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No protection for property
buyers
08/04/2008 The Star Articles of
Law By Bhag Singh
The Housing Developers Act 1966 only provides protection where housing
accommodation is involved.
THERE is a general perception that a buyer of landed property is protected
by laws which are specifically enacted to safeguard him. Hence a reader was
surprised that as a buyer of a unit in a shopping complex, he was not so
protected. He asked whether he could claim compensation if the project was
abandoned.
Buyers of such property should be reminded that protection and rights that
exist depend on the property involved and the manner in which it was
acquired. An individual may buy it directly from a developer or he may buy
it from someone who purchased the unit from the developer. This is referred
to as a “sub sale”.
Most purchasers will invariably enter into a Sale and Purchase Agreement
with the seller. A purchaser, whether dealing with an individual or a
developer, protects himself through the agreement that is entered into.
When purchasing a property from another individual, it is usually a
completed unit and the normal practice is to pay 10% upon signing of the
agreement and the balance within three months with a possible extension of
one or two months.
However, where the property is purchased from a developer, progress payments
are made as the construction proceeds.
A purchaser should be careful in committing himself to the time-frame for
payment of the balance purchase price. Otherwise he may lose not only the
property but also the deposit and part payment. On the other hand, the
seller must make sure that he is able to hand over the property as agreed.
Basically, the rights depend on the agreement. Even if both parties have
taken a keen interest in the contents, it could still end up being more
onerous on one party than the other. This could be caused by market
conditions, depending on whether there are too few properties or too many
buyers.
Statutory intervention
However, at a time when there was increasing interest in home ownership
aided by grants of loans at concessionary interest rates to government
employees, a law on the subject became necessary in the form of the Housing
Developers Act (Control and Licensing) 1966. The origin and history of the
Act was explained by Suffian LP in SEA Housing Corporation Sdn Bhd vs Lee
Poh Choo in the following words:
“It is common knowledge that in recent years, especially when the government
started giving housing loans making it possible for public servants to
borrow money at 4% interest per annum to buy homes, there was an upsurge in
demand for housing, and that to protect home buyers, most of whom are people
of modest means, from rich and powerful developers, Parliament found it
necessary to regulate the sale of houses and protect buyers by enacting the
Act”.
It does so now by providing for a standard form agreement to be used on a
mandatory basis. The opportunity to negotiate is removed and the standard
terms will apply to the parties involved when a property is bought. However,
it does not extend to everyone, in particular, to people like our reader.
The Act does not cover all property purchases in all circumstances all the
time. To obtain protection, the transaction must come within its scope. Thus
the property involved must be “housing accommodation”.
According to Section 3 of the Act, “housing accommodation includes any
building, tenement or messuage which is wholly or principally constructed,
adapted or intended for human habitation or partly for human habitation and
partly for business premises but does not include an accommodation erected
on any land designated for or approved for commercial development”.
Apart from the fact that the property must be housing accommodation, the Act
only applies in the context of housing development and not otherwise.
“Housing development” is defined as meaning: “to develop or construct or
cause to be constructed in any manner more than four units of housing
accommodation and includes the collection of monies or the carrying on of
any building operations for the purpose of erecting housing accommodation
in, on, over or under any land; or the sale of more than four units of
housing lots by the landowner or his nominee with the view of constructing
more than four units of housing accommodation by the said landowner or his
nominee”.
Where a purchaser is dealing with a person who is building one, two or three
properties, even if these are housing accommodation, the Act would not apply
because the person building the house would not be considered a housing
developer.
Of course, there could be certain entities that may be exempted from the
need to be licensed. If the property is purchased from such an entity
otherwise exempted from the provisions of the Act, then the Act will not
apply.
Thus the property mentioned by our reader would not even come within the
meaning of “housing accommodation”. As such there is no added protection
under the Act, beyond his rights under the agreement that he has signed.
Of course, where a project is abandoned, the matter takes a different turn.
This is because in many such cases, the developer has lost its financial
ability to complete the project and has become insolvent.
In the case of our reader, the existing legislation with regard to housing
would not apply because the unit in question is not housing accommodation,
but in reality it makes no difference in a situation where the developer
faces insolvency. Unless the developer has assets, the buyer will be left to
bear the loss, whether the housing development legislation applies or not. |
