Building defects is one of the biggest nightmares a homeowner could face. Unfortunately, the occurrence of defects, especially after the DLP ends is becoming a norm in many residential high-rise buildings in Malaysia. Find out what are your homebuyer rights, tips on conducting a property defect inspection and how to build a legal case to claim for latent defects.
Apartments, condominiums, serviced residences and other high rise residential buildings with modern amenities are appealing to the younger segments of the population, especially in urban areas. When purchasing a newly constructed strata property, one has to wait 36 months before receiving the letter of vacant possession from the developer informing that the property has been completed and the keys to the property are ready for collection.
The developer usually gives the purchaser a folder with the house keys and some documents including a Defect Form. This form is used to note down any property defects that the purchaser has identified, which is then required to be submitted to the developer for rectification work within 30 days. It is based on the Defect Liability Period (DLP) clause in the Sale and Purchase Agreement (SPA).
What are homebuyers’ rights when it comes to property defects?
The SPA template for strata properties (Schedule H) is provided for under the Housing Development (Control and Licensing) Act 1966 (HDA). It outlines the standard terms and conditions between the housebuyers and property developer.
Clause 14 of the HDA specifies that building materials and workmanship are to conform to the description stipulated in the SPA and that said Parcel/housing unit and all the common facilities and properties shall be constructed in a good and workmanlike manner in accordance with the description set out in the Fourth Schedule. The building plans should also have been approved by the appropriate local authorities as per the Second Schedule.
Clause 30 of the HDA on DLP on the other hand, stipulates that any defect, shrinkage or other faults in the housing unit or the common property which becomes apparent (patent defects) within 24 months after the date of vacant possession shall be repaired and made good by the property developer, within 30 days receiving a written notice from the Purchaser. This 24-month period is known as the Defect Liability Period.
Should the Developer fail to rectify the defects during the 30 days notice, the purchaser may proceed with the rectification work and deduct such costs from any sum which has been held by the Developer’s lawyer as Stakeholders under item 5 of the Third Schedule of the SPA.
Property developers are required to deposit in cash or bank guarantee with the Commissioner of Buildings (COB) within 21 days prior to the Vacant Possession, a sum of not less than 0.5% of the estimated costs of construction (excluding land) or RM50,000.00, whichever is higher. The COB shall open and maintain a Common Property Defects Account (CPDA) for each development area. He may use the deposit for the purpose of carrying out any work which is necessary to rectify any defects in the common property to address the complaint of defects during the Defect Liability Period from the parties as follows:
- A purchaser;
- A proprietor;
- A joint management body;
- A management corporation
- A subsidiary management corporation (JMB)
- A managing agent appointed by the COB under subsection 86(1) or 91(1) of the Act; and
- Any other interested person, with the permission of COB
Due to the short period of the DLP lasting for 2 years only, coupled with the lack of motivation for building managers who are appointed by the developer prior to handing over building management responsibilities to the JMB, defects in the common property are commonly overlooked or poorly managed.
Important note for new strata owners
Thus, in the event of extensive defects, a building audit funded by CPDA may be conducted to record the defects and propose the appropriate rectification method and the estimated rectification costs upon the approval of the COB. Should the homebuyers fail to record and report the defects during the DLP, the house buyers forfeit their right and inherit the patent defects after the DLP.
During the Movement Control Order, audit and rectification work in common properties have been delayed. Section 36 of the “Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19)” or Act 829 allows exclusion for the period from 18 March 2020 to 31 August 2020 and for an extension of time in the calculation of the DLP if an application is made to the Minister and approval is granted. These subsequent Gazettes include, but are not limited to:
- P.U.(A) 386 for such extension for the period from 1 January 2021 to 31 March 2021
- P.U.(A) 121 for such extension for the period from 1 April 2021 to 30 June 2021
- P.U.(A) 287 for such extension for the period from 1 July 2021 to 31 December 2021
- P.U.(A) 485 for such extension for the period from 1 January 2022 to 22 October 2021
What should you do during a property defect inspection?
