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Sun (Used by permission)
by Andrew Wong
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.