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Buyer-friendly Act
21/12/2002 NST By Shamsulbahri bin Ibrahim and Roger Tan Kor Mee

The Housing Developers (Control and Licensing) (Amendment) Act 2002 which was gazetted on Jan 31, 2002 came into operation on Dec 1, 2002. With that, the Housing Developers (Control and Licensing) Act 1966 is now known as the Housing Development (Control and Licensing) Act 1966 (the Act).

Together with the Amendment Act 2002, the following regulations also came into effect on Dec 1, 2002:

(1) the Housing Developers (Control and Licensing) (Amendment) Regulations 2002 which amended the Housing Developers (Control and Licensing) Regulations 1989 including the statutory sale and purchase agreements (SPAs) as set out in Schedule G (for landed properties) and Schedule H (for sub-divided buildings such as residential apartments/condominium unites). The 1989 Regulations is now known as Housing Development (Control and Licensing) Regulations 1989 (HDA Regulations) and the amendments took effect on Dec 1, 2002.

In other words, developers of on-going projects are required to use the latest statutory Schedules G and H SPAs from Dec 1, 2002 notwithstanding purchasers of the same scheme or project before Dec 1, 2002 were using the format prescribed before that date. This is also the first time that the statutory Schedules G an H SPAs have to be used in the sale of housing accommodations undertaken by cooperative societies, Federal and State Government bodies and agencies.

(2) the Housing Developers (Housing Development Account) (Amendment) Regulations 2002 amended the Housing Developers (Housing Development Account) Regulations 1991 which is now called the Housing Development (Housing Development Account) Regulations 1991 (HDA Account Regulations).

(3) the Housing Development (The Tribunal For Homebuyer Claims) Regulations 2002; and

(4) the Housing Development (Compounding of Offences) Regulations 2002.

All the four regulations have gone through many months of deliberation and final scrutiny of the Attorney Generalís Chambers which finally amended and approved them in November 2002.

Housing Developers (Control and Licensing) (Amendment) Regulations 2002. The main amendments are as follows:

(1) a housing developer is not required to follow the statutory Schedule G or H SPA if at the time of the contract of sale, the certificate of fitness for occupation (CFO) for the property has been issued and a certified true copy of which has been given to the purchaser.

This is to encourage developers to adopt the ďbuild-then-sellĒ concept, that is, selling completed properties together with CFO.

(2) a purchaserís solicitor shall be entitled to a complete set of the contract of sale including the original and duplicate copies and all annexures free of charge from the developer subject to the undertaking of the purchaserís solicitor to return the said documents intact in the event the contract of sale is not executed by the purchaser within 14 days from the date of receipt of such documents unless otherwise agreed by the developer.

(3) the developer can only impose an administrative fee or any fee by whatever name called not exceeding 0.5 per cent of the purchase price or RM500, whichever is the lower for giving its consent to an assignment, that is, for a purchaser or subsequent purchaser to resell the property to which no separate or strata title has been issued at the time of the sale. However, the developer cannot impose any fee at all for giving his consent if the assignment is for the purpose of securing financing in whole or in part for the purchase of the property. This regulation cannot be excluded by any agreement and is repeated in both Schedules G and H.

Therefore, it is now an offence if any developer imposes a higher fee for giving his consent for the sale or if the developer imposes any fee at all for giving his consent to a purchaser for the purpose of obtaining financing.

(4) it is also an offence from Dec 1, 2002 where in the sale of a housing accommodation to which no separate title has been issued, the housing developer fails to execute the instrument of title within 21 days from the date of receipt of the separate title from the appropriate authority or if the purchaser fails to execute the instrument of transfer within 21 days from the date of receipt of the same from the housing developer. This is to ensure that if separate titles have been issued, the transfer is to be effected expeditiously and sometimes developers have faced difficulties in locating and getting purchasers to execute the transfer after the completion of the sale.

(5) any advertisement and sale must be in accordance with the advertisement and sale permit as approved by the Controller. When applying for the permit, if the developer supplies any misleading statement, false representation or description of the particulars or information in the approved building plans and proposed advertisement or any other information as required by the Controller, he will be committing an offence under the HDA Regulations. In this respect, advertisement conveyed through the internet or in films such as via videotape, compact disc or video or digital compact disc will also be caught under the HDA Regulations.

(6) applications to renew the housing developerís licence or the advertisement and sale permit have to be made 60 days before their expiry.

(7) other amendments include requiring the developer to provide more particulars when applying or renewing the licence and permit under the HDA Regulations. For example, the developer when applying for the housing developerís licence is now required, among other things, to provide an estimated statement of projected cash flow and the latest form of annual returns to the Controller.

With these amendments, we wish to draw the attention of all the parties including the developer, his solicitors, architects, engineers and quantity surveyors, the purchaser and his solicitors and all those who aid, abet, counsel, procure or command the commission of the above offences that the penalty for contravening the HDA Regulations is a fine not exceeding RM5,000 or to a term of imprisonment not exceeding three years or to both upon conviction.

Housing Developers (Housing Development Account) (Amendment) Regulations 2002
There are substantial amendments to the Housing Developers (Housing Development Account) Regulations 1991. The HDA Account Regulations govern the operation and management of a housing development account, which every licensed housing developer is required to open under the Act within 14 days after the issuance of the housing developerís licence.

The developer is exempted from the HDA Account Regulations, that is, to open and maintain a HDA Account if at the time of the sale, CFO for the property has already been issued and a certified true copy has also been given to the purchaser. Again, this is to promote the ďbuild-then-sellĒ concept.