Although the defect liability clause is present in the SPA, many first-time homebuyers are usually surprised to know that they bear the responsibility to inspect their new homes and report defects, if any. Being a non-technical person, the purchaser may not know what are considered defects and how to check for such defects in the building construction, utilities or finishes. While some of the defects are easily identified, others may be hidden from view and some other defects may be in common areas. Check out our house defect inspection checklist for new homeowners
During the inspection, the Purchasers should refer to the Fourth Schedule and the plans approved by the appropriate authorities as in the Second Schedule during the inspection for defects.
Any deviation to the approved building plans and description set out in the Fourth and Second Schedule is considered a defect. This is reflected in the case of Ong Nge Wei & Ors v Kemajuan Masteron Sdn Bhd & Ors  1 LNS 540, HC whereby the scheduled SPA is known to be a statutory contract that cannot be varied. Besides, unfinished work, non-compliance to good workmanship, good and proper materials and lack of reasonable fitness for human habitation can be considered as defects.
Lastly, the rectification of defects that recur after the DLP must also be referred back to the developer for repair as unfinished works. According to Teh Khem On & Ors v Yeoh & Wu Development Sdn Bhd & Ors  2 AMR 1558,  2 MLJ 663, HC, the repair must be able to address the root causes and restore the typical service lifespan of the building component affected as if no defect has happened.
Should any dispute arise in the issue of defects not exceeding RM50,000, homebuyers may refer and file a case against the developers in the Tribunal for Homebuyer Claims. The jurisdiction of the Tribunal shall be limited to a defect claim not later than 12 months from the expiry of the DLP.
What can I do if I need assistance to check for property defects?
Nevertheless, the assessment of construction quality may be beyond the knowledge of the home buyers especially those with no technical background and experience. Consequently, who can the home buyers refer to for assistance to conduct an inspection for defects, shrinkage and building flaws?
You can opt to hire a home inspection service provider who has QLASSIC certification. QLASSIC assessors are trained home inspectors certified by the Construction Industry Development Authority (CIDB). Some of these assessors can be found by doing a search on the internet. A few home inspection service companies that have good reviews online include
Quality Assessment System in Construction (QLASSIC) is a system or method to measure and evaluate the workmanship quality of a building construction work based on Construction Industry Standard (CIS 7:2006). QLASSIC, which is under the purview of the Construction Industry Development Authority enables the quality of workmanship of construction projects to be objectively compared through a scoring system. Marks are awarded if the workmanship complies with the standard and these points are then summed up to calculate the QLASSIC Score (%) for the construction project. Construction works that are rectified after an assessment will not be re-assessed. The objective of this principle is to encourage the contractor to “Do Things Right the First Time and Every Time”[i].
Prior to vacant possession, developers or contractors can get their projects assessed using the QLASSIC Certification Scheme. Developers or contractors may liaise with Construction Research Institute of Malaysia (CREAM) through its Construction Assessment Centre (CASC). CREAM is a subsidiary company of CIDB Malaysia that handles various types of businesses related to the construction industry.
What should homebuyers know about latent defects?
The 24-month DLP is great and all that but what about defects that cannot be seen/detected even by a professionally trained person during building inspection? What are the rights of the home buyers in relation to hidden defects?
A new law on Latent Defects, the Limitation (Amendment) Act 2018 was actually enacted in 2018 and enforced on the 1st of September, 2019. The law introduces a new section 6A to the principal Act, (Limitation Act 1953) for “Limitation of actions to claim damages for negligence not involving personal injuries” with a long time bar of 15 years, starting from the date on which the cause of action accrued within which time the owner must take legal actions within 3 years.
To illustrate this, two examples and timelines are shown below:
Example 1: C bought a house from D in 2000. In 2010, C discovered a crack that damaged the walls badly. A building report made by a consultant revealed that the cracks had appeared in 2002, two years after C moved into the house. C has three years from 2010 to file an action in court against D for damages.
