The Federal Court has on January 19, 2021 ruled, in no uncertain terms, that there shall be only one certification i.e. Certificate of Completion and Compliance (CCC) under the housing legislations vis-a-vis Housing Development (Control & Licensing) Act, 1966 (HDA) and its regulations. Why is this decision so important? And how could this protect the rights of property buyers?
The developer has delivered vacant possession to Carol and attached a “certification” from its architect that her condominium was ready for occupation.
On taking possession of her unit, she realised that the common facilities stated in her sale and purchase agreement had not been completed – the swimming pool, water features, landscape, gym and the four “super-speed” passenger lifts were not operational.
Despite that, the developer levied maintenance charges and sinking funds for all and sundry. The common facilities were subsequently delivered six months after the date Carol had taken physical possession of her unit.
When Abdul Rahim took the keys to his condominium, he was bursting with joy. His joy was short-lived, though, when his neighbours told him that the developer’s architects had issued Form F1 (Partial CCC), denoting that the development was only partially completed (rather incomplete in totality).
On checking, he realised a lot of construction works, as promised, had not been fulfilled as required of the housing developer. Though his unit parcel was completed somehow, the temporary hoardings were still erected, separating the main blocks from the common properties. There were frequent construction works with “prowling” foreign workers at site, giving rise to concerns about safety and hygiene for his family.
HDA forbids the use of ‘Partial CCC’ in delivery of vacant possession
HDA is a statute to provide for the control and licensing of the business of housing development in Peninsular Malaysia, the protection of the interest of purchasers and for matters connected therewith. In other words, HDA is a specialised legislation dealing with housing issues under its strict provisions.
The intention and emphasis of the HDA is best illustrated by the Federal Court on Nov 26, 2019, in its judgement in the landmark case known as Ang Ming Lee & Ors vs Menteri Kesejahteraan Bandar & Pengawal Perumahan, which ruled that the housing controller has no power to waive or modify provisions of the contracts of sale as prescribed by regulations 11(1) and (2) of the Housing Development (Control and Licensing) Regulations, 1989 (1989 Regulations).
Her Ladyship Chief Justice Tun Tengku Maimum Tuan Mat had emphasised in no uncertain terms in the judgement that Act 118 (Housing Development (Control & Licensing) Act 1966) is a “social legislation” intended to protect homebuyers. The interests of the purchasers shall be the paramount consideration against the developer.
This can be inferred from the fact that Partial CCC was explicitly precluded from one of the quintessential VP (delivery of vacant possession) conditions:-
i) Section 3 of Act 118 inter-alia:
“Certificate of Completion and Compliance” means the certificate of completion and compliance given or granted under the Street, Drainage and Building Act, 1974 and any by-laws made under that Act certifying that the housing accommodation has been completed and is safe and fit for occupation but does not include partial certificate of completion and compliance.
ii) Clause 1 (b) Schedule G; and
iii) Clause 1 (c) Schedule H, Clause 1(b) Schedule I and Clause 1(c) Schedule J
The exclusion is a testament that the issue of Partial CCC has indeed been deliberated, considered and left out in good measure under the HDA legislations.
Why ‘Partial CCC’ is a bad idea
A partially completed scheme due to “phased development” is known to have created a litany of problems for the purchasers, owners or occupants, among other things.
First of all, there is a risk of incompletion of the overall neighbourhood for the occupants of the earlier phases, in the event where the developer may abandon the project halfway or be unable to continue with the subsequent phases due to financial burden or winding up.
For example, imagine a podium for a shopping mall with a residential tower block sitting on top of it. What would happen if the developer abandoned the construction of the podium block after the issuance of Partial CCC to the purchasers of the residential tower block, due to low take-up rate of the retail outlets?
The purchasers would have to put up with the partially completed structure and worse still, they would have to go through the unfinished areas daily if both the podium and residential block happened to share a common access. The abandoned podium would become a breeding ground for mosquitoes, rats, rodents, insects as well as other undesirable elements.
Not only would it be an eyesore to the neighbourhood, but there would also definitely be a reduction in the value of their property as a direct consequence of such abandonment.
Even if the podium phase were not abandoned, the subsequent ongoing construction activities would create a host of potential security threats, safety and health hazards caused by smog, noise and dust pollution to the purchasers of the earlier phase.
Only one type of certification for both parcel and common facilities
In a landmark decision on January 19, 2021 the Federal Court has delivered its grounds of judgement in respect of the case of PJD Regency Sdn Bhd vs Tribunal Tuntutan Pembeli Rumah & Another & 6 Other Appeals. Apart from clarifying the legal position as to when time starts to run in respect of VP of the property, the Apex also distinguished between Certificate of Practical Completion (CPC) and CCC.
1) CPC is a certification for building works done under a construction contract entered into between the owner or developer and the builder or contractor. Such certification is a private legal obligation between such parties;
2) Whereas CCC is a statutory requirement, as pointed out by Her Ladyship, and that “... is only issued upon the developer complying with all regulatory laws such as the Street, Drainage and Building Act 1974”.
The question posted to the Federal Court panel of five Judges was: “Whether the developer can be deemed to have delivered common facilities to the purchaser upon the issuance of the CPC and not the CCC”.
Reverting to the principles of interpretation of social legislation, the Court is required to construe the statutory contract in a manner most favourable to the purchasers. It is clear that the SPA only refers to one type of certification, namely the CCC. This CCC issued by the architect is required for the VP to the purchasers.
CJ Tengku Maimun held the following:-
It cannot be the intention of the legislature to refer to one standard in respect of VP and another standard in respect of the completion of common facilities. Furthermore, CCC is a legal requirement imposed by law which will be issued upon the developer complying with all regulatory laws such as the Street, Drainage and Building Act, 1974. This affords protection to purchasers who can be rest assured that the relevant authorities have approved the construction. The same cannot be said in respect of the CPC or any other such documents not amounting to a CCC.
For the purposes of ascertaining the date of completion of common facilities under a prescribed statutory contract of sale, the relevant date is the date when the CCC is issued for purposes of VP of the Property.
Hence, it is abundantly clear from the decision that parcels and common facilities ought to be completed and handed over to the buyers simultaneously and not separately. Completion of the common facilities must be in tandem with the completion of the property itself, as the purpose of the common facilities is for the use and comfort of the purchasers.
Datuk Chang Kim Loong is the Hon Secretary-General and Ar YS Ng is the technical advisor of the National House Buyers Association (HBA).
HBA can be contacted at:
Email: [email protected]
Tel: +6012 334 5676
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