Opening of the HDA Account
Within 14 days after being informed by the purchaser of the name and address of his financier, the developer has to notify the purchaserís financier of the name and address of the bank in which the HDA Account is kept and its account number.

Deposit made by the developer

The sum of RM200,000 which the developer is required to deposit with the Controller when applying for the housing developerís licence can be made by way of cash; and guarantee; or having a balance of RM200,000.00 at any one time in the HDA Account.

Deposit of all monies paid by purchaser
The developer is required within two banking days after the payment is made in cash, to issue a statement to the purchaser that such payment has been credited into the HDA Account.

Purchaserís financier to pay direct into the HDA Account
A new regulation 4A has been inserted to require the purchaserís financier to deposit, within 21 working days after receiving invoice sent by the developer in respect of the progressive payments relating to the purchase of the property by the purchaser, directly any payment made into the HDA Account with a statement to the developer and the purchaser that such payment has been made. Further, any payment to the developerís solicitor as the stakeholder shall be paid directly to the solicitor with a statement to the developer and the purchaser that such payment has been made.

Withdrawals of monies from the HDA Account
The main amendments in respect of withdrawals of monies from the HDA Account are as follows:

(a) the payment of legal fees in respect of the SPA of the housing accommodation will no longer be an item which justifies a withdrawal of any money from the HDA Account.
(b) withdrawals of monies from the HDA Account for the cost of carrying out soil investigations; earthworks; foundation works; building works; external works; site and boundary survey for each lot; infrastructure works; relocation of squatters; works related to infrastructure preparation instructed by the appropriate authorities; and other works have to be in proportion to the housing accommodations that have been approved under the developerís licence.
(c) monies in the HDA Account may now also be withdrawn for the purpose of meeting:

(i) any cost and expense incurred by persons specified by the Minister in carrying out the Ministerís direction or decision under section 11(1A) of the Act;
(ii) the payment of any liquidated damages pursuant to the housing development;
(iii) the payment of any defect, shrinkage or other fault pertaining to the project during the defect liability period.

Conditions for withdrawal of monies from HDA Account
Whenever a claim is made by the developer from the HDA Account, a copy of the notice of claim shall concurrently be submitted to the Controller.

Withdrawal of surplus monies from HDA Account
The developer can only withdraw any surplus monies in the HDA Account after:
(a) the issuance of the CFO for the housing development;
(b) the approval of the Controller; and
(c) deducting the:-
(i) the amount required to complete the housing development and the sale and purchase under all the SPAs in respect of the housing development;
(ii) 10 per cent of the amount referred to in paragraph (i) for contingencies and inflation;
(iii) all the claims on liquidated damages that have been settled.

Withdrawal on furnishing of bankerís guarantee.
Regulation 10 is deleted and this means the developer can no longer withdraw monies in the HDA Account by furnishing to the Controller a bankerís guarantee for such amount.

Withdrawal of all monies in HDA Account
Regulation 11 has been amended to provide that withdrawal of all monies remaining in the HDA Account now require the approval of the Controller. Previously, the developer could withdraw all the monies in the HDA Account without any approval from any authority when the housing development has been completed and the solicitor for the developer has certified that the obligations of the developer in respect of transfer of title under all the SPAs in that housing development have been fulfilled.

Controller may use money in the HDA Account
The new Regulation 11A entitles the Controller to use the monies in the HDA Account to ensure the completion of the development if he is satisfied that the development of a housing development is detrimental to the interest of the purchasers.

Auditor to make annual report
The new Regulations 12A and 12B require every auditor of a developer to, within 6 months after the close of the financial year of such developer, make an annual report to the Controller as to the HDA Account and shall state in every such report whether or not in his opinion:-

(a) each and every deposit and withdrawal recorded in the account are in accordance with HDA Account Regulations;
(b) the accounting and the records examined by him are properly kept; and
(c) if the auditor has called for an explanation or information from the officers or agents of the developer, such explanation or information has been satisfactory.
Further, the auditor is required to immediately lodge a report to the Controller together with a full statement and relevant documents if he found any fraudulent act or misappropriation of money in the HDA Account and the auditor is bound to supply any information or document if requested by the Controller.

The new Regulation 13A stipulates that any person who contravenes any provision under the HDA Account Regulations shall on conviction be liable to a fine not exceeding RM5,000 or to imprisonment for a term not exceeding 3 years or to both. In our opinion, ďpersonĒ here includes the auditor, the purchaserís financier and the banks which permit withdrawals of monies from the HDA Account in breach of the HDA Account Regulations.

Nothing in the amended regulations shall affect the use of the HDA Account under the housing licence issued prior to 1 December 2002 until all the properties in the housing development have been completed.

Housing Development (The Tribunal For Homebuyer Claims) Regulations 2002
The Tribunal Regulations set out detailed but simple procedures for a homebuyer to file a claim against the developer. In order to preserve uniformity of laws, the procedures are almost similar to that of the Consumer Claims Tribunal established under the Consumer Protection Act 1999.

Housing Development (Compounding of Offences) Regulations 2002
These regulations provide that certain minor offences under the Act may be compounded by the Controller or any officer authorised by the Controller. The offer to compound an offence is for a period of 14 days, and if full payment of the sum offered is made on or before the expiry of 14 days, no further proceedings shall be taken against such person. Otherwise prosecution will be instituted without further notice.

Shamsulbahri bin Ibrahim is the Legal Adviser to the Ministry of Housing and Local Government who together with Roger Tan Kor Mee, an advocate and solicitor sat on the Steering Committee on Legislative Drafting.


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