©The Sun (Used
by permission)
by Roger Tan
(The full version of this Q & A meant for members of the
Bar can be downloaded here)
The Housing Development (Control and Licensing) (Amendment) Act 2007 (“Amendment
Act”) which amended the Housing Development (Control and Licensing) Act 1966
(“Act 118”) came into force on April 12, 2007. Since then, the Conveyancing
Practice Committee of the Bar Council (“CPC”) has received numerous queries from
lawyers, developers and the public on the operation of some of the amendments.
While it is not the policy of CPC to proffer any legal opinion on questions of
law posed to them, the CPC has decided that in order to assist the affected
parties and subject to the disclaimer below, our views on some of the queries
are as follows:
Section 22D(1)of Act 118 stipulates beyond any doubt that the consent of the
developer is not required for the absolute assignment of rights or interests in
a housing accommodation. In a case where the developer is not the proprietor of
the land, is it necessary to obtain the proprietor’s consent to the assignment?
As the consent of the proprietor to an assignment was not required before the
amendment, it is also, therefore, not required after the amendment.
The CPC is of the view that an absolute assignment is good if served by way of a
notice pursuant to section 4(3) of the Civil Law Act 1956. What section 22D
seeks to do is to restate the position of the law and to provide penal sanctions
against a developer who requires consent to an assignment.
The CPC notes that under both the current Schedules G and H agreements, the duty
to obtain the issue document of title or the strata title, as the case may be,
and to deliver the same together with an instrument of transfer lies with the
developer.
The CPC also notes that in a case of a sale of property for which no title has
been issued at the time of sale and the developer is not the proprietor of the
land, it has been the practice of solicitors for the purchaser or the
purchaser’s financier to obtain the proprietor’s undertaking to deliver the
issue document of title to the purchaser or the financier, when issued. It would
therefore be prudent for a purchaser or financier to give notice of assignment
to the proprietor as well, in which case, the undertaking from the proprietor to
deliver title when issued is no longer necessary.
To reinforce this point, the amended Schedules G & H should be brought in line
with section 22D by expressly stipulating that a purchaser may assign his rights
and benefits under the sale and purchase agreement after the completion date
without the consent of either the developer or the proprietor.
Since the developer’s consent has been dispensed with, there is no longer a
need for the consent page to the deed of assignment between the assignor
(vendor) and the assignee (purchaser). However, the consent page normally
contains an undertaking by the developer to deliver the strata title and a valid
and registrable instrument of transfer thereof in favour of the assignee. Is it
necessary to request the developer to issue an undertaking by way of a separate
letter to the new purchaser or to the new purchaser’s financier?
The obligation of the developer to deliver the strata title when issued together
with the instrument of transfer and the right of the first purchaser to the same
is already set out in clause 11 of the Schedule H agreement. In an assignment
from a first purchaser to a second purchaser, all the rights and interests of
the first purchaser are assigned to the second purchaser. When the second
purchaser requires financing, all the rights and interests which he obtained
from the first purchaser are in turn assigned to the second purchaser’s
financier. Hence no further undertaking from the developer, by way of a separate
letter or otherwise, is necessary.
Section 22(D)(4) states that the purchaser or his financier or their
respective solicitors may request for the necessary confirmation from the
developer, subject to payment of a fee not exceeding RM50 for every request for
confirmation. Previously, it has been a normal practice to require the vendor to
apply for the developer's consent, at the vendor's own cost and expense, and the
developer's administrative fee usually includes the replies or confirmations
made to the relevant solicitors. Section 22(D)(4) provides that the purchaser
should pay the RM50.00 for every request made. Shouldn't the vendor be paying
for this?
The law now requires the purchaser to seek the necessary confirmation from the
developer, and to pay to the developer for every request made. The Vendor is not
required to pay for this.
In a sub–sale transaction, the SPA was signed before April 12 and the
developer has given its conditional consent before April 12. The developer's
consent was conditional, inter alia, upon:
(i) the vendor paying the administrative charges of RM500.00;
(ii) the purchaser signing a fresh deed of mutual covenants with the developer;
and
(iii) the developer endorsing its consent on the deed of assignment.
All these conditions have not been complied with by the vendor and purchaser at
this moment.
1. Is the developer's consent or the endorsement of its consent on the deed of
assignment still required in the above case?
2. Do the vendor and the purchaser still need to comply with the developer's
conditions imposed before April 12, since the developer is now not permitted to
impose any conditions under the section 22D?
3. Can the developer still insist on the compliance by the vendor and the
purchaser of its conditions which were imposed before the section 22D came into
force?
The answer to all the above three questions is “No”.
If an application had been made for the developer’s consent before April 12, and
all the conditions and payments imposed or required by the developer have been
fulfilled or paid, and the developer had endorsed its consent to the deed of
assignment before April 12, then the parties to the transaction should continue
and complete the transaction accordingly.
If the developer’s consent, conditional or otherwise, was granted before April
12, and the conditions or payments imposed or required have not been fulfilled
or paid and the developer has not endorsed its consent on the assignment, then
the pursuit of the developer’s consent should be abandoned as it no longer
required. Parties are, however, required to comply with section 22(D)(2) and
22(D)(4).
After April 12, no developer is permitted to require any consent, and this will
include endorsement of any consent granted before April 12. It follows that as
the breach can only occur after April 12, the question of whether the
legislation has any retrospective effect does not arise.
In a sub–sale of property where the individual strata title has not been
issued, in view of the new section 22D, please confirm the conditions precedent
to such an agreement (if any) as we are of the view that the vendor should
obtain the developer’s written confirmation on the status or details of the
property before the completion period can commence.
Before the Amendment Act, it had been the practice to require the vendor to
obtain the developer’s consent and the obtaining of such consent is usually made
a condition precedent to the completion of a sale and purchase transaction.
After the amendment, there should be no longer any condition precedent relating
to obtaining the developer’s consent.
However this should not affect the requirement of other consents from any other
relevant body or authority required under any other written law, which may
continue to be made as conditions precedent.
The amendment refers to any sub–sale or re–financing. In direct purchases
from a developer, is the developer’s endorsement of consent necessary for the
Deed of Assignment (by way of security)?
Section 22(D) applies to all these cases:
(a) financing of the acquisition by the first purchaser from the developer;
(b) sub–sale between the first purchaser and the second purchaser and purchasers
subsequent thereto; and
(c) financing of the acquisition by the second purchaser and purchasers
subsequent thereto.
Is the consent of the developer still required for a Deed of Receipt and
Reassignment?
A Deed of Receipt and Reassignment is essentially an instrument where the
financier assigns the rights and interests back to the purchaser/borrower. As
such, consent of the developer is not required.
No amendments have yet been made to the Schedule G and H agreement under the
1989 Regulations. The existing provisions in the Schedule G and H SPA state that
the developer shall endorse its consent to the purchaser’s assignment to any
third party and charge an administrative fee of RM500 or 0.5% of the purchase
price whichever shall be lower. In the event of a sub–sale of a property where
no individual document of title has been issued, the principal SPA (whether
under Schedule G or H) having such exiting provisions would be inconsistent with
the Amendment Act. Are the parties still bound by the existing provisions?
We understand the amended Regulations are expected to be out soon. In the
meantime, where there is inconsistency, the parent Act will prevail, meaning
that from April 12, no consent is required and no administrative fee is required
to be paid.
Does the definition of “housing accommodation” in the amended Act include
serviced suites or apartments?
If the serviced suites or serviced apartments are intended for human habitation
or partly for human habitation and partly for business premises, then they will
fall within the definition of housing accommodation as amended. It does not
matter if the accommodation is erected on a land designated or approved for
commercial development as the Amendment Act has removed these words from the
definition of housing accommodation inserted by the 2002 Amendment Act.
Does Section 22(D) apply to a housing development undertaken by DBKL,
Perbadanan Kemajuan Negeri Selangor (PKNS) or the Perbadanan Kemajuan of other
States?
Unless exempted by the Minister under section 2(2), all housing developers have
to comply with Act 118 since 2002. Prior to December 1, 2002, Act 118 did not
apply to any society registered or incorporated under any written law relating
to co–operative societies and any body or agency established and incorporated by
statute and under the control of the Federal Government or the Government of any
State.
The writer is the Chairman of the Conveyancing Practice Committee, Bar
Council Malaysia
www.malaysianbar.org.my
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