge a fair rate and get a good number of guests wanting to stay at your property. Well performing 3-bedroom condominiums can easily achieve a revenue of RM5000 or more during the holiday months.
Would you be committing a crime?
The common question that arises is the legality of running Airbnb out of a property. A search on Google will probably yield nothing more than vague responses in outdated articles on news portals.
While in Sabah, Airbnb has been declared illegal by the state government, it is legal to run a short-term rental in the rest of the country.
Specifically, if a development has a commercial title, usually serviced apartments, SoHo and SoVo units do, then operating an Airbnb unit would not be an issue.
If, however, the unit is under a residential title, here’s where it gets a little tricky:
- Is it stated in your development’s by-laws?
Don’t worry about going to jail or having a police record. If Airbnb isn’t allowed in your development, you won’t be committing a crime, you would just be in violation of your development’s by-laws, which under the Malaysian Strata Management Act 2013, is subject to a maximum penalty of RM200 per infringement.
As per the exact words in the Strata Management Act:
A joint management body may, by a special resolution, make additional by-laws or make amendments to such additional by-laws, not inconsistent with the by-laws prescribed by regulations made under section 150, for regulating the control, management, administration, use and enjoyment of the building or land intended for subdivision into parcels and the common property, including all or any of the following matters:…
(i) Imposition of fine not exceeding two hundred ringgit against any parcel owner, occupant or invitee who is in breach of any of the by-laws.
What this basically means is that if your development’s by-laws do not contain terms disallowing short-term rentals, then you’re good to go, no matter what your nosy neighbours say.
- Can a development ban short-term rentals?
Well, yes and no.
In Kuala Lumpur, some property lawyers are of the notion that to officially ban short-term rentals like Airbnb from a development, the Joint Management Body (JMB) or Management Corporation (MC) can vote, during an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM), to disallow short-term rentals with an imposition of a fine for any owners found breaching the by-law.
For this to be passed, a special resolution is required. Compared to an ordinary resolution, which only requires a simple majority of the votes, a special resolution requires not less than 75% of votes.
On the other hand, the Strata Management Act 2013 also states that
“No additional by-law shall be capable of operating to prohibit or restrict the transfer, lease or charge of, or any other dealing with any parcel of a subdivided building or land…”,
If you read the previous excerpt, a JMB or MC cannot make additional by-laws inconsistent with the existing by-laws, making this special resolution, if proposed – legally debatable.
Seize the opportunity
The Malaysian government has not officially issued guidelines on the short-term rental phenomenon that’s taking Malaysia by storm.
However, the sentiment is that the government of the day will be supportive when taking stance on the issue, looking at how important tourism is to our economy amidst the shortage of hotel rooms in Malaysia (23,600 rooms per day in 2017).
So seeing as how Airbnb is legal in Malaysia, if you own property and are considering listing it under Airbnb and other short-term rental platforms, now might be the best time to capitalise on this fast-growing market and influx of tourists to maximise your investment returns.