In 2019, the Federal Court administered that the Controller of Housing Controller can no longer grant an extension of time or EOT to property developers who are unable to complete their housing developments on time. Unfortunately, there have been recent initiatives to circumvent the previous ruling – some parties are calling for a new provision in the HDA to enable for the EOT to be granted freely again.
There are certain milestones in an adult’s life which has a lasting impact throughout one lifespan – this includes getting employment, marriage and purchasing one’s residential property. It would be apt to say that securing your own home is probably the biggest purchase in one’s life – as the liability and responsibility of owning a property perpetuate for an average of 30 years of a working adult. I use the ‘30 year period’, as this is a conventional period of a housing loan.
It is due to this rationale, that the Government of Malaysia back in 1999 worked to amend the Housing Development (Control & Licensing) Act, 1966 (HDA). At that time the Housing Ministry was headed by YB Dato Seri Ong Kah Ting (now conferred the honorific of ‘Tan Sri’), who was also the president of MCA. The Housing Minister at that time took an unprecedented progressive step in inviting non-government stakeholder’s active participation in drafting a Government’s legislation, and this was when the House Buyers Association (HBA) was formed by a group of apolitical Malaysians to speak up and fight for house buyers rights on a pro-bono basis.
I want laws to be written in black and white and in no uncertainty. I don’t want any abuse by my officers to have unfettered and discretionary powers: it may lead to abuse and biasness”. -YB Dato Seri Ong Ka Ting-
What is the function of the Housing Development Act Malaysia (HDA)?
Essentially, the HDA is the mother of all housing development regulations in Malaysia that protects the interests of residential title home buyers against developers for a specific period. Protections include defect liability period, management of strata title issues, and safeguard of buyer-related conflicts, disputes, and claims against unscrupulous developers. This legislation also brought about the formation of the Tribunal for Home Buyers Claims which enabled house buyers to obtain legal redress in an affordable, transparent and speedy manner.
Collectively, one common theme that flows throughout the HDA as a social legislation was that of ‘certainty’:
- certainty of obligations of both contracting parties
- certainty of the price of a property
- certainty as to when and how the title is to pass to buyers
- certainty as to the quality of housing that the buyers get after signing half their financial life away
- certainty as to the terms and conditions in the Sales & Purchase Agreement (SPA) and the house buyers rights and entitlements.
This was crucial because a house buyer enters into a contract with the property developer without having the privilege of having a certainty of when the house will actually be passed to him to occupy. There were many instances when house buyers continue to pay for their homes even they are yet to receive the keys to their assets. This is a common feature for abandoned housing developments usually undertaken by unscrupulous and recalcitrant developers.
So, for the house buyers who buys a brand new residential property, the Government regulates the component of “certainty” of obligations in the statutory Contracts in Schedule G (landed property) and H (stratified property) of the legislation, which means, no amendments or variations are allowed to the standard form contract as to the completion date, no variation of price are allowed mid-way, and liquidated ascertained damages (LAD) imposed in the event that there is an unwarranted delay.
Why is the HDA important?
Now in Malaysia, this is very crucial because Malaysia’s Housing Laws have not fully adopted a “Built and Sell (BTS)” approach to residential property which is common in most developed countries like Australia and the United Kingdom. In fact, what is not known to many is that the HDA and its Regulations were amended in 2012 with the introduction of Schedule I (landed property BTS 10:90 concept) and Schedule J (stratified property BTS 10:90 concept). There was a move by the then current government to progressively move to a Built and Sell concept as prevalent in Australia and the United Kingdom. A compromise was reached between the stakeholders that the system would progressively change and by 2015 Malaysia should fully adopt the BTS 10:90 concept as the sole method of residential development. Unfortunately, perhaps due to “convenient selective institutional dementia” these promises were not kept.
In our country, we purchase property that is yet to be built; and the financial obligations to pay for these properties start progressively upon the house buyer signing the contract. In short, the house buyer funds the development of his house pays for interests on an uncompleted property and bears the full brunt of financial risk in the event that the project is abandoned.
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Notwithstanding the statutory protection afforded by the Government in the form of Statutory Contracts, there have been numerous instances recently where certain housing developers would lobby the Ministry of Housing to grant an Extension of Time or EOT. This enables the property developer to shirk his obligation to complete the housing development to which it was originally agreed. When such EOT is granted, the house buyer would then be prevented from seeking “late delivery damages” for the residential property that was meant to be completed within either a 24 month (landed property) or 36 months (stratified property).
So at the end of the day, with a stroke of a pen, the house buyer then forks out an additional premium (in the form of interest to his banks) to gain access to his property. The EOT conundrum was actually a hot topic raised in 2017, in Parliament as well as in the media, where allegations of rampant abuse of power and exercise of discretionary power were being invoked within the Ministry of Housing.
For years, some property developers would seek an EOT from the Controller of Housing, who would then unilaterally grant an EOT by using Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 in favour of the developers usurping the buyers’ rights for redress. It seems that the Executive branch of government, under political pressure often pandered to certain recalcitrant developers and certain lobbyists.
EOT was barred in 2019
However, after a long battle initiated by a group of pro-bono lawyers from HBA, some balance was struck when the Federal Court of Malaysia decided in the case of Ang Ming Lee & others v Minister of Housing and others (2020) 1 CLJ 162 that the Controller of Housing had no right in law to grant “extension of time” to property developers and the use of the regulations to grant an EOT was an abuse of power and ultra vires (in excess of legal power or authority) of the intent of the HDA.
The battle continues to keep EOT at bay
The Federal Court again has reemphasised in the decision, of the PJD Regency Sdn Bhd v TTPR & others (2021) 2 MLJ 60 case that the HDA and its subsidiary legislation i.e., the Housing Development (Control and Licensing) Regulations 1989 were social legislation, intended to safeguard home buyers.
Now, notwithstanding the strong message sent repeatedly by the Federal Court in a few cases, there seems to be now a renewed attempt by the Government of the day in usurping the rights of Buyers that have been guaranteed by the Federal Court. The move by the Government includes an attempt to amend the legislation to give the Controller of Housing unfettered power to amend/remove the element of “certainty” guaranteed and provided by statutory contracts within Schedule G and H of the HDA and HDReg 1989, as enumerated by the Federal Court.
In short, the executive branch of Government seemingly wants the unilateral power to amend housing contracts that are predicated on the concept of Sell and Built funded by the house buyers. What is dumbfounding is that this move does not take into account in granting the house buyers reprieve from paying an additional premium (in the form of bank interest) to the agreed initial purchase price.
In conclusion one can only ask the following questions:
- Why should the Controller of Housing (who is not a party to Housing contracts) be given the power to intervene on behalf and for the benefit of the property developers?
- Why is the Government of the day trying to circumvent the wisdom and protection of house buyers interest by the Federal Court?
- Why are we still stubbornly regressing to enabling absolute power to the executive branch of government to alter the “element of certainty” in a “consumer contract”?
- Why do we still refuse to accept that “Power corrupts and Absolute Power corrupts?
- Do they not know that discretionary power will somehow lead to abuse and biases in decisions against the weaker party?
When contemplating the answers to these policy questions, let me remind the esteemed Housing Minister and those under his charge of two crucial points, the first being that in the next general election; 4.5 Million registered voters would be from the ages of 18 to 21 years of age would be prospective house buyers and the bulk of voters on the next general election would be that of those who are below the age of 35, all of whom would undeniably be impacted by this regressive move. The second crucial point is that there are recent studies as in 2021 that show that ‘Corruption Can Drive up Costs of Property Developments by Almost 15%’.
If you enjoyed this article, read this next: What happens when a property development gets abandoned and changes ownership?
This article is penned by Vicknaraj Thanarajah, Esq, a legal advisor of the National House Buyers of Malaysia, who was privileged to have been present when the HDAct was drafted, amended and tested over the years in the Courts on a pro-bono basis. He has been silently and passionately been observing the progress of housing laws in Malaysia. He currently practises law in Melbourne, Australia and is burdened by a good memory and the love for his Nation.