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Avoiding legal pitfalls
11/09/2004 NST-PROP By Salleh Buang

THERE is an old common law doctrine called "the freedom of contract" which, simply put, means that people are free to make their own contracts.

However, this principle is not applicable if a particular law says so. Two examples easily come to mind in Malaysia - one, the Hire Purchase Act 1967 and the other, the Housing Development (Control & Licensing) Act 1966. They are usually referred to as "consumer-oriented legislation".

Regulation 11(1) of the Housing Development (Control & Licensing) Regulations 1989 states that every contract of sale and purchase of a conventional house on terra firma must be in the form prescribed in Schedule G. In the case of a unit in a subdivided building (flat, apartment or condominium), the contract should be in the form prescribed in Schedule H.

Regulation 11(2) goes on to state that no housing developer is permitted to collect "any payment by whatever name called" except as prescribed by the contract of sale.

The legislative intent is abundantly clear. No developer is allowed to "contract out" of the standard Sale and Purchase Agreement (SPA), which must conform to either Schedule G or H. The developer also cannot collect any money until the parties have signed the SPA and thereafter, further payments can only be collected in accordance with the terms of the agreement.

Regrettably, there are so many among us who are still ignorant of the law and the situation is made worse by the number of black sheep developers who never bother to abide by it.

Some have even been known to collect "booking fees" or "registration fees" despite knowing it is an offence to do so.

There have been instances where developers have gone ahead to sell their houses even though they have not obtained the necessary approvals, licences or permits from the relevant authorities. Yet, have you heard of any case where crooked developers were hauled to court and sent to prison for their crimes?

With the media now giving attention to the "build-then-sell" concept, do take note that under Regulation 11 (1A), the developer need not comply with Regulation 11 (1) if "the Certificate of Fitness for Occupation (CF) for the housing accommodation has been issued and a certified true copy, which has been forwarded to the purchaser" at the time the SPA is signed.

The intention behind Regulation 11 (1A) is that the standard SPA can be dispensed with under a "build-then-sell" situation.

That should count as a significant incentive for our developers (the experienced and financially equipped) to practice this system of housing supply.

Salleh Buang is senior advisor of a company specialising in competitive intelligence. He is also active in training and public speaking and can be reached at sallehbuang@hotmail.com

 

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