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26/01/2002 Published in NST-PROP A Buyer Watch Article by National House Buyers Association

Several issues need to be looked into before drawing up the Housing Development Rules and Regulations, says the House Buyers Association.

The Housing Development (Control & Licensing) Act scheduled to be gazetted next month, gives the Ministry of Housing and Local Government, vast powers to control, license and to take actions against irresponsible developers.

The Minister of Housing and Local Government has been vested with the powers to make rules and regulations governing the industry. The House Buyers Association urges the Minister to exercise these for the benefits of the long disadvantaged house buyers. This includes looking into the standard sale and purchase agreement or SPA (Schedule G for land and building and Schedule H for subdivided buildings).

Deed of Mutual Covenants

The Minister has the power to provide for a standardized Deed of Mutual Covenants (DMC) for subdivided buildings. Developers have been using the DMC, to introduce clauses that they are unable to incorporate into the SPA, often to the detriment of buyers.

Unlike the SPA, the DMC is not uniform and is presently is drafted by the Developers according to their whims and fancies and which would make the document in their favour. When some purchasers wish to amend any part of the DMC, developers often refuse to allow it, arguing that the deed has been ratified and put on record and thus cannot be changed.

To ensure better protection for buyers, HBA is of the opinion that the document should be standardised by the Ministry. If the contract of sale can be standardized, so can the DMC.

There are instances of clauses, where Developers give themselves the rights to cut off water supply in the event that owners default in their payments of maintenance charges. Water supply is the basic necessity to sustain life and no one should be deprived of this necessity when they have paid the water bills promptly. There are other options in law available to address the problems of non-payment of maintenance charges.

Manner of delivery of vacant possession

HBA urges the Minister to consider re-regulating Clause 21 and  23 respectively relating to the manner of delivery of vacant possession  to adopt the concept of ‘Vacant Possession only upon issuance of Certificate of Fitness for Occupation (CFO).’ The present clauses are unfair, problematic and causes financial losses from a buyer’s perspective. HBA takes this stand based on the following grounds:- 

  1. the taking over of vacant possession without the CFO is meaningless and detrimental to the buyers because they are still unable to move into their houses;

  2. from the date they are ‘deemed’ to have taken over of vacant possession, of their houses, buyers also take over responsibility for the security of the houses. Yet, how can they assure security when they are not allowed to move in? The houses would be subjected to vandalism, theft, and other hazards if unoccupied.

  3. the defect liability period starts from the date of vacant possession yet, can buyers identify any defects when they are not allowed to stay in the houses while waiting for the CFO? In extreme cases, if the issuance of CFO is delayed by eighteen (18) months or more, then the defects liability period would have run out before the house buyers could even move in!

  4. it would mean that the bank would have to pay the developer the final 20% of the balance purchase price under the 3rd Schedule of the Sale and Purchase Agreement. and  buyers would have to commence instalment payments to their financiers.

  5. For those renting homes, they may have to continue doing so, adding a burden to their pockets.
    f. Once vacant possession is given, the calculations for the compensation of late delivery stops – but why should it stop when the buyers continue to suffer losses as they are still unable to occupy their homes?

  6. In exchange for the keys to their homes during the handing over of vacant possession , the purchasers are usually slapped with a long list of payments, which usually includes service charges, miscellaneous charges, quit rent assessment, late payment interest and so on is frustrating for house buyers to keep paying, especially service charges when they cannot move in and enjoy the services.

Vacant possession with CFO

The most common problem faced by house buyers is the issue of being forced to take delivery of the property  but being unable to move in because the CFO has not been issued by the Local Authority. Some house buyers have taken possession of their property for more than two years and yet no CFO has been issued.

Statements have been made by various dignitaries on efforts to speed up the issuance of CFO. There is even a commendable proposal to set up a one stop center to handle CFO applications. Some Local Authorities have even assured the public that CFOs can be issued within two (2) to (6) weeks upon receiving the Form E application from the Developer. We applaud and look towards these positive changes. 

We also note that the amendments to the Housing Development (Control & Licensing ) 1966 has indirectly addressed the delay in the issuance of CFO by amending Section 7 of the principal Act by inserting a new paragraph (i). If the Local Authorities and the Housing Ministry are positive in wanting to address this CFO issue and  have given the assurance of speedier approval and issuance of the CF in less than a month, we do not understand why the amendments did not include a new section to require the developer to deliver vacant possession with CFO.

If one were to study the present mechanism as provided and enshrined in Schedule G or H, under clause 23 it is mandatory for the developer to have “applied for CFO” before it is allowed to deliver vacant possession. Therefore, if the local authorities honour their assurance of speedier processing and issuance of CFO, then it is not impossible to achieve the concept of “VP with CFO”, as the only difference is a question of  four-week delay.

But from the various cases that we have investigated, the problem does not always lie with the Local Authority. There is a general misconception by house buyers that the CFO delays are due to the wrong-doings and inefficiency of the issuing Authority. From our analysis, the Developer’s applications for CFO usually are incomplete  causing  the Local Authority to reject them.

"Incomplete" means the Form E does not come together with the seven or nine various government agencies supporting letters or the if the supporting letters are issued with conditions which the Developer has yet to comply with. Under such circumstances, the local authority cannot be blame for not been able to issue the CF for the properties.

The Housing Ministry  has rejected the concept of “vacant possession with CFO” when it was raised on the grounds that it is impractical. We cannot apprehend the rationale given. If the Ministry feels that the Act cannot be amended to incorporate the concept, then as an alternative we seek the Minister’s commitment that when he exercises his power under Section 24 to make regulations, the Clause 23 of the Schedules H & G to impose upon the developer a strict requirement to comply with the following, before they have the right to exercise delivery of vacant possession to the purchasers :-

  1. the Developer must submit his application for CFO together with all required agencies unconditional supporting letters;

  2. the Developer has received the acknowledgement letter from the appropriate authority that their Form E has been accepted.

HBA was invited to attend a dialogue between the Public Complaints Bureau and a housing project’s buyers committee in Putrajaya recently. One of the issues was that the developer claimed to have submitted the Form E to the Local Council and therefore is entitled to deliver vacant possession. The developer was able to produce a letter from the local council  to indicate receipt of their form. 

However, it was clear that there are still many aspects of the construction and development that would not have gained the approval of the government agencies. Upon investigation, the local council had in fact rejected the Form E for because not all the relevant supporting letters from government agencies were enclosed. Therefore, the CFO was not issued for sometime after vacant possession. If the truth of the matter had not been discovered, the house buyers would have wrongly blamed the local council and continued to suffer losses when it was actually the developer who was not truthful.

HBA is of the opinion that the present wordings of Clause 24 is ambiguous in relation to the issue of submission of application for CFO by the developer resulting to open wide abuse by the Developer in most cases.

In a Federal Court case of BECA (MALAYSIA) SDN BHD – VS – TAN CHONNG KUANG & ANOR (1986) 1 MLJ390, Chief Justice Lee Hun Hoe commented that: “Having regard to the scope and purpose of the Enactment and the Rules made hereunder, they are clearly made for the benefit of a class of people, namely, the house buyers. The duty of observing the law is firmly places on the housing developer for the protection of the house buyers “ 

The existing law and rules regarding delivery of vacant possession are definitely not a reflection of His Lordship’s comments and wishes. 

The present Ministry of Housing has done a relatively good job in reviving the element of consumerism in the new Act. This long awaited amendment after 35 years is seen as a major breakthrough for house buyers. Our input in the current law was accepted to a good certain degree. However, we feel that the Act will have optimum impact if part of the enforcement is retrospective in nature. This may provide some comfort and relief to those already disadvantaged by the existing situation. It will also ease the Ministry’s frustration on the claim that they “currently do not have the teeth to bite”.


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