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Rights
of house buyers
06/03/2001 The Star Articles of Law with Bhag Singh
In recent months there has been discussion in the press about
changes in the laws affecting housebuyers.
One reader expresses his concerns over the fact that no clear
picture is emerging.
Such concern is understandable. This is because housebuyers hope
that, through some new law, all their problems will be solved. This,
of course, is unlikely to happen in a big way. Not every problem
area will be completely addressed.
Even when an issue is extensively addressed, it may not be to
everyone's satisfaction. Furthermore many proposals may be
abandoned or amended.
Various conflicting interests are involved and lobbying is only to
be expected.
Nevertheless, it is interesting to consider what these proposals are
intended to be. In many ways they will, hopefully, affect
housebuyers for the better. Yet when some of what is said is
considered, one wonders how positively these are going to better
protect the interests of housebuyers.
In a recent report, it appears that the name of the Act is to be
changed. In this connection, the Housing and Local Government
Minister has been quoted as saying that the proposed amendments
would be more balanced and comprehensive.
The minister added: "the new name is necessary as otherwise the old
Housing Developers Act tends to be misconstrued by the public to be
a piece of legislation only for the benefit of housing developers.
And housebuyers often feel side-lined by the name of the legislation
that this Act is not meant at all for their protection,"
However such a change would merely be cosmetic. Whether it protects
buyers depends on its provisions and how these are implemented in
practice. The title of the Act will really make no difference
whatsoever. After all, legal transactions are recognized, enforced
and have effect through the content and the detailed provisions. It
is not the title that determines the rights of parties involved.
Apart from other grievances which may appear minor, two significant
aspects are damages for delay and defective work of a serious kind.
The provision regarding payment of damages for late delivery would
appear to be very clear and straightforward. It reads:
"If the vendor fails to hand over vacant possession of the said
building, to which water and electricity supply are ready for
connection to the said building, in time, the vendor shall pay
immediately to the purchaser liquidated damages to be calculated
from day to day at the rate of 10% per annum of the purchase price,"
This obligation of the developer is reinforced by Clause 7 of the
prescribed stationary Sale and Purchase Agreement (SPA) which says
that "time shall be the essence of the contract in relation to all
provisions of this agreement." Very clearly this is not with regards
to obligations of the housebuyers to pay progress payments only.
Therefore when the developer fails to hand over vacant possession as
stipulated with out good reason in accordance with the SPA, the
developer should be willing to calculate the amount and set it off
against the amount due to the developer because the obligation is to
pay "immediately".
Yet many developers will not do so. They will ask the housebuyer to
pay up all amounts due before handing over the proper.
The difficulties that a housebuyer experiences at this stage are
only too well known.Therefore the suggestion by the House Buyer's Association that
developers should be made to pay compensation for late delivery on an
automatic basis via a provision to be expressly stated in the SPA is
most reasonable.
This suggestion whose effect is that accounts are taken at the point
of handing over so that what is due from the housing developer is
set off against what is due to the housing developer is not only
legal but fair and just.
However, in reality, the developer is in a stronger position than
the housebuyer. If all outstanding payments are not made, the
developer will simply not hand over the property. Given this
scenario, the developer does not have much to lose because the house
would have almost been paid for in full. But the housebuyer is
desperate because he has paid almost all the purchase price and he
cannot afford to be without the house and so he gives in. It is a
classic case of arm twisting.
O course, the proposal to have a tribunal to deal with claims for
units costing RM25,000 and below is a welcome development. But the
cap of RM25,000 appears to be too low given the prices of houses and
apartments these days. With growing inflation, there may little for
the tribunal to deal with.
It has also been said that the courts are still the best place to
resolve disputes over compensation for late delivery. It would
therefore appear that even if the proposal is implemented, the
present situation with regards to claim for compensation for late
delivery will continue for a while.
The difficulties encountered by housebuyers making such claims and
arguments raised by developers are well known. Much money and even
more emotional and mental stamina are required to deal with such a
situation.
However, for most housebuyers the burden will continue to rest on
them to pursue their rights to claim for such compensation. Too many
housebuyers are not determined enough to pursue such claims and may
developers are only too aware of this. As such the present scenario
will continue for a while, too.
On the other hand, if housebuyers are serious about claiming
compensation for late delivery and are determined to pursue their
claims despite the inconvenience and costs involved, developers may
take their obligation to complete the houses on time more seriously
to avoid having to make payments. |
