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Action against developers

18/12/2001 The Star Articles of Law with Bhag Singh

A READER says: “I went to a Housing Developer’s sales launch last December and, being impressed by the sales person’s recommendation, I booked an apartment. The cost of the unit was about RM150,000 and I paid a deposit of RM5,000. A few weeks later I went to the lawyer’s office (which was the developer’s lawyer) to sign the Sale and Purchase Agreement (S&P).

“When the lawyer presented the S&P, I found that the terms and conditions were not exactly what the sales person told me, especially regarding the service charge and other matters. The lawyer did not want to make any amendment, saying that it was a standard agreement. I felt that it was one-sided so I refused to sign the S&P.

“Later I sent a letter asking for a refund of my booking fee but the developer rejected my claim. I wish to know if I can get back my booking fee as I feel it was an unfair deal.”

Here’s a house buyer who put his foot down and decided not to go ahead with the purchase because what was in the S&P was not in accordance with what had earlier been conveyed to him. But the result is that his booking fee is held up and it looks like it would be lost because the developer has rejected his request for a refund. So where does the house buyer stand in such
a situation?

Legally the house buyer is entitled to a refund of the deposit. The word “deposit” itself and where it is used have much significance. Is it a part payment or merely a deposit to show good faith but which then becomes payable if and when the contract is concluded?

In the case of an apartment, it would come within the scope of the Housing Developers Act 1966 and by virtue of the standard S&P that the developers’ lawyer refers to (and correctly says that it is standard), it is also the position that 10% of the purchase price is only payable when the standard S&P is signed. Therefore under which provision of the Act was the deposit collected is the question to be posed to the developer.

It would be clear that the money paid as a deposit only belongs to the developer when the S&P is signed. If therefore for any reason whatsoever the S&P is not signed, the deposit has to be refunded.

On account of legal principles and my understanding of the law, the position is that the house buyer is entitled to the return of the deposit. The realities of life, however, sometimes take a different complexion.

The money is already in the developer’s pocket. Even though he should rightfully refund it, he is unwilling to do so. The developer is, of course, behaving like many others.

Developers also know that house buyers will not pursue further the return of the deposit. So if the recipient hangs onto the deposit long enough the likelihood is that it would eventually be his for good.

Others who find themselves in such a situation may write a letter of complaint to a newspaper or even the Department or Ministry concerned. However such organisations cannot compel the developer to refund the deposit or this may be considered too minor to be deserving of Departmental or Ministerial attention. Or it may be felt that the house buyer should resort to other avenues which are available.

A delinquent developer, which is usually a corporate body, is quite used to having such complaints made and tend to ignore them. They are likely to know the house buyer will, in due course, exhaust himself and being fed-up decide to forget about the deposit.

In such a situation, is there hope for a house buyer to get the deposit back? The answer is certainly yes. However the house buyer must show the developer that he is serious. And this seriousness only impacts on the developer if, in the absence of an available dispute resolution procedure, a summons is served on the developer and the matter set for trial. That is, if there is no third party-imposed dispute resolution procedure available.

At this point the developer is likely to agree to refund the entire sum as he may balk at the prospect of paying interest or costs but at least there is likely to be an offer to refund the full deposit unless some exceptional circumstances exist.

Thus a house buyer who is determined enough will get his deposit back.

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