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NEWS FROM HOUSE BUYERS ASSOCIATION
Common gripes about developers The Star - Gripe Box - Saturday, August
11,2001
Last week, we highlighted some of the problems housebuyers face including
insolvent developers, shoddy workmanship, misleading advertisements and
abandoned schemes, with some suggestions on what a buyer can do. In this
second part, we look at more niggling problems and what the law has to
say about them.
Stakeholder fund
The last 5% of the progress payment is not meant to be paid to the developer
until the defect liability period is over. This money will be held by
the stakeholder who is usually me developer's solicitor. The purpose of
a stakeholder fund is to ensure that the developer makes good the necessary
defects which shows up during the defect liability period. The stakeholder
must ensure that he does not release the money to the developer until
all defects are rectified. If a developer has not rectified defects raised
by the buyers during the defective liability period, the latter can immediately
write to the developer's stakeholder and ask them to withhold the stakeholder
fund until the defects are rectified. However, should the last 5% be handed
over to the developer (as it has happened before) by the stakeholders
even before the expiry of the defect liability period, then me buyer should
report the lawyer's action to the Bar Council. The address is as follows:
The President
The Bar Council
No.5 Jalan Tun Perak
50050 Kuala Lumpur
Strata Titles
The problem with strata titles is getting them issued as soon as possible.
The problem could lie either with the developer or the Land Office.
According to the Strata Titles Act 1985 (applicable to Peninsula Malaysia
only), the developer must apply for the strata titles within six months
from the date of the first Sales Purchase Agreement (SPA) or from the
date when the Certificate of Fitness for Occupation (CFO) is issued, depending
on when the building is completed.
Failure to do so by the developer can lead to a fine. However, s.7(3)
states that a developer can even apply for strata titles anytime before
the CFO is issued.
If the developer is taking an inexplicably long time to apply for the
strata titles, a court action can be filed to compel the developer to
submit the complete application to the Land Office.
On the other hand if the fault does not lie with the developer but with
the Land Office, then owners of apartments should join forces and put
pressure on the Land Office to get the strata titles issued quickly.
We understand that amendments to the Strata Titles Act 1985 are being
proposed to speed up the process of application and issuance of strata
titles. We urge the Ministry of Housing and Local Government to take into
account all problems faced by purchasers in amending the Act
Homes not built to specifications
Where houses are not built according to the specifications in the SPA,
the first thing the affected buyers should do is to form an action committee
so that buyers will be in a better bargaining position.
Buyers should first complain to the developer as well as channel their
complaints to the Ministry of Housing and Local Government. If the Ministry
is unable to settle the problem satisfactorily, then the next step would
be to examine the cost of items that were not built to specification.
For example, in the case of a developer not supplying sliding doors as
agreed and the sum involved for the rectification of this problem is RM5,000
and below, than individual buyers can demand for this sum from the developer.
If unsuccessful, file a claim in the Small Claims Court (which conies
under the Magistrate's court).
However, if rectifying the problem will cost each buyer more than RM5,000
and the developer refuses to compensate the buyers, then the buyers will
have to file a suit in court against the developer.
Purchasers should note the contents of Clause 12 of the standard SPA under
the Regulations, which give purchasers the following rights:
No changes can be made to the approved plans without the consent in writing
of the purchaser, except if it is required by the authorities.
The purchaser shall not be liable for the cost of such changes or deviations
If the changes or deviations involve the substitution or use of cheaper
materials or the omission of works originally agreed upon, then the purchaser
shall be entitled to a corresponding reduction in the purchase price or
to damages.
Developers demand "extra" fees
Although the Regulations state that developers shall not collect any payment
except as prescribed by the contract of sale, developers try to get around
this by making buyers sign additional agreements called Supplementary
Agreements or House Rules wherein such "extra" contributions
are included.
Supplemental-)' agreements most often exist when buyers purchase strata
properties ie. apartments and condominiums. CAP'S stand is that the Supplementary
Agreements or House Rules are not enforceable, as long as no such agreement
is provided for by statute-
The Regulations also provide strict requirements for any waiver or modification
to the statutory SPA, which can only be done with the consent of the Ministry.
Buyers therefore should not be subjected to terms contradictory to the
statutory SPA. In one case, an action in court was filed on behalf of
a buyer who refused to pay me management fund demanded by the developer.
The developer refused to hand over the buyer's keys even though the buyer
had settled the total purchase price in accordance with the SPA-In August
TTO, the Penang High Court ruled in favour of the buyer and ordered the
developer to hand over the keys. Our advice to buyers is to read the supplementary
agreements before signing them as once buyers sign them, developers will
argue that the buyers are bound by contract.
If buyers are not agreeable with the terms of these supplementary agreements
then they may have no choice but to challenge the validity of the agreement
in court.
High fees charged by management companies
Whenever there are complaints about high maintenance fees, there are two options open to the residents. When strata titles have been issued, a management corporation should have been set up, and no changes to the service charges can be made without the consensus of the residents. Where strata titles have not been issued, the developer usually maintains the property with the help of a management company. If the residents are unhappy with the developer or the management company's work of running the property then the residents, as a group should voice their dissatisfaction to both parties concerned.
If nothing is done, then the residents can form their own residents' association and take over the management of the property. However, management of a property prior to the issuance of strata titles is not governed by any law- A new Act called the Building and Common Properties Act is due to be passed sometime this year. This Act is supposed to govern all aspects of maintenance of properties prior to the issuance of strata titles. Residents are also entitled to look at the income and expenditure accounts of the management company in order to see how the monthly service fees and sinking fund are utilised.
Build and Sell
We feel that many of the problems faced by housebuyers would in the long run disappear if developers adopt the concept of build and sell. Although it costs more for properties to be built under this concept, buyers would sell the houses. This would also do away with fly-by-night developers who are only out to make quick profits as only reputable developers with serious intentions to build good homes can survive in the industry.
Buyers need not worry about servicing their loans before being handed vacant possession of their homes because they would be able to obtain financing as soon as they have decided to purchase their ready-made homes.
Further, there would not be complaints about non-compliance with advertising claims. Buyers would not also be faced with problems of non-completion of common facilities. This concept would eradicate the problem of abandoned schemes and thus save the government a lot of cost and expense to revive abandoned projects. Buyers would also be free of sleepless nights wondering if they would ever see their houses ever being completed.
Conclusion
It is unfortunate that in many of the situations set out above, the buyers have to resort to various lands of measures to protect or exercise their rights, such as signing documents under protest and setting up residents committees. Instead of expecting purchasers to always he on their guard and keep reading the fine print, all these and should give them avenues to assert their rights, without being laced by ambiguities and dead-ends.
Enforcement by local authorities and the Ministry is also crucial in this aspect. The Ministry of Housing and Local Government are in the process of setting up a housing tribunal where buyers can file their housing claims just like in the Consumer Claims Tribunal. It is hoped that with the setting up of this tribunal, many housing problems will be dealt with speedily and cheaply.
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