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Book first, Regret Later
01/09/2003 Malaysian Business-Housing & Property By National House Buyers
Association
House buyers are advised to do their
homework first to avoid booking fee
headaches.
A woman
paid RM2,000 as deposit for an apartment
to the developer without her family's
knowledge. Her parents objected because
when they came to know about it because
they were afraid she would be tied down
by the added commitment. She wanted to
know if she could cancel the booking and
get a refund.
A man paid RM200 as a
booking fee for an apartment unit. He
later visited the site and found that
the construction progress was not to his
satisfaction. He went back to the
developer's office to cancel the booking
and request for a refund. At first, he
was verbally informed by the company's
marketing manager that a refund will be
given. After waiting two weeks, he
called the company again to be told that
deposit would not be refunded. His
argument is that since he had not signed
the sale and purchase agreement (SPA),
he is entitled to a refund.
A woman paid the 10%
booking fee and signed the SPA for a
house. She later learned that she was
only eligible to secure a bank loan of
85% of the purchase price, instead of
90%. Because of that, she wished to
cancel the booking. She was asked by the
developer to show proof that she was not
eligible to obtain a loan.
Another woman booked a
unit and paid RM1,000 as the booking
fee. She was supposed to come up with
the remaining 10% downpayment within two
weeks. However, she decided not to buy
the property and wished to cancel the
booking and get a full refund.
The National House
Buyers Association (HBA) receives many
enquiries each year from such people
about their deposit problems, including
some from buyers who have given up hope
of seeing their deposits refunded.
In a normal
conveyancing practice where the property
is completed, there is a chain of events
starting with an 'offer to purchase'
together with a payment of an initial
deposit. There is no fixed guideline on
this, and it is up to the vendor,
purchaser and their lawyers. This offer
to purchase is legally binding once the
offer is accepted and should one of the
parties withdraw, there is a penalty
involved - usually the forfeiture of the
deposit or compensation in lieu thereof.
However, with the
purchase of housing from plans or under
construction from housing developers,
there is no provision under the law for
collection of booking fees. Obviously,
this is confusing to potential
purchasers, as there are many
advertisements offering initial booking
fees as low as RM1.
Collection of booking
fees in whatever name is illegal.
Regulation 11(2) of the Housing
Development (Control & Licensing)
Regulations 1989 (revamped 2002) states
that: 'No housing developer shall
collect any payments except by whatever
name called except as prescribed by the
contract of sale.'
The statutory SPA
forms - the Schedule of Payments of
Purchase Price (Third Schedule of
Schedules G and H) - specifies that 10%
of the purchase price is to be paid
immediately upon signing of the
agreement. Our conclusion is that the
developers must have obtained prior
written consent from the Controller of
Housing to be allowed to collect the
booking fees.
Some creative
developers than devised ways to
circumvent this illegal 'booking fees'
by getting the buyers to 'offer to
purchase' and to accept the fees to book
their units. These forms/letters
provided by the developers also require
the purchaser to pay the rest of the
booking fees within two weeks. There is
usually no cooling-off period, and
purchasers are often bound by the offer
letter as the monies are now in the
hands of the developer.
To serious buyers, it
means you do not have to provide a
deposit if you have an SPA and the
initial payment of 10% of the purchase
price. Even after payment of 10% of the
purchase price, in cases where the
purchaser is unable to obtain a loan, he
is able to back his deposit, albeit with
a deduction of 1%. This has been
provided for in the recent amendment to
the contract of sales according to the
Housing Development (Control &
Licensing) Regulations. This only
applies if the purchaser fails to obtain
the loan due to his ineligibility of
income and has produced proof of such
ineligibility to the developer.
Purchasers in the
situations above still have an avenue to
seek the refunds by going to the
Tribunal for Homebuyer Claims. Our
advice to serious buyers is to do your
homework well, such as checking the
construction site and your credit
eligibility, before you make any
bookings to prevent any regrets.
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