When searching for a property to buy, you’d consider the bare essentials like the price, location, facilities, whether it’s a leasehold or freehold property, and if it comes fully-furnished or bare.
Before you settle on a home, however, one small but VERY significant aspect you should consider is who the property developer is, and your rights as a homeowner, especially when it comes to certain legalities concerning the project.
Choosing The Right Developer
You might be thinking, “Why the fuss over who built my home, when my concern should be about me living inside?”
Let’s think of it as a family: Both the parents (which are the developer and contractor), work together to provide a happy life and home for their children (that’s you, the buyer!).
If a parent doesn’t play their part well, it affects the child; this means that as a homeowner, it could affect your lifestyle and comfort, perhaps even your safety.
Before you decide on a home, consider the background of the property developer, by doing as much background research on them and asking all the relevant questions.
Do they have a reputation for good, high-quality work? Are projects completed on time? Have any of their projects been abandoned, or seem like it’s been ‘under construction’ for more than 5 years?
If the answers are yes, yes, and no, then chances are that they’re pretty credible. Additionally, purchasing a property from a top developer might reap better returns when it’s time to sell or rent out, thanks to the developer’s brand recognition.
Why Choose A Top Developer?
There’s a reason why certain developers are the crème de la crème – and it’s because of their spectacular understanding of planning laws, construction requirements, and their dedication to making a good return investment.
When it comes to buying a property, there are a few ways to tell the difference between a top developer and a mediocre one.
A good developer has a proven track record of experience in offering quality projects to buyers, and they’re more likely to provide better financial security than run-of-the-mill developers.
These top developers also pride themselves on excellent project planning and scheduling, and as they have such good credentials, their reputation and brand familiarity are high up in the minds of property seekers.
Even if you don’t intend on choosing one of Malaysia’s top developers, there’s absolutely nothing wrong with that!
Just be sure that the property developer you’re dealing with has an Advertising Permit and Developer License (APDL), which is legally required for developers to sell property (sample provided below).
How To Determine A Developer’s Credibility
If you’re purchasing a property from a well-known developer in Malaysia or one who at least has a few years of experience to their name, you won’t have to worry much.
However, if you come across a property developer whom you’ve never heard of before, it’s time to do some serious digging.
For starters, look up the developer’s background and their past projects. Fancy artist’s impressions of the project might not suffice, and a true-blue under-construction project should have at least updated photos of the site’s work-in-progress.
It never hurts to ask for more information as well, so if you have a feeling something’s not quite right, you can apply with the Companies Commission of Malaysia (SSM) to view the developer/owner’s history.
If you’re still not convinced, check if they’re on the list of blacklisted developers issued by the Malaysian Ministry of Housing and Local Government.
This list of blacklisted developers includes those operating without that mandatory APDL, who have abandoned projects, have failed to honour tribunal claims, and/or failed to settle compound payments.
Uncompleted Projects Past Their Expected-To-Be-Completed Date
Every property buyer excitedly looks forward to the day they receive their keys, but what if the developer keeps delaying? Worse still, what if they abandon the project altogether??
If the developer delays the handover of the property, the buyer is entitled to claim LAD (Liquidated Ascertained Damages), which is a clause that you should find in your Sale and Purchase Agreement (SPA).
This allows you to claim some compensation, as you would have experienced a form of financial loss because of the handover delay.
To claim for LAD, you must first issue a demand letter to the property developer. If they refuse to compensate you, then only will you need to file for civil action or a legal claim with the relevant authorities.
There have been tactless cases of property developers abandoning projects when they’re halfway through construction, primarily through ‘sell-then-build’ concepts, where the developer only starts building once they receive enough money (from buyers) to do so.
If the project never materializes, or if the developer runs away, there are 3 actions you can take: Terminate your SPA, obtain a full refund, or prosecute the developer.
Although the Housing Development (Control and Licensing) Act 1966 (HDA 1966) protects buyers and grants them the right to terminate the SPA, this is only allowed IF the project has no progress for a continuous 6 months after the SPA’s execution date.
Unscrupulous developers might see this as a loophole and instead, only perform minor work every 6 months to prevent the buyers from terminating the SPA.
Now this could drag the project’s completion date even longer than expected, increasing the financial loss for unsuspecting buyers.
If you wanted to obtain a full refund after terminating your SPA, the developer is forced to do so within 30 days, under section 8a (3) of the HDA Act!
And finally, under section 18A of the HDA Act, developers can be brought to court and fined anywhere between RM250,000 to RM500,000, or face imprisonment for up to 3 years, or both!
Filing Lawsuits Against Property Developers
Yes, you can actually sue, and win! Here are just two sample scenarios where you can bring the negligent parties to justice:
Case #1: My Property Was Destroyed
In the unfortunate incident that your property has been destroyed, you can file for civil action against the parties who have caused the damages to you – whether emotional, physical, monetary, etc.
One of the ways for you to claim compensation includes the termination of the SPA, and get a full refund, as mentioned above.
As the developer intends to neglect or not complete the project, this is an anticipatory breach where one party has refused or is unable to perform their part.
However! If the property experiences damages while still under construction, you cannot take legal action since under the SPA, the developer has until the completion date to hand over the property to you.
Hence, repairs and reconstruction can still be carried out. And technically speaking, since you don’t own the property yet, you don’t suffer any damages.
Alternatively, you can claim for negligence under the law of tort and file against the developer, engineer, architect, or any other party IF you can prove that their actions and/or lack of it have caused you loss/damage/trauma.
PropertyGuru Tip
The term ‘law of tort’ basically refers to a wrongdoing which is severe enough for you to sue, or get sued!
This can be applied for cases like the sudden collapse of your home due to man-made errors, or the misuse of toxic materials in the building of the property that’ll have adverse health effects.
Case #2: Injuries Sustained In My New Home
Ouch! Nobody enjoys getting injured, especially in their new home, which makes it all the more upsetting (imagine if it had happened to a guest or loved one).
If that’s what your new home greets you with, the good news to this is that you can claim compensation for injuries and sue the developer.
As per the SPA, the developer has a responsibility to construct the property well and up to safe standards, before handing it over to you in good condition.
Furthermore, you’re only allowed to have possession of the property once a Certificate of Competition and Compliance (CCC) is issued.
Obtaining a CCC means that the property has been inspected and given the green light for human occupancy. In other words, it’s the final touch a developer needs, before they hand over the home to the buyer.
For injuries sustained in a new home, you can claim medical costs, repair costs, and even loss of wages if it renders you unable to work!
Do take note that you will need to prove that it was really the developer’s fault for this, and not your contractor or yourself.
Master Title vs. Individual Title vs. Strata Title
Titles, titles. Although they can be puzzling to new homebuyers, here’s a simplified version of what each property title means, and how they work.
The king of titles (the Master Title) records the rights of ownership for the property developer or current landowner.
It gives them the rights to sell or perform transactions, in regards to the overall development or land covered by the Master Title.
A Master Title refers to all the properties or divisions built, until the time comes where a Strata Title or Individual Title is issued (usually to separated units when they’re sold).
Usually, for landed properties, an Individual Title is used to allocate ownership for properties on their own individual plots of land.
The legal document includes details about the property, conditions related to the ownership, and the name of the current owner (you!).
On the other hand, Strata Titles are registered for buildings like condominiums, apartments, and other properties where individual units are part of an overall shared development.
Charges that fall under this include the maintenance fees and sinking funds, plus detailing the common areas and shared responsibilities.
When you buy your new home, it should carry either a Strata Title or Individual Title. If it does not and still bears the Master Title registration, you’ll need to apply for a transfer of ownership with the High Court. Why?
That’s because the developer might just go bankrupt before they can issue the proper titles. In such cases, it’d be extremely troublesome as you would need to acquire a title from a liquidator and fork out money for legal representation.
in addition, without a Strata or Individual Title, it would be hard to be approved for a home loan by banks when you want to buy a property from the secondary market.
Remember to take a good look at your documents before and after signing (best if you’ve got an experienced legal professional on your side), and follow up if anything’s missing.
Dealing with property developers might seem intimidating for first-time homebuyers, but hopefully, this guide will prepare you to face them and ask the right questions!
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