What makes
buyers unhappy with legal provision in S&P
25/12/1999
NST-PROP By Salleh Buang
When a Malaysian buys a house or an
apartment from a licensed housing developer, the sale and purchase
agreement that the parties are obliged to sign is not open to negotiation.
The SPA contains standard terms and
conditions determined by law - in this case, by the Housing
Developers (Control and Licensing) Regulations 1989.
The SPA for conventional housing is
contained in Schedule G whilst the SPA for sub-divided buildings such as
apartments and condominiums is contained in Schedule H of the 1989
Regulations. Though not exactly identical, they are essentially similar.
Not only is the SPA fixed by law, thus
forming part and parcel of the 1989 Regulations, but the courts have also
consistently upheld that the parties are not permitted to "contract out"
of any of its terms.
This means neither the developer nor the
house buyer is permitted to waive or vary any term or condition contained
in the standard SPA.
A case in point is that of the Koperasi
Serbaguna Cuepacs Tanggungan Berhad v. City Investment Sdn Bhd [1984] 1
CLJ 250, in which the court held that any attempt to contract out of the
Act "is an open defiance of the Housing Developers' legislation".
The court said the protection afforded
by law to the house buyers is " not merely a private right but a matter of
public interest which Parliament has intended to protect from being
bargained away or renounced in advance by an individual purchaser". At
first glance, the SPA is perfectly in order and quite capable of
protecting the interest of the house buyer.
This perception is quite understandable
because clause 7 of Schedule G for conventional housing and Schedule H for
sub-divided buildings clearly stipulates: "Time shall be of the essence of
the contract in relation to all provisions of this Agreement."
When read with other provisions of the
Agreement that stipulate the time of completion of the property by the
developer, the house buyer can definitely expect that his house or
apartment will be completed on time.
In the unlikely event that the developer
defaults, damages must be paid to the house buyer for non-completion.
Unfortunately for the house buyer, the letter of the law does not end
there. There is a darker and more uncertain territory of the law, of which
few purchasers have knowledge.
What is less spoken about, and therefore
receives less public attention, is regulation 11(3) which states that
where the Controller of Housing is "satisfied" that there exists some
"special circumstances or hardship" which render it difficult or
impracticable for the developers to comply fully with the terms and
conditions of the SPA, the Controller can, by a certificate in writing,
waive or modify such terms.
In simple words, where such "special
circumstances or hardship" exist, a developer can apply to the Controller
to modify the terms of the SPA, for example, to extend the time of
completion.
If the Controller is satisfied that the
application meets with the circumstances spelt out in regulation 11(3), he
can then issue a certificate in writing, waiving the date of completion as
stated in the SPA. Thus the developer gets more time to complete his
project.
As a result of the Controller's
intervention, the house buyer's right to sue the developer for late
completion may be lost. Understandably, there are several reasons why
purchasers are not happy with this provision in the law.
First, it cuts into or erodes the basic
philosophy and objective of the housing legislation - which is to protect
the house purchaser. Second, it is clearly in conflict with clause 7 of
both Schedules G and H (which stipulates that "Time shall be the essence
of the contract').
Another reason is that regulation 11(3)
is vague with regard to the "special circumstances or hardship" under
which the Controller is empowered to issue his certificate, and this
vagueness and uncertainty in the law could lead to abuse or incorrect
exercise of discretion.
Finally, it is not clear whether the
Controller is obliged to notify the affected purchasers if and when such
application is made by the developer and, if so, whether the purchasers
can object to such an application by the developer.
Hopefully, when the Housing Developers
Act is revamped in the next millennium, this particular provision in the
law will be repealed.
