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LAW &
REALTY: Significant changes to Housing Act |
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Contributed by Andrew Wong Fook Hin |
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Friday, 04 January 2008 08:11am |
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SINCE April 12, 2007, the
Housing Development (Control and Licensing) Act, 1966 (Act 118) was not only
an Act to regulate the business of housing developers, but also an Act to
protect the interest of purchasers. In line with this purpose, the recently amended
Housing Development (Control and Licensing) Regulations 1989 (1989
Regulations), which came into operation on Dec 1, 2007, introduced some
significant changes to the statutory agreements required to be used in the
sale of a housing accommodation to a purchaser. This article will examine
some of the significant changes made to the statutory sale and purchase
agreement for a housing accommodation comprising land and building. Agreement for land and
building (Schedule G) The contract of sale of a
housing accommodation comprising land and building is known as Schedule G
agreement. A Schedule G agreement is required to be used where the building
is erected on a plot of land to be held under a separate issue document of
title under the National Land Code. Loan If a purchaser has obtained a
loan from a financier, the normal practice is that the developer will execute
the transfer in favour of the purchaser and deliver the title to the
purchaser or his financier so that the property can be transferred to the purchaser
and charged to the financier, even before the full purchase is paid to the
developer. The developer will only do this if he has received an undertaking
from the financier to pay the loan sum in accordance with the schedule of
payment set out in the Schedule G agreement. Many problems have arisen out
of this practice, as it is common for the financier to stipulate various
conditions in its undertaking to the developer, some of which are not really
reasonable, to say the least Much time can be taken before the terms of the
financier¡¯s undertaking are acceptable to the developer and this battle of
wordings to be used in an undertaking usually results in a delay in the
release of the loan by the financier. The purchaser ends up paying interest
for late payment of the purchase price claimed by the developer. The recent amendment now
requires the financier to furnish to the developer an unconditional
undertaking to pay the loan sum and, in return, the developer will undertake
to refund the loan sum in the event the transfer cannot be registered in
favour of the purchaser for any reason which is not attributable to the
purchaser. A notable point is that the developer is no longer required to
furnish an undertaking to refund the loan sum in the event the transfer in
favour of the purchaser cannot be registered ¡°for any reasons whatsoever¡±. Purchaser¡¯s right to initiate
and maintain action In many instances, the
separate title may not have been issued at the time of purchase or handing
over of vacant possession. In such a case, as security for the purchaser¡¯s
loan, the purchaser will be required to assign absolutely all his rights and
interest in the property to his financier. By doing so, the purchaser may be
deprived of his right to initiate or maintain any action against the
developer in respect of any matter arising out of the contract of sale. The new Schedule G agreement
makes it very clear that, in such a case, a purchaser may now initiate and
maintain any action or suit in any court or tribunal provided that his
financier is notified of the action or suit within 14 days after the action
or suit has been filed. Interest on late payment A housing developer is not
entitled to charge interest on any late payment of any instalment of the
purchase price in the event the separate title has not been issued on the
date of agreement and the purchaser has obtained a loan from a financier, if
the developer delays or fails to execute and deliver the instrument of
transfer of the housing accommodation to the purchaser. Infrastructure and
maintenance A purchaser is required to
contribute to the cost and expense of the maintenance of the infrastructure,
including the roads, driveways, drains, culverts, water mains and sewerage
plants until such time such infrastructures are taken over and maintained by
the appropriate authority. The new Schedule G agreement
requires the developer to provide the buyer a list and description of the
infrastructure and the expenditure incurred in the maintenance of these
infrastructures before the purchaser becomes liable to make any contribution. Maintenance of services In addition to contributing
to the maintenance of infrastructures, the purchaser is also liable to
contribute to services provided by the developer for refuse collection,
cleaning of public drains and grass cutting on the road reserves, until such
time as these services are taken over by the appropriate authority. For such
services, the purchaser is required to pay six months¡¯ advance when he takes
vacant possession of his property. The new Schedule G agreement
now provides that when such services have been taken over by the appropriate
authority, the developer shall refund to the purchaser the balance of the
amount of such contribution paid by the purchaser. Delivery of vacant possession It has been the case that
even after taking delivery of vacant possession, the purchaser is not
permitted to occupy the house until the certificate of fitness for occupation
(CFO) has been issued by the appropriate authority. Now, the developer shall let
the purchaser occupy the house when the certificate of completion and
compliance has been issued by the developer¡¯s architect or engineer, as the
case may be. The purchaser may immediately occupy the property as the CFO is
no longer required. Defect liability period The defect liability period,
which requires the developer to make good any defect shrinkage or other
faults in the house, has been increased from 18 to 24 months. Provisions allowing the
purchaser to make a claim on the monies retained by the developer¡¯s
solicitors for this purpose have been enhanced and improved. A purchaser may
make a claim before the expiry of eight or 24 months after he takes over the
vacant property. Once a notice of claim by a purchaser has been made, the
developer¡¯s solicitors may not release the monies held by him until the
developer¡¯s architect has certified that the defect shrinkage or other faults
have been repaired and made good by the developer. Title not issued at time of
vacant possession If, at the time of taking
vacant possession, the separate title to the plot of land has not been
issued, an additional sum equivalent to 2.5% of the purchase price will be
held by the developer¡¯s solicitors and will not be paid to the developer
until the separate title and the instrument of transfer in favour of the
purchaser has been delivered by the developer to the purchaser or his
solicitor. Next month¡¯s article will
examine the significant changes made to the statutory agreement for a housing
accommodation comprising a building or land intended to be subdivided into
parcels held under strata titles. The writer is the deputy
chairman of the Conveyancing Practice Committee, Bar Council, Malaysia www.malaysianbar.org.my. Note: This column is brought
to you by the Bar Council for your information only. It does not constitute
legal advice. You should therefore seek professional legal advice for your
specific needs. Neither the Bar Council nor the Sun Media Corporation Sdn Bhd
shall be liable to any reader who suffers losses as a result of relying on
this column. |
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