LAW & REALTY: Purchasing a new property

WHEN purchasing a new property., he is often told that the sale and purchase agreement (SPA) is a “standard agreement”. This article attempts to explain the legal implications of having signed the SPA. -LAW & REALTY:

New properties available for sale can either fall within or outside the purview of the Housing Development (Control & Licensing) Act 1966 (HDA 1966). The test will be whether the property falls within the definition of “housing accommodation” which in general is a building wholly or principally constructed or intended for human habitation or partly for human habitation. Under the Housing Development (Control & Licensing) Regulations 1989, the prescribed format known as Schedule G is for landed property and Schedule H is for condominiums, apartments or flats (hereinafter both the Schedule G and H SPA shall be referred to as “the Schedule SPA”).

Any amendment to the terms of the Schedule SPA requires the written consent of the Controller of Housing.

A property constructed or intended for human habitation can only be offered for sale to the public after the developer has obtained a developer’s licence and an advertising permit.

The Schedule SPA does not apply to properties like commercial properties which include serviced apartments, strata offices, commercial lots, factories etc.

There are a number of differences between the Schedule SPA and a Non-Schedule SPA, and the illustrations here are not exhaustive but mere examples.

Date for delivery

Under the Schedule SPA, the effective date for the purpose of computation of the date of delivery of vacant possession is 24 months from the date the deposit is first paid to the developer for a Schedule G agreement, and 36 months for a Schedule H agreement.

In the case of a Non-Schedule SPA, the effective date does not commence until the occurrence of certain events, e.g. the approval of building plans, which the developer commonly refers to as “unconditional date”. The completion date may be extended for reasons which the developer claims to be not within its control. As the “unconditional date” is often not known, it is almost impossible to compute the delivery date for the delivery of vacant possession.

Payment

The purchase price to be paid under the Schedule SPA, consists of progress payments after the architect has certified that a particular stage of the work has been completed.

In the case of a Non-Schedule SPA, progress payments may have to be paid when the architect certifies that the work for a particular stage has commenced, even though not completed. In the latter case, the developer is actually paid in advance for works to be carried out.

Damages for late delivery

In a Schedule G agreement, damages for late delivery are based on 10% per annum of the purchase price, from the day immediately after the completion date to the actual date of the delivery of vacant possession. In a Schedule H agreement, an additional claim for liquidated damages can be made for non-completion of the common facilities.

In a Non-Schedule SPA, the right to claim for liquidated damages for late delivery will be dependent on the actual wording used in the agreement, and in some cases, 10% per annum on the amount paid.

It is common to find provisions where certain events will automatically entitle the developer to extend the date of the delivery of vacant possession.

Developer’s consent to sell properties without titles

Currently, the consent fee payable to a developer for the sub-sale of a property purchased under a Schedule H agreement is RM500.

For a Non-Schedule SPA, a purchaser who wishes to sub-sell his property may have to pay a consent fee ranging from 1% to 3% of the transacted price.

Utilisation of progress payments

In the case of the Schedule SPA, all progress payments received by the developer must be deposited into a Housing Development Account (HDA Account) under section 7A of HDA 1966 and the Housing Development (Housing Development Account) Regulations 1991 (HDA Account Regulations). Any withdrawal from the HDA Account shall be supported by a certificate from the architect, engineer or quantity surveyor, as the case may be, in charge of the housing development stating that payment is due to be made for a particular purpose. A copy of the notice of claim must be submitted concurrently to the Controller.

The developer, may with the approval of the Controller, withdraw all monies remaining in the HDA Account after the completion of the development and after the solicitors for the developer have certified that the obligation of the developer in respect of the transfer of title for all the sale and purchase in the development has been fulfilled.

The Controller may use the monies in the HDA Account to ensure the completion of the development.

The auditor of the developer is required to submit an annual report to the Controller relating to the HDA Account and state, in his opinion, whether or not each deposit and withdrawal, the accounting and other records and the explanation given are in compliance with the HDA Account Regulations.

For the Non-Schedule SPA, there is no statutory check for the deposit and withdrawal of progress payments.

Grievances

A purchaser under the Schedule SPA may file complaints with the Controller for any dissatisfaction relating to the property purchased. A claim against the developer may also be filed with the “Tribunal for Homebuyer Claims” (Tribunal). Such claims may include liquidated damages for late delivery, poor workmanship and non-compliance with building specifications. Currently, the Tribunal’s jurisdiction is limited to claims of up to RM25,000.

Such a purchaser may also file his claim against the developer in a civil court but if he chooses to file his claim with the Tribunal, then the Tribunal will have exclusive jurisdiction to hear the matter.

In the case of the Non-Schedule SPA, any claim will have to be filed in the civil court.

A purchaser of property should read the clauses in the SPA and seek independent legal advice before he signs the SPA.

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