KUALA LUMPUR: Landlords can be held liable if they allow illegal activity such as storing illegal cigarettes on their property.

HELP University Faculty of Business, Economics and Accounting and Institute Crime and Criminology senior lecturer R Paneir Selvam said landlords are choosing to ignore tenants' backgrounds to service on-going bank loans under the current economic upheaval or conduct sufficient tenant due diligence.

"This is especially so, especially if they are offered above the market rate or paid twelve or twenty-four rentals in advance," he said, adding that such crime is punishable under Section 135 of Customs Act as well as Section 107 and 108 of the Penal Code.

Paneir comments came following a series of news reports highlighting the rise in cases where warehouses, shop lots and even homes were used by criminals to stash large amounts of illegal cigarettes before distribution in the domestic market. 

"This ignorance or oversight will often land them into trouble as there are multiple reports of tenants using warehouses or private homes for nefarious activities such as storing contraband goods like cigarettes," Paneir said.

Last week, Royal Malaysian Customs Department director-general Datuk Seri Abdul Latif Abdul Kadir warned landlords that they could be charged under Section 135 (1)(d) of the Customs Act 1967 for allowing tenants to store uncustomed or forbidden goods.

Paneir explained that if the landlord knows that his tenant is using his residence to conceal illicit cigarettes, not only the tenant but also the landlord as the owner of the house, can be charged under this subsection, which carries a minimum fine of RM100,000 or minimum imprisonment of not less than 6 months and not more than five years or both.

"Furthermore, anyone convicted for a second or subsequent conviction faces a minimum fine of RM200,000 or jail sentence of not less than 6 months and not more than seven years in prison or both," he said.

Therefore, he said it is the landlord's responsibility to scrutinise the potential tenant's background and be answerable for whether or not their property has been used for illegal activity.

"Moreover, the landlord has the onus to prove in court that he did not know the alleged behaviour of his tenant. By accepting rent and proving other circumstances in court, he bears a heavy burden as a homeowner. This is a negligible risk borne by the owner," Paneir said.

If illegal activities are being committed, the landlord must file a police report and take legal action against the offending renters.

If the landlord is aware of the illegal activity, the court may hold the landlord liable for aiding and abetting the tenants under Section 107 and 108 of the Penal Code," Paneir said further.

Paneir said that there are some instances that landlords trusted real estate agents, who were enticed by the attractive commission rates from tenants engaged in illegal activity.

He said landlords should check the credentials of such agents and alternatively check whether they are registered agents.

"To avoid issues, landlords should enter into proper tenancy agreements with tenants before renting out their properties.

"Landlords should also conduct a due diligence on the nature of their tenant's business for business purposes and ensure proper identification of the tenants for residential purposes before engaging into a tenancy agreement," he said. 

Tenancy arrangements are normally governed by contract law, and if any illegal activities are carried out on the property, the tenants will be held liable for breach of contract.

This would violate the tenancy agreement's covenants, and the tenant would be liable for damages to the landlords.

Landlords have the responsibility to ensure that their tenants are not engaging in any illegal activity, and if they are, they must report it to the appropriate authorities.

"In a nutshell, landlords should thoroughly evaluate tenants and choose people who are more likely to follow the law. They should also keep an eye out for unusual activities, such as increased traffic into and out of the rental property.

"Meanwhile, the landlord must remove any violent or suspicious tenants by questioning them about their criminal history and drug use.

"They should also respond to concerns from tenants and neighbours regarding illegal activity on the rental property. Then, report an incident to the police as soon as they become aware of it. Finally, they should speak with security professionals to determine what steps they need to take to detect and prevent criminal activities on the rental property," Paneir said.

https://www.nst.com.my/business/2021/09/726110/landlord-will-face-fines-jail-time-if-their-warehouses-private-homes-used