In a bid to woo investors and buyers, housing developers have coined various names for the yet-to-be built stratified properties, such as small office flexi office (Sofo), small office home office (Soho), small office versatile office (Sovo), hotel suite, condotel or butler serviced apartment.
“However, for the inexperienced – not all apartments are created equal. Although the sales and marketing brochures may look alike, the small prints will tell you the difference, if you care to take a magnifying glass to inspect,” said National House Buyers Association secretary-general Chang Kim Loong.
As many prospective house buyers have little knowledge of what aspects to look for when purchasing a home, it is always a good idea to find out the legalities – whether the development is regulated under the housing legislations, he said.
Chang noted that the construction of a housing project involves numerous legislations and parties, and when problems arise, help in any form is often costly and time-consuming.
“The onus is on prospective house buyers to be educated on their rights and to seek help from all sources available before they make their first payment.”
The Housing Development (Control & Licensing) Act 1966 (amended 2012) (Housing Act), for instance, controls the development of ‘housing accommodation’.
“’Housing accommodation’ may not be the same as what you think you are buying. Purchasers of service apartments and Soho are often surprised when told they have bought a commercial property,” he said.
“The statutory sale and purchase agreement (S&P) is schedule H (building or land intended for subdivision into parcels) and schedule I (built then sell 10:90 concept for stratified property) pursuant to the housing development (control and licensing) regulations 1989 (amended 2015).”
Some of the pertinent clauses for the protection of home buyers under the statutory S&P are the following:
> Date of commencement and completion – the date of the S&P is generally the date the contract takes place and is binding upon both the developer and buyer. It is set to be completed within 36 months from the date of the contract.
It is a prerequisite for housing developers to obtain all layout plans, building plans and approvals from the local council before they can secure the APDL (advertisement and sales) permit and developer’s licence.
> Compensation for late delivery commonly known as LAD (liquidated ascertained damages) – is calculated at the rate of 10 percent of the purchase price should the developer exceed the stipulated period of 36 months.
> Manner of delivery of vacant possession – Delivery of vacant possession shall be supported by a certificate of completion and compliance (CCC). This includes the handing over of keys of the parcel to the buyer, with water and electricity supply ready for connection.
> Defect liability period – The developer is required to warrant against defect, shrinkage or other faults in the parcel, building and the common property that may become apparent within 24 months following the date the buyer takes vacant possession.
> Stakeholders’ money – The retention sum against repairs and replacement is five percent of the purchase price. It is kept by the developer’s appointed lawyer stakeholder and will be released in two tranches.
> Schedule of payment of purchase price – Every stage of the works completed must be supported by a certificate signed by the developer’s architect or engineer in charge of the housing development. The signed certificate shall serve as proof of completion of the various stages of progress works.
> Tribunal for home buyers claim – The Parliament created the housing tribunal as an easy, cheap and speedy alternative forum for home buyers to seek legal redress. Since it was to be a tribunal or “court” for the ordinary home buyers, numerous measures were taken to ensure that it is user-friendly and affordable, including a cap on filing fee at a nominal sum of RM10, and keeping lawyers out.
Meanwhile, the non-standard S&P agreement is drafted under the whims and caprices of developers with their lawyers.
“Efforts are not spared to ensure that they are disguised with bold titles appearing to emulate the statutory S&P but with diverse terms and conditions embedded otherwise,” said Chang.
As such, it is not uncommon to find home buyers stressed out and frustrated after having identified the differences between the non-standard and standard S&P agreement.
“By that time, the relationship between the developer and the affected buyer would have been strained and stained.”
For comparison, below are some of the clauses usually found in non-standard S&P:
> Date of commencement and completion – At the time of sale and the date of the S&P the developer often has not secured the necessary approvals – be it building plans, floor plans or the likes.
Their completion date is that stated in the S&P – often between 42 and 48 months from the date the developer obtains the ‘building plans’ approval. Developers under this category are not licensed (thus, not under the purview and jurisdiction of the Housing Ministry) since they are not building ‘housing accommodation’. Moreover, there is neither any requirement for an APDL nor need to comply with the Housing Act.
“Those built on commercial titles will have to bear commercial rates of assessment, quit rent, utility charges (electricity and water tariffs). There are instances of housing developer constructing Soho that has been granted exemption from the Housing Minister – thus, to be precluded from the ambit of the Housing Act: on the pretext that they are developing commercial development,” he said.
> Compensation for late delivery commonly known as LAD – It is often calculated at 10 percent on such portion of the purchase price already paid by the buyer to the developer where it exceed the stipulated period of 42 to 48 months, as the case maybe.
> Manner of delivery of vacant possession – This is often only supported by the developer’s architect’s certificate of practical completion which is not tantamount to CCC.
“It does not give the buyer the right to occupy the parcel until such time as the CCC is issued. Where there is no time frame to issue the CCC, it becomes meaningless and the buyer will not be able to plan his occupation,” noted Chang.
There is also no provision for connection of electricity and water supply to the said parcel.
> Defect liability period – The warranty against defect, shrinkage or other faults in the parcel is often 12 months after the purchaser takes vacant possession, with no warranty on the building and common properties.
> Stakeholders’ money – Here, there is no retention sum. All monies are released to the developer immediately upon the date of notice of delivery of vacant possession, whether the buyer takes physical possession or not.
> Schedule of payment of purchase price – Normally all installments are released to the developer on the commencement of works, without any need to be certified.
“For example, 15 percent of the purchase price is due to be paid to the developer when the developer commences earthworks at site.”
“He will conveniently have his tractor scoop up the earth and hence – commenced. He too will get another payment 15 percent on commencement of his first piling and footing works.”
He noted that most of these projects fail since developers collect their profit even before completing the job. Their payment schedules are top heavy – which means that they collect the bulk at the start of the project leaving less for the later stages of works.
> Tribunal for home buyers claim – Here, the aggrieved buyers cannot go to the tribunal.
“Their legal recourse is through the courts and they will have to argue within the four corners of the S&P contract. They cannot say that they don’t know – as the maxim goes: “Ignorance of the law is no excuse’.”
With these, Chang advises home buyers to appoint his or her own lawyer, who is well versed in conveyancing practices, to vet through the S&P agreement.
“In the cases of ‘unfriendly terms and conditions’: ‘Don’t buy’. The prerogative is the house buyers’ to safeguard themselves though all means,” he added.
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
