But how feasible is the BTS concept when for the past 40 years the
inveterate “sell-then-build” (STB) system has been so ingrained in our
Firstly, it must be emphasised that our current laws do, in fact,
encourage developers to practise BTS as the STB system has also over the
years become the bęte noire of those who champion the rights of house
Currently, a developer is not required to open and maintain a housing
development account or adopt the statutory Schedule G or H sale and purchase
agreement (SPA) if the properties offered for sale have already been issued
with the certificates of fitness for occupation (CFO).
This is partly the result of a revamp of the housing laws pushed through
by the Housing and Local Government Minister Datuk Seri Ong Ka Ting in 2002.
During his first term of office, Ong managed to revamp our housing laws,
and some of the changes include:
Giving the purchaser a right to terminate the statutory SPA due to his
inability to obtain financing as a result of his ineligibility of income, in
which case he is entitled to a refund of 99% of all monies paid to the
But all these do not seem to impress the proponents of BTS who still feel
that this is one concept which Malaysia should embrace as soon as possible.
But groups like the National House Buyers Association do acknowledge that it
may be too early for us to adopt a full form of BTS.
So they are now supporting a hybrid form of BTS whereby a developer can
sell housing units before completion, but he may only collect a certain
percentage of the purchase price (e.g. 10%) upfront with the balance payable
only upon delivery of the housing unit with CFO. This system, first mooted
by Ong, is better known as the 10/90 system.
The idea first came about in July 2004 after Ong’s trip to Australia to
study the BTS concept practised there.
It appears to be modelled upon S9AA of the Sale of Land Act 1962 of the
State of Victoria (see box).
Much has been written elsewhere about the merits of the 10/90 system. But
what are some of its drawbacks?
Firstly, section 9AA is not about selling and delivery of a housing unit.
It is about a sale of land prior to the approval of plan. Thus in
comparison, the issue of fairness does arise whether 10% is a reasonable sum
to bind a developer as it is more akin to a situation where the winner takes
all and the loser loses everything.
Secondly, is it fair for the purchaser to opt out of the sale if the
completion of his housing unit is delayed when he can be adequately
compensated with damages for late delivery?
Further, can a purchaser also opt out for any other reason? Whilst a
developer is most likely to get the purchaser’s financier to undertake to
pay the 90% of purchase price upon completion, there is really nothing to
prevent a purchaser to opt out, say if upon completion the property price
should plummet to a level which does not make sense for the purchaser to
continue with his purchase.
Under these circumstances, is the developer entitled to specific
performance? If not, will this not lead to the completed project being
It is envisaged that under this practice, the developer will impose many
conditions allowing him to withdraw from the contract, for example, if not
many units are sold.
Financial institutions may not also come on board to finance a project
unless a certain number of units have been pre-sold.
Therefore, is Schedule G or H SPA still required to be used? If so, it
really does not make a lot of difference from the present system and the
10/90 system may in fact cause the purchaser to be embroiled in more legal
battles over the current usual late delivery and poor workmanship
In this respect, it may not be so attractive for the developers to adopt
the 10/90 system if they still have to comply with the existing strict
housing development laws and State Governments’ polices on bumiputra
ownership, low-cost housing and improvement service funds for
In fact, we should pride ourselves as one country which requires
developers to follow a statutory SPA and open a housing development trust
account compared to other countries which practise the STB concept.
What is more important is the provision of affordable housing to the
people. The BTS and 10/90 concepts are more commercially-driven with little
emphasis on the social aspect of a housing development.
While the purchaser’s rights may be strengthened under the 10/90 concept,
he may be more disadvantaged economically as his need for affordable housing
may no longer be within his reach.
We should focus more on the enforcement aspect and give a little more
time for the 2002 amendments to bite in and if necessary, strengthen further
the current laws.
Since the revamp of the housing laws in 2002, we have seen a vast
improvement in the housing industry – reduction in abandoned projects,
effective enforcement and effective dispute resolution by the Tribunal for
Home Buyer claims.
It may be too soon to adopt a system which is not universally practised.