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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.


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