Example 2: C bought a house from D in 2000. In 2020, C discovered a crack that damaged the walls badly. A building report made by a consultant revealed that the cracks had appeared in 2002, two years after C moved in. C cannot claim any damage under Limitation (Amendment) Act 2018 due to the 15-year time bar which began in 2005.
Although “cracks” were used to illustrate the application of the Limitation (Amendment) Act 2018, it must be noted that minor cracks are acceptable in the design and construction of reinforced concrete structures based on “BS 8110: Structural use of concrete. Thus, only cracks and defects that materially affect the safety, structural stability and durability, fitness for purpose and functionality of the buildings would qualify as Latent Defects.
In principle, cracks can be classified as follows:
- Natural shrinkage & plastic shrinkage crack: No risk
- Crazing crack: No risk
- Flexural & tension crack: Not risky but patching is required in order to prevent further deterioration
- Shear crack: High-risk structural crack
- Diagonal crack due to differential settlement: High-risk structural crack
Refer to the visual below to get a better idea of these different building cracks:
Besides, other considerations like typical service lifespan based on industrial practice and warranty by applicators or manufacturers should also be referred to in determining buildings built in a good and workmanlike manner. An example of this would be properly installed waterproofing in toilets in a new building should last for at least 5 years without leaking, based on widely used industrial practices. Should it suffer from pre-mature failure in the third year (after DLP), the purchaser may seek damages under the Limitation (Amendment) Act 2018.
Other considerations like vandalism, poor maintenance and damage by a third party that shortens the lifespan of the building components affected must be excluded.
How to build a case in court for latent defects in your property
Since latent defects are not visible to the naked eye, the use of non-destructive testing is essential in ascertaining the causation link of either an action or an omission that results in negligence. Four criteria must be considered during the course of building up the prima facie case in latent defects, namely:
1) Duty: A duty is simply a legal obligation. In order to be sued for negligence, the defendant must have owed a duty to the plaintiff.
2) Breach: A breach is a violation of a law or duty. The defendant must breach his duty in order to be liable for negligence.
3) Cause: The breach of duty must have caused harm to the plaintiff.
4) Harm: The plaintiff must suffer harm in order to sue for negligence. If the purchaser suffers no harm, he cannot sue.[ii]
Under section 101 of the Malaysia Evidence Act 1950, the burden of proof for negligence on the Plaintiff and the standard of proof is on the balance of probability i.e. that it was more probable than not that the Defendant was negligent[iii].
In a recent landmark case regarding latent defects – Dua Residency Management Corporation v Edisi Utama Sdn Bhd, the learned judge made the following decision:
- The management corporation had no cause of action in the SPA. In other words, the JMB does not have the locus standing to take legal action against the developer for breach of contracts. Only the homebuyers could sue the developer for breach of contract and not the JMB.
- The breach of a public law right (Street, Drainage and Building Act 1974 and Uniform Building By-Laws 1984) by itself gives rise to no claim for damages. A claim for damages must be based on a private law cause of action.
- Developers have a duty to exercise reasonable care in the construction of the common property to avoid the kind of economic loss sustained by the Management Corporation.
Cases on latent defects are under the jurisdiction of the courts. Thus, a lawyer must be hired for consultation, filing, presenting and defending the case in the relevant court accordingly. Besides, an expert witness with the relevant expertise, credentials and experiences in the investigation and giving of testimony is needed. By virtue of not being able to be seen by naked eyes, latent defects can only be investigated and verified with Non-destructive Testing (NDT) methods and invasive inspection only.
Such methods must be substantiated by empirical studies and ideally widely debated, tested and recognized by prestigious professional bodies and tertiary educational centres. For pathology in concrete structures, for instance, misplaced or missing reinforcement steel bars accounts for premature concrete failure and cracking. Additionally, poor quality control of concrete casting also contributes widely to the loss of compressive strength of the structures. Ultrasound technology like echo impact and Ultrasonic Pulse Velocity can locate the size of the reinforcement steel bar as well as the position thereof. New developments in Ground Penetrating Radar have started to gain popularity recently.
How to investigate and show proof for water leakage in strata buildings?
Another common latent defect is water leakage. Infrared thermographic imaging aided by a moisture meter can locate and scientifically verify the location and intensity of leakage. Nevertheless, further testing is needed to determine the leaking path. For instance, dampness in common areas may originate from waterproofing failure, pipe leakage or cracks on the external walls. There are designated NDT methods for each of these building components respectively as follows:
• Domestic pipe: Pressure Gauge Testing based on the Testing & Commissioning protocol of SPAN
• Waterproofing on flat roof: ASTM C1153 – 10(2015) Standard practice for location of wet insulation in Roofing Systems using Infrared Imaging
• Waterproofing in indoor wet areas: ASTM D5957 – 98(2013) Standard guide for flood testing horizontal waterproofing installation
• Fenestration: AAMA 511-08 Voluntary guidelines for forensic water penetration testing of fenestration products
• External wall: HKCI: TM1 Detection of building surface defects by Infrared Thermography
Further analysis into material failure involves support from the relevant laboratories with suitable equipment and capability to carry out materials failure analysis. Interpretation of laboratory testing may involve a materials scientist with the relevant expertise.
With all these non-destructive and invasive testing, the forensic investigator may derive conclusions without hacking, demolition or dismantling of building components. Nevertheless, in the event all NDT methods have been exhausted, coring, dismantling or hacking may be needed. Due care must be taken to ensure that the invasive measures do not destroy the building component under investigation in order to maintain the objective conclusion thereof.
Lastly, a report must be compiled in accordance with Section 45(1) of the Evidence Act 1950 and Order 40A, Rules of Court 2012.
PKN Building Solutions Sdn Bhd is a pioneer in forensic investigation inspection in Malaysia. To find out more, click here.
In conclusion, the legal and technical frameworks in diagnosing building flaws for both patent and latent defects are currently mature and comprehensive. The use of suitable NDT can reveal hidden defects even during the DLP period in order to perform a more thorough and holistic inspection.
The long typical service lifespan of stratified buildings ranging between 90 to 100 years also contradicts the short 15 years time bar stipulated by the Limitation Amendment Act 2018. Structural consultants who design building structures are liable for the safety of the structures designed by them throughout the designed service lifespan. Such loophole, if manipulated, is detrimental to the structural integrity and durability of the buildings. We will like to urge the relevant authorities to look into such a loophole before any detrimental impact occurs in future.
To the developers, a house constructed for sale is just another merchandise that is sold for profit. However, most homebuyers have to work for the most part of their lives to pay for the property that they purchased, and they develop an emotional attachment. Therefore, developers are urged to take proactive actions to maintain and safeguard the quality of construction of their buildings in order to realize the spirit of the HDA – by protecting homebuyers’ rights and championing the well-being of occupants in stratified communities.
Preventive maintenance, regular monitoring and Periodic Inspection are also critical to building safety. Should any abnormality is discovered on soil settlement or leaking underground pipes and cracks, diligent efforts must be carried out for investigation and detection before further damage occurs. Indeed, the building managers and independent engineers who carry out the periodic inspection have vicarious liability to the safety of the building safety and the occupants thereof. Thus, due diligence and maintenance and inspection are critical in such aspects.
This article was co-authored by Tuan Roshan, a Senior Federal Counsel and the former Head of Claim and Legal division of Tribunal Perumahan dan Pengurusan Strata (TPPS) as well as Viola Lettice De Cruz, a lawyer with more than 20 years of experience specializes in property and strata management laws. She is currently the Managing Partner of V. L. DeCruz & Co.
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