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Rights of
house buyers
06/03/2001 The Star Articles of Law with Bhag Singh
In recent months there has been discussion in the press about changes in the
laws affecting housebuyers.
One reader expresses his concerns over the
fact that no clear picture is emerging. Such concern is understandable. This
is because housebuyers hope that, through some new law, all their problems
will be solved. This, of course, is unlikely to happen in a big way. Not every
problem area will be completely addressed.
Even when an issue is extensively addressed,
it may not be to everyone's satisfaction. Furthermore many proposals may be
abandoned or amended. Various conflicting interests are involved and lobbying
is only to be expected.
Nevertheless, it is interesting to consider
what these proposals are intended to be. In many ways they will, hopefully,
affect housebuyers for the better. Yet when some of what is said is considered,
one wonders how positively these are going to better protect the interests
of housebuyers.
In a recent report, it appears that the
name of the Act is to be changed. In this connection, the Housing and Local
Government Minister has been quoted as saying that the proposed amendments
would be more balanced and comprehensive.
The minister added: "the new name is necessary
as otherwise the old Housing Developers Act tends to be misconstrued by the
public to be a piece of legislation only for the benefit of housing developers.
And housebuyers often feel side-lined by the name of the legislation that
this Act is not meant at all for their protection,"
However such a change would merely be cosmetic.
Whether it protects buyers depends on its provisions and how these are implemented
in practice. The title of the Act will really make no difference whatsoever.
After all, legal transactions are recognized, enforced and have effect through
the content and the detailed provisions. It is not the title that determines
the rights of parties involved.
Apart from other grievances which may appear
minor, two significant aspects are damages for delay and defective work of
a serious kind. The provision regarding payment of damages for late delivery
would appear to be very clear and straightforward. It reads: "If the vendor
fails to hand over vacant possession of the said building, to which water
and electricity supply are ready for connection to the said building, in time,
the vendor shall pay immediately to the purchaser liquidated damages to be
calculated from day to day at the rate of 10% per annum of the purchase price,"
This obligation of the developer is reinforced
by Clause 7 of the prescribed stationary Sale and Purchase Agreement (SPA)
which says that "time shall be the essence of the contract in relation to
all provisions of this agreement." Very clearly this is not with regards to
obligations of the housebuyers to pay progress payments only.
Therefore when the developer fails to hand
over vacant possession as stipulated with out good reason in accordance with
the SPA, the developer should be willing to calculate the amount and set it
off against the amount due to the developer because the obligation is to pay
"immediately".
Yet many developers will not do so. They
will ask the housebuyer to pay up all amounts due before handing over the
proper.
The difficulties that a housebuyer experiences
at this stage are only too well known.Therefore the suggestion by the House
Buyer's Association that developers should be made to pay compensation for
late delivery on an automatic basis via a provision to be expressly stated
in the SPA is most reasonable.
This suggestion whose effect is that accounts
are taken at the point of handing over so that what is due from the housing
developer is set off against what is due to the housing developer is not only
legal but fair and just.
However, in reality, the developer is in
a stronger position than the housebuyer. If all outstanding payments are not
made, the developer will simply not hand over the property. Given this scenario,
the developer does not have much to lose because the house would have almost
been paid for in full. But the housebuyer is desperate because he has paid
almost all the purchase price and he cannot afford to be without the house
and so he gives in. It is a classic case of arm twisting.
O course, the proposal to have a tribunal
to deal with claims for units costing RM25,000 and below is a welcome development.
But the cap of RM25,000 appears to be too low given the prices of houses and
apartments these days. With growing inflation, there may little for the tribunal
to deal with.
It has also been said that the courts are
still the best place to resolve disputes over compensation for late delivery.
It would therefore appear that even if the proposal is implemented, the present
situation with regards to claim for compensation for late delivery will continue
for a while.
The difficulties encountered by housebuyers
making such claims and arguments raised by developers are well known. Much
money and even more emotional and mental stamina are required to deal with
such a situation.
However, for most housebuyers the burden
will continue to rest on them to pursue their rights to claim for such compensation.
Too many housebuyers are not determined enough to pursue such claims and may
developers are only too aware of this. As such the present scenario will continue
for a while, too.
On the other hand, if housebuyers are serious
about claiming compensation for late delivery and are determined to pursue
their claims despite the inconvenience and costs involved, developers may
take their obligation to complete the houses on time more seriously to avoid
having to make payments.
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