Avoiding legal pitfalls
11/09/2004 NST-PROP By Salleh
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
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
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
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
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 email@example.com