iExpert: 10 most popular questions answered by HBA

You have asked the questions, now here are the answers by our iExpert of the month, National House Buyers Association of Malaysia (HBA). We’ve chosen the top 10 questions about home owners rights. So read on to find out what they are and how to handle these situations if you’re a first time home buyer or if you’ve faced any of these issues before.

1. I have got my property but it is a late handover by 370 days. What should I do?

HBA:  You must read and understand the terms and conditions of your Sale & Purchase Agreement for its full effects and entitlement. If your purchase is under the Housing Development (Control & Licensing) Act, 1966 (amended 2015), then you are entitled to compensation for late delivery (in law to refer it to as ‘Liquidated Ascertained Damages’ (LAD) which is calculated at the rate of 10% of the purchase price stated in the contract. For stratified property under Schedule H contracts, an additional 10% of the balance 20% of the purchase price is the LAD for late handover of the common property.

Firstly, you should make your demand in writing immediately upon receiving notice for handover of vacant possession. If you do not know how to go about writing a demand letter, you may use our sample as a guideline in our website.

If you are not satisfied with the response from the developer whether verbal or written, then you may then seek legal recourse. If your claim is below RM50,000, you may check further to see if other conditions falls under the jurisdiction of the Tribunal for Homebuyer Claims. Otherwise, you may seek redress at the Civil Courts.

2. I did not know that I must engage my own lawyer. The developer always states, free SPA. What does that mean?

HBA: The first rule of conveyancing is ‘buyer must engage own lawyer’. Consult a lawyer right from the start and not after you have paid the deposits. Reasons to use your own lawyer:

i. Under the law you are deemed to have read and understood every document you signed. Furthermore, promises made by the seller or someone else about the deal may not be enforceable if the promises are not in writing.

ii. Lawyers cannot represent both the vendor & purchaser. If you are using the vendor’s panel lawyer, often, when disputes happen, the lawyer is unlikely to represent you against their bigger client.

iii. A lawyer in general practice will be able to complete your purchase. However, lawyers with a focused real estate practice may prove a better tool if you are unsure of what to do, or have complications in your purchase agreement or mortgage. While you may think that you cannot afford the services of your own lawyer, consider whether you can afford not to.

3. Is it recommended for first-time home buyers to work with a real estate agent when buying a house? How would I know whether they are giving genuine insights?

HBA: It would be prudent to seek out those real estate agents that are registered and licensed by the Board namely: Board of Valuers, Appraisers, Estate Agents and Property Managers . You could seek and make an online check whether the estate agent that you intend to deal with is registered or not through his/her ‘E’ registration number.

Seek out those prominent estate agents for their genuine property insights. Do your own homework by surfing the internet to broaden your horizon and knowledge. You could also attend those free lectures and public talks that are prevalent in property fairs. Don’t fall for the trap of those ‘self-styled’ property gurus in the market. For more information on this issue, you can refer to this article: Investment in knowledge pays the best

4. Is it true that we need to get a lawyer to write to the bank if we want to make an early settlement of the home loan of a local bank in Malaysia?

HBA: There is no need to appoint a lawyer/s to seek a redemption statement from the bank or financial Institution. You could just write a simple letter to the bank for a redemption statement for an early settlement. The professional services of a lawyer/s is only needed when the bank requires legal documentations to be prepared ie discharge of charge or deed of receipt & reassignment etc.

5. Can we get more insights on free legal fees and guaranteed schemes offered by developers, for example, guaranteed rental returns?

HBA: We shall answer your questions in 2 parts:

Free legal fees

The first rule of conveyancing is ‘buyer must engage own lawyer’. Consult a lawyer right from the start and not after you have paid the deposits. Reasons to use your own lawyer:

Under the law, you are deemed to have read and understood every document that you have signed. Furthermore, promises made by the seller or someone else about the deal may not be enforceable if the promises are not in writing.

Lawyers cannot represent both vendor & purchaser. If you are using the vendor’s panel lawyer, often, when disputes happen, the lawyer is unlikely to represent you against their bigger client.

A lawyer in general practice will be able to complete your purchase. However, lawyers with a focused real estate practice may prove a better tool if you are unsure of what to do, or have complications in your purchase agreement or mortgage. While you may think that you cannot afford the services of your own lawyer, consider whether you can afford not to.

Guaranteed schemes

A guarantee is only as good as the company who underwrites it. Even if the Guarantee Rental Return (GRR) seems reasonable and are offered with honorable intentions, investors need to be sure that the developer would be able to sustain the returns if the rental or sales market were to take a turn for the worse. If developers were to default on the payments due to buyers, these buyers will likely default on their respective loan repayments, thereby setting off a chain of events with dire consequences.

Terms and conditions in GRR agreements are not regulated by law. As such, the inexperienced investors may not understand that the fine prints are often written in the guarantors’ favour.

GRRs offered to investors should be checked carefully against the local market and competition. A simple survey within the location will give an investor a fair idea of the state of the local market. If market prices are lower than the proposed rent, incentives and discounts being offered to woo the buyers, then this are issues to be considered. If guarantees of rentals are higher than the existing market rate, then a rent decline after the end of the guarantee is likely. It is a classic case of caveat emptor – rental guarantees can sometimes guarantee investors nothing but heartache.

Anyone who has any real estate experience knows there is no such thing as a guaranteed rental. Real estate, as with any other type of investment, has its ups and downs. There are times when one cannot rent out. Any developer or any person (mind you) who says that he is able to predict the future is “bluffing.”

Our economic cycle goes through cyclical changes that response to economic and other happenings in, as well as, outside our country. Projected monetary returns that cannot be guaranteed (or self-guaranteed) are doubtful in nature. For more information, please do read Guaranteed rental return schemes: Too good to be true?

6. What are the rules on S&P agreements in Malaysia? Is having my own legal counsel advisable?

HBA: The first rule of conveyancing is ‘buyer must engage own lawyer’. Consult a lawyer right from the start and not after you have paid the deposits. Reasons to use your own lawyer:

Under the law you are deemed to have read and understood every document you signed. Furthermore, promises made by the seller or someone else about the deal may not be enforceable if the promises are not in writing.

Lawyers cannot represent both Vendor & Purchaser – if you are using the Vendor’s panel lawyer, often, when disputes happen, the lawyer is unlikely to represent you against their bigger client.

A lawyer in general practice will be able to complete your purchase; however, lawyers with a focused real estate practice may prove a better tool if you are unsure of what to do, or have complications in your purchase agreement or mortgage. While you may think that you cannot afford the services of your own lawyer, consider whether you can afford not to.  

7. What are the income tax involved with property purchase and sale?

   HBA: We think you are referring to Real Property Gains Tax (RPGT).

   The current RPGT is as follows:

   From date of acquisition to date of disposal	Malaysian & permanent resident	Non-Malaysian	Company
   	RPGT Rate (%)
   First to third year (%)	30	30	30
   Fourth year (%)	20	30	20
   Fifth year (%)	15	30	15
   Sixth year onwards (%)	0	5	5

8. There is a problem with the infestation of rats in the property. The workmanship was shoddy. There were many holes and the rats bit through the fiber cable. There were also droppings from the ceiling which has caused inconvenience to residents and has affected potential rental. Who should I complain to?

HBA:  If your purchase is still within the Defects Liability Period (DLP) of 24 month under the Housing Development (Control & Licensing) Act, 1966 (amended 2015) then read on.

Defects liability period – how to make your claims

If you find any defects in the property after receiving vacant possession, make sure you submit the defects list in writing to the developer within 18 or 24 months (whichever is applicable) from the date of vacant possession. The developer will have 30 days from the date of receipt of your list to rectify the defects. If the developer fails to rectify within the stated time, you can then engage someone else to do the rectification works and charge the costs (through the stakeholder lawyer who is holding the 5% purchase price) to the developer provided you have given another 14 or 30 days’ (whichever is applicable) notice to notify the developer of your intention.

Since 5% of the purchase price is being retained as stake holder’s fund, we urge complainants to give written notice to the stakeholders’ lawyers’ to withhold release of the said sum until and unless the complainant is satisfied with the remedial and repair works by the developer.

You are at liberty to file your claim for the costs of repairs and replacement to the Tribunal for Homebuyer Claims. Please visit them for more details.

9. Serviced apartment’s land status is not unlike a condominium. It is categorized as a commercial land even though mine is more than 90% purely for residential purposes. Thus, we have different tariffs for water/electricity and also even property tax ‘cukai harta’! I never knew these were the hidden costs until I moved into my apartment. Is there anyway to solve this matter?

HBA: ‘Serviced Apartments’ like ‘Small Office Home Office (SOHO)’ are erected on ‘commercial’ land instead of ‘residential land’ per se. The imposition of tariff – water/ electricity/ assessment rates are thus, calculated on commercial rate based on the land status.

There has been a handful of ‘success’ story of TNB allowing a conversion of tariffs to ‘residential rates’ provided all the owners unanimously agreed to the same. Similarly, we hear of successful case on water migration involving ‘Syabas’ too. We suggest that your community through your Joint Management Body (JMB) or Management Corporation (MC) approach the service providers directly.

10. If the house loan is under one name, can I put 2 names in the Sales and Purchase agreement? Must we inform the lawyer first and what if the lawyer disagrees?

HBA: The prerogative to allow changes (to include another name as a ‘co-owner’) when a housing loan is still subsisting rest with the bank. You should first approach the bank for its approval. If the bank consents to your inclusion of another name to the property, the bank will appoint its own panel lawyer/s to prepare the relevant legal documents to safeguard its interest.

Got a burning question regarding property investment as a millennial? Check out our Facebook on 18^th May to ask our iExpert of the month, Kahlil Adis, author of ‘Property Buying for Gen Y’ for insights and tips to set you ahead of the curve.