Making 10:90 work
26/08/2006 Published in NST-PROP
A Buyer Watch Article by National House Buyers
This mode of housing delivery requires changes to legislation, which should
With the Government allowing the 10:90 concept of housing delivery to run
together with the Sell-Then-Build (STB) method, we at the National House
Buyers Association (HBA) believe some changes to the housing law are
necessary for the former to work.’
In light of this, we have drafted two new standard Sale and Purchase
Agreement schedules for the Government to consider. We have terms one
“Schedule J” (for landed residential property) and the other, “Schedule K”
(for stratified residential units).
The Minister of Housing and Local Government can exercise his powers under
Section 24 of the Housing Development (Control & Licensing) Regulations,
1989 (revamped in 2002) to introduce these new schedules.
We believe our proposals will offer greater protection to buyers and
generally, better regulate the housing industry.
Instead of reinventing the wheel and causing unnecessary bureaucratic
delays, the proposals involve the adaptation of the existing Schedules G and
H to suit the 10:90 concept, with only the following amendments:
Clause 4: Schedule of payments
We propose that a new sub-clause
on the need for periodical reports be inserted here. With it, the vendor
must provide purchasers and financiers (if any) with periodical reports on
the progress of the construction of their houses, and these must be
certified by the architect or engineer in charge of the project.
When construction is at the 80
per cent stage, the vendor must give the purchasers written notice to apply
for loans to finance the payment of the purchase price, with the notice
supported by a copy of the individual document of title to the property.
Clause 7: Purchasers' right to
initiate and maintain action
We would like this clause amended
with the insertion of two sub-clauses. One is for the vendor to give
purchasers notice in writing for a joint inspection of their buildings,
during which all defects found must be rectified at the vendor's cost and
expense prior to the issuance of the notice to take vacant possession.
The second sub-clause designed to
further protect purchasers' interest is to allow them to visually inspect
their houses for all apparent defects requiring rectification before
physically taking possession of it.
Clause 11: Separate
document of title / transfer of title.
Amendments here are to require
that the vendor:
Obtain at its own cost, a
separate document of title to a property not later than six months before
delivery of vacant possession;
Execute a valid and registrable
memorandum of transfer of the property to a purchaser within 21 days from
the issuance of the separate document of title.
These features will pre-empt
problems related to obtaining ownership papers or title deeds, thus closing
a major floodgate of complaints that the HBA receives, as well as exonerate
the Land Office of blame for a developer's failure to apply for individual
Clause 24: Manner of delivery
of vacant possession
In anticipation of the
Government's preference that houses be issued with Certificate of Completion
and Compliance (CCC) instead of the current Certificates of Fitness for
Occupation (CFs), we suggest that a sub-clause be added to provide for this
Third Schedule: Payment of
Here, progressive payment in
accordance with the stages of construction should be removed and replaced
with payment of 90 per cent of the purchase price once vacant possession of
the property has been delivered.
Fifth Schedule: Periodical
With our proposal to amend Clause
4, there needs to be the inclusion of a Fifth Schedule on "periodical
reports" in both the proposed Schedules J and K.
These periodical reports, duly
certified by the vendor's architect or engineer, must be issued to
purchasers after the completion of various stages of construction (see
We believe that with the 10:90
concept, when purchasers take possession of their houses, they must not just
receive the keys but also the CF or CCC (as the case may be); the ownership
papers; as well as a habitable property connected to electricity and water
We have submitted our
recommendations to Housing and Local Government MInistry Secretary-General
Datuk Ahmad Fuad earlier this month on Aug 3 and we acknowledge the fact
that other amendments that can be incorporated.
We welcome these, so long as they
can help to create a balance between developers' and buyers' interest.
of the 10:90 concept sale & Purchase Agreement
Purchaser pays a 10 per cent
downpayment to the developer.
The downpayment is placed either
in an interest-bearing Escrow Trust Account with the lawyer/bridging
financier or in the existing Housing Development Account.
The Sale and Purchase Agreement
architects/engineers must provide periodical updates and certify progressive
