indepth

Enhanced homebuyer protection

Housing Development (Control and Licensing) (Amendment) Act 2012 SPA

IF you are purchasing residential property directly that is still being constructed, the party that you are dealing with is the developer. In Peninsular Malaysia, the relationship between the homebuyer and developer is regulated by the Housing Development (Control and Licensing) Act 1966 (HDA).

The HDA 1966 was recently updated with the Housing Development (Control and Licensing) (Amendment) Act 2012 (HDAA) that came into force on June 1 this year.

Under the HDAA, the Sale and Purchase Agreement (SPA) signed for the purchase of a residential property from the developer is prescribed under Schedule G, H, I and J.

However, our focus here will be the prescribed Schedule H of the Act to cater for the trending stratified residential property even though similar terms are also addressed in the respective Schedule G, I and J to effect the required homebuyer protection.

1. No misleading advertisement

Property advertisements are always the first source of information for most homebuyers, especially for off-plan sales, also known as sell-then-build developments.

This is because homebuyers would have to rely heavily on the representations made by developers in advertisements for their products.

Some homebuyers also tend not to do their research on the developer’s track record or learn more about a development by visiting the location of the construction site or even a simple internet search.

Developers’ advertisements often contain information that homebuyers must spend much time and effort to verify, and yet these are usually also the factors that clinch the deal for the developer. Thus the HDAA prohibits developers from including the following information in their property advertisements:

(a) Offer of free legal fees;

(b) Projected monetary return gains and

     rental income;

(c) Claim of panoramic view;

(d) Travelling time from housing projects

     to popular destinations; or

(e) Any information to which a housing

     developer cannot genuinely lay proper

     claim.

This means claims such as “10 minutes away from KLCC” are now prohibited from being included into the developer’s advertisement because there are many circumstances that can affect the accuracy of such a claim.

2. Statutory termination of SPA

What happens if the developer fails to continue with the development for more than six months?

Below (see table) is a comparison of the situation when the SPA is deemed to have been terminated before and after the HDAA 2012 came into effect this year.

3. Amended Schedule H

The following shows the significant amendments to Schedule H:

Redemption Sum

This is the sum that the homebuyer needs to pay the developer’s financier to redeem the unit from being charged to the bank. The bank shall upon payment of this redemption sum issue a letter of disclaimer in favour of the homebuyer.

If the redemption sum payable to the developer’s financier is more than 35% of Purchase Price, the developer has to settle such redemption sum or the homebuyer is relieved from paying in excess of 50% of the purchase price until the redemption sum is settled by the developer.

Delivery of Vacant Possession

Strata title is now expected as part of the delivery. The stamp duty for transfer shall be paid sooner than before and the homebuyer gains better security with the title.

Delivery of Vacant Possession without Strata Title

The developer will need to apply for a certification from the authority before delivery of vacant possession in place of the expected strata title.

Deeming Provision (statutory assumption) on Delivery of Vacant Possession

It has been extended to 30 days (from 14 days before amendment) from the date of service of notice of vacant possession.

Execution of Memorandum of Transfer

Upon the issuance of the strata title to the respective property, the developer needs to execute the Memorandum of Transfer to the homebuyer together with a strata title to be represented for registration in favour of the homebuyer.

With the new laws on developer’s advertisements, provision for statutory termination of the SPA and the amendment of Schedule H of the Act in place, homebuyer protection in Malaysia has definitely moved up a few notches from before.

Chris Tan is a lawyer, author, speaker and keen observer of real estate locally and abroad. He is founder and managing partner of Chur Associates.

If you have questions that you would like to ask Tan, please go to the Tips section of theedgeproperty.com.

Disclaimer: The information here does not constitute legal advice. Please seek professional help for your specific needs.

This article first appeared in property+, a section of the digitaledge DAILY, on Sept 4, 2015. Download property+ for free here.

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