Baffled over eSPA

The man in the street thinks we now have a DIY SPA vide eSPA and there is no need for the services of lawyers in property purchases. But is that so?

The Housing and Local Government Ministry (KPKT) has recently introduced an online platform called Housing Integrated Management System (HIMS), a single-entry system to replace the existing BLESS, IDAMAN and e-Pemaju, all of which are now rendered redundant (pun intended).

Through HIMS, housing developers are to submit their applications for APDL (Advertising Permit and Developer’s Licence) online. HIMS also has a host of other features that regulate, manage, receive and gather data.

However, one baffling thing that has been introduced through HIMS is the eSPA (electronic sale and purchase agreement). In particular, it has sent shock waves through the legal circle, especially among law firms that have been engaged by housing developers for sale and purchase legal work. They are now at risk of being sidelined, made redundant and put out of business once the eSPA is fully activated.

Digital signing?

The HIMS is meant to be an application and bipartisan reporting system between the government and developers. Along this purpose, the eSPA does nothing more than facilitate KPKT’s job by identifying the buyers’ particulars and details of purchases. It is merely a tool to allow the developers or their agents to key in the details of the purchasers’ names, identities, addresses and details of the purchased properties. It should stop there, except there is a section for digital signing.

Now comes the million-dollar question: If there is digital signing by the purchaser, who is to bear witness to formalise the contract of sale and purchase agreement (SPA) and the related memorandum of transfer (MOT)? Who is to safeguard the digital signatures of the purchasers from being misused and exploited?

The completion of the blanks in the statutory SPA does appear to be a clerical job and can be undertaken by the purchasers themselves without the need for lawyers. However, the signing of the SPA is merely the beginning of a journey to a sale and purchase transaction. This have been explained in earlier published articles titled: Property Chat – Why you need lawyers in property transactions, unlike buying cars Part 1 & Part 2 .

With the eSPA, it seems the developer will just need to fill in the blanks and generate the SPA from the HIMS. The onus is now on the housing developers and government to ensure the SPA for buyers of the whole country is legally binding.

Check and balance

Is it really that simple? In the first place, the government’s role is to regulate the terms and conditions in the statutory SPA in Schedules G (landed property), H (stratified property), I (landed property build-then-sell (BTS) 10:90 concept) and J (stratified property BTS 10:90 concept).

However, what purpose does it serve for the government to be involved in the documentation of the individual SPAs? It does help developers produce the SPAs without the need of lawyers, but how does it help the buyers? In any event, they will still need to engage lawyers to transfer the properties to them.

It is a pre-requisite requirement pursuant to Section 211 (Fifth Schedule) of the National Land Code, 1965 (revised 2020) that the transferors and transferees in a MOT (Form 14A) and all dealing instruments have to be attested and witnessed by those persons designated under the Land Code, of which lawyers are one of them. Bank officers, developers’ managers, Controller of Housing, Commissioner for Oaths and clerks cannot attest and witness the signatories to the MOT and the other related dealing instruments.

The government should leave the conveyancing of property to lawyers as the lawyers have always been the check and balance between the rights of developers and the entitlements of purchasers. The government should continue its role as the regulator and custodian of the law, ensure the developers have sufficient fund to complete their projects, resolve disputes and effectively monitor, police and enforce compliance to the housing laws and policies; and not get involved in the business of developers.

Otherwise, in defending the function of the eSPA and the HIMS as a whole, the government could be biased against purchasers.

Is KPKT setting up a repository?

It seems that, after the eSPA is stamped, a copy must be uploaded to HIMS for data collection by KPKT and “subsequent management” between the developers and KPKT.

What does this “subsequent management” mean? Does KPKT wish to be the repository data collection centre where all purchasers are tracked like the current MySejahtera? Will KPKT’s repository maintain a complete record of all movements of sales and sub-sales? Will the information be made available when a developer goes belly up and can the information be easily retrieved by the court-appointed private liquidators for a repository and custodian fee? Will all information be safely stored and conducted digitally online, thereby reducing chances of various thefts and frauds?

However, the current Housing Development (Control & Licensing) Act (HDA) legislation does not provide for the need to register and process information of purchasers. Correspondingly, it does not regulate and afford any protection to the processing of purchasers’ personal data.

The HDA and its regulations only prescribe the standard form and contents of SPA but do not require any such SPA with purchasers’ information to be generated from any system operated by KPKT. Therefore, HIMS is not legally empowered to collect any personal data or generate any SPA with purchasers’ information.

KPKT contends that the eSPA is merely for administrative purpose only. Does that argument hold water in legal speak?

Is it legal for KPKT to amend the SPA’s terms and conditions?

The validity of the Controller of Housing and Minster’s approval of Extension of Time (EOT) has been a contentious issue in the courts of law. It has been ruled by the Federal Court in Ang Ming Lee and others v Menteri Perumahan (2020) 1 MLJ 281 that the EOT is ultra vires (beyond the powers).

Hence, the validity of KPKT’s discretion to amend and vary the prescribed SPA, especially the completion date from 36 months (in SPA Schedule H) to 48/54 months is an issue. Any exemption or variation from HDA must be by way of Regulations and gazetted under Section 2(2) read with Section 24(2)(ia) of the HDA and not merely by “surat lanjutan” (letter of extension) or “surat pindaan” (letter of variation) to the statutory SPA.

When exercising the Minister’s discretion, can he assume and exclude the voices of the purchasers of housing developments, who are directly affected by his action or inaction? On what premise can a Minister make the assumption that he is well aware of all the plights and voices of end-purchasers? Is it reasonable or logical for a Minister to modify the scheduled SPA to exonerate developers from all financial risks at the sole and exclusive burden of end-purchasers with the stroke of a pen?

What about the issue of privity of contract, when the Minister or the Controller of Housing is not even a party to the SPA and allowed to intervene, aka interfere? Would it not be within reason and logic for the Minister to hear all voices of the end-purchasers to consider and devise all available or different remedies that would advance the protection of end-purchasers? What if the discretionary power is abused and exercised in biasness against the weaker party? Who adopts the check and balance here? Surely the affected end-purchasers must be accorded the rights to be heard? The Minister and Controller of Housing cannot assume omniscience – that he knows all and sees all and can purportedly feel the pulse of each of the end-purchaser who falls victim to his decision.

Hence, the application of HIMS to issue letters of extension and variation whether by Minister or his charge i.e. Controller of Housing should not be implemented as it would seem to be in defiance of the celebrated Federal Court ruling.

We hope KPKT will revisit the contentious issues and not launch something that is merely administrative in nature with no legal standing or in its term “punca kuasa” (source of legal jurisdiction).

Nevertheless, the National House Buyers Association (HBA) will continue to monitor the contentious issues that relate to the eSPA and ensure the identity of the purchasers and digital signatures of the purchasers are not misused, abused and exploited.

 

This article is written by Datuk Chang Kim Loong (Pictured), the Hon Sec-Gen of the National House Buyers Association (HBA) and edited by HBA volunteer lawyers. HBA could be contacted at: Email: [email protected] Tel: 012 3345676