When a project stalls
12/02/2002 The Star Articles of Law with
Bhag Singh
DESPITE all that is said about laws to protect house buyers, the reality is that many people who enter into agreements to buy
houses or other types of property are left high and dry and therefore continue to complain.
Why does this happen despite all the laws that exist to protect house buyers? The only explanation is that the existing laws have
weaknesses. The laws that are talked about are merely either ideas or laws that have been enacted but not brought into force.
There are also instances of other laws which are already in force but not enforced.
Even where there are adequate laws in existence there is no guarantee of complete protection for the ordinary house buyer in all
situations. This is because the laws may have been improved but the individual may have signed his agreement under earlier laws
which will apply to him.
One problem is where, after a substantial payment has been made, work stops and the house buyer is stranded. A reader writes:
“I bought a three-room apartment in the Petaling District of Selangor. The Sale and Purchase Agreement (SPA) was signed in
November 1997. According to the SPA the apartment must be completed within 36 months. Now 50 months have passed but the property
has not been completed yet.
“So far I have paid 30% of the purchase price or about RM75,000 as progress payment. Work has been at a stand-still from the
middle of 2000. Requests for compensation for the delay were turned down. The developer never kept his promises. Can you please
advise as to what action can be taken? Many of the purchasers are not even in contact with each other.”
The situation does not appear to be pleasant. Our reader did not say whether the housing developer is still around or at which
stage of construction the apartment is. It is assumed that the construction work had gone on according to the progress payment
report.
The only options available to the house buyer are to either wait for the house to be completed or repudiate the SPA and seek a
refund and damages that have been suffered. Most house buyers would prefer the former because it is less drastic. If the house is
completed they have a house in which they can stay and they can then go about taking action against the developer for the delay.
In a way this course of action is of comparatively less resistance.
The developer will also prefer that the house buyer take this approach. This is because the developer will not be immediately
confronted with legal action. Furthermore, once the houses are completed and handed over, there is a good likelihood that many of
the house buyers will not bother to sue the developer. And for those who do, there is always the option for the developer to
create obstacles.
The essence of the matter is that waiting for the house to be completed is the course of least resistance. To the developer this
is entirely satisfactory because it is the house buyer who does the waiting.
However, the only problem is that the house may never be completed! Therefore how long is the house buyer going to wait before
finding this out? The longer the house buyer waits, the worse it is for him because he is bearing the burden of financing the
purchase of the property.
If the house buyer feels that the developer will not complete the house, then one option is to treat it as a repudiation.
Repudiation here means that the housing developer has indicated by words or action that he is no longer able or willing to fulfil
his obligation. On this basis the house buyer will have to be prepared to accept the refusal and be entitled to treat the
agreement as having ended and sue the developer for a refund of all money paid and damages. Damages would be the loss to the house
buyer. How is this loss measured?
The loss would be the interest that the house buyer would have earned on the money which he paid to the developer. Or if the price
of similar property has increased, the difference would be the measure of his loss. The larger of the two amounts can be taken as
damage suffered.
There are situations where, if the house is near completion, house buyers move into the house and complete them themselves. This
could lead to a variety of problems but that is a matter that needs to be discussed separately. It would of course be very helpful
if all or a large number of house buyers in a particular scheme could act as a group. Action by house buyers as a collective group
is necessary to deal with the developer who is financially stronger than an individual house buyer.
But the difficulty faced by our reader is that he does not know who the other house buyers are. One possible solution is to place
a notice at the site calling on other house buyers to meet to discuss the issue. A notice in a newspaper could also help.
In placing such a notice, however, care should be taken to state the facts accurately. It should not be used to hurl accusations
against the developer.
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