In order to promote reasonable and fair residential lease agreements ("Residential Lease Agreements") and to cope with the disputes arising therefrom, the Ministry of the Interior, Executive Yuan (MOI) promulgated the "Mandatory and Prohibitory Provisions of Standard Contracts for Residential Lease Agreement" ("Guideline") pursuant to Article 17 of the Consumer Protection Act ("CPA") on 23 June 2016.
The major points of the Guideline are as follows:
A. The following provisions are mandatory to be stipulated in the Residential Lease Agreements ("Mandatory Provisions"):
- A contract should be reviewed for a period of no less than three days.
- The amount of the security deposit should not exceed the total of two months' rent.
- The party that is responsible for the payment of water charges, electricity charges, and any relevant taxes and expenses must be specified.
- Whether early termination is permitted under the Residential Lease Agreement must be specified. If the answer is yes, a requisite prior notice period has to be given. In addition, the penalty for early termination of the Residential Lease Agreement should not exceed one month's rent, and the rent paid in advance should be returned to the tenant upon the termination (in the case that such termination is not due to the tenant's default).
- Procedures regarding confirmation and delivery of the leased premises and the calculation of the penalty for failure to return the leases premises should be specified.
- The causes for termination by either party should be expressly stipulated.
B. The following provisions are prohibited from being prescribed in the Residential Lease Agreements ("Prohibitory Provisions"):
- A waiver of the period for the review of the contract.
- A provision stipulating that advertisements are for reference only.
- A provision prohibiting the tenant from declaring rent as an expense for tax purposes.
- A provision prohibiting the tenant from reporting the leased premises in his/her household registration.
- A provision stipulating that should taxes to be borne by the landlord be increased due to the execution of the Residential Lease Agreement, the tenant should bear such extra taxes.
- A disclaimer of the statutory liability for warranty under the Civil Code for landlord's intentional concealment of defect(s) of the leased premises.
- A provision stipulating that the tenant is obliged to return the original of the Residential Lease Agreement to the landlord.
By the operation of Article 17 of the CPA, any provision of the Residential Lease Agreement in violation of the Guideline should be null and void. Also, the Mandatory Provisions, though not provided in the Residential Lease Agreements, should be deemed as having been stipulated therein. Moreover, according to Article 56-1 of the CPA, a landlord in violation of the Guideline will be subject to an administrative fine of up to NT$300,000 and consecutive default fines if he/she fails to rectify the non-compliance as ordered by the Consumer Protection Committee, Executive Yuan (CPC).
In addition, the MOI further clarified that the Guideline should apply to the tenant that is a final consumer and thus, should not apply to the premises leased for business use/purposes. As for the landlord, if he/she is continuously in the business of leasing, instead of leasing on a one-off occasion, he/she should fall within the definition of an "enterprise" under the CPA and therefore, be subject to the Guideline. In the Taiwan market, "individual landlords" make up a significant proportion of residential leasing. However, the criterion for judging whether one is "continuously in the business of leasing" is still being discussed by the CPC and other relevant authorities.