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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.

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