is not uncommon for buyers to be given vacant possession of their
newly-built houses, only to find that their developer has yet to even
apply for the Certificate of Fitness for Occupation (CF). The National
House Buyers Association often receives feedback from buyers regarding
receiving their keys, buyers often have to spend the next 18 months
chasing developers to comply with any breaches they may have caused and
rectify defects. Until CFs are approved, they will not be able to move
into their houses, even though the full purchase price has been
disbursed and they have started servicing their bank loans.
when available, are also often slow in happening. While the Housing
Development (Control and Licensing) Act and the Housing Developers’
Regulations are aimed at safeguarding the interests of buyers, they
lack the bite. And this is largely because of poor enforcement.
Housing and Local Government Ministry's Monitoring and Enforcement
Division has been given the task of overseeing the activities of
developers and enforcing the law.
this division's workload is extremely heavy and it cannot keep a
constant vigil on developers. But this is vital as laws can only do so
terms and conditions in the statutory contract of sale, which is the
Sale and Purchase Agreement (SPA), bind those who buy houses from a
there are no provisions in the SPA for purchasers to get out of the
contract and get a refund of the money paid should a developer commit
any breach or fails to perform or observe any material term of the
agreement, goes bankrupt or goes into liquidation.
and above this, buyers face many other risks under the existing
practice of housing supply, which is ‘buying-off-the-plan' or the
mitigate the risks, buyers are often advised to “check the financial
strength and capability of the developer”, meaning they should check
its reputation, honesty, goodwill, track record and most importantly,
its financial resources. But this task is beyond the capability of the
average house buyer.
one, there is nothing to inspect. Potential buyers rely on
advertisements, write-ups, architects’ plans and specifications,
artists’ drawings and projected returns. Bridging financiers and end
financiers also do nothing to protect the interests of buyers.
a sale is completed, that is when a purchaser has made full payment on
the house. They would still not be able to occupy the house until the
CF is issued.
this while, construction remains a ‘no-risk’ venture for the developer.
If a project fails, it is buyers who suffer. A developer typically
cites financial problems when they fail to complete and deliver a
project on time.
also find other excuses, such as bad weather, government policies,
building material shortage, stop-work orders by authorities and even
disputes with land owners, consultants or contractors.
any other business, a company involved in a contract that fails to
deliver the specific product required on time, would shoulder the risks
and not pass them on to its customers.
in the case of housing, if a project is abandoned and then revived,
buyers would end paying more – and the government would lose revenue.
Such was the case in the Majestic Heights saga that played out in Penang.
the case, the first phase of the development comprising RM75,000
medium-cost apartments were launched in 1995 and were due to be
completed in 1998. However, the project was abandoned early that year.
Oct 16, 2001, the High Court in Penang ordered the developer to be
wound up; this eventually led to the formation of an action panel, in
which the buyers were also involved, that resumed construction.
Each buyer had to pay RM7,500 more and the units were finally completed
with the CFs issued early this year.
these buyers could claim late delivery compensation, each of them would
have been paid RM45,000 for all the bank payments that they had made
over the years. The statutory charges waived by the Penang Island
Municipal Council, Tenaga Nasional Bhd and Indah Water Konsortium alone
came up to RM3.62 million.
in reality, it is an even more expensive affair to revive an abandoned
project, not only for buyers but also for the Government and other
maintains that despite amendments and re-amendments to housing laws,
weaknesses remain. One way to tackle these problems is to have another
comprehensive review of the Housing Development Act – and to push for
the mandatory building of housing units before selling them.
This is our continuing saga of why the build-then-sell or 10:90 system of sale and purchase should be embraced mandatorily
National House Buyers Association (HBA) is a voluntary,
non-governmental organization manned by unpaid volunteers. For more
information, check out their website at http://www.hba.org.my