Rents 'may rise' on regulations

Apartment owners are not happy about the latest regulations. (Photo by Pattanapong Hirunard)

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Apartment rents are likely to increase after the Office of the Consumer Protection Board's (CPB) new regulations that control lease contracts for residential properties took effect on May 1, say legal and property consultants.

Chinapat Visuttipat, a partner at law firm Siam City Law Offices Ltd, said the new regulations will have a strong impact on apartment owners as they need to revise lease contracts and raise rents to cover new risks.

"As the new regulations do not allow apartment owners to collect rents more than three months in advance, monthly rents might be raised," he said.

The new rules state that those renting out five residential units or more per month cannot collect more than one month's rent as a deposit and one month's rent for a damage guarantee, on top of the first rent payment. Landlords at more upscale buildings have collected more than three months' rent to cover the costs when more expensive furnishings get damaged.

Apartment owners have also been prohibited from collecting utility bills (water and electricity) in excess of the real cost.

But landlords sometimes collect higher utility fees to cover other expenses like garbage collection, electricity for the elevator, CCTV, water pump, key cards, cleaning and security services.

Mr Chinapat said some apartment owners have decided to raise rents 500-1,000 baht per month to cover common area expenses.

He said a group of apartment owners representing more than 6,000 projects nationwide had submitted a letter to the Administrative Court seeking to stop the new regulations.

"Many tenants have higher rents as apartment owners want to cover other expenses," he said. "When compared with previous rents plus water and electricity bills, the new rents will be higher," said Mr Chinapat.

Suphin Mechuchep, managing director of property consultant JLL Thailand, said the three-month cap may hurt foreign tenants, who are frequent travellers.

"Those travelling frequently may be willing to pay rent for an entire year, which they can also get a discount for. But the regulations should be clear on this issue so that lease contracts will not be voided," she said.

She said payment of water and electricity bills in line with actual costs may not be practical due to variations in monthly cycles and the dates tenants actually move in.

There are also discrepancies between main- and sub-metres, a cost which gets passed on to apartment owners, said Mr Suphin.

"Rents will need to rise eventually to cover other expenses like facilities and maintenance," she said.

Mrs Suphin said a one-month deposit is too small, as the time period provides landlords too little time to track down delinquent tenants.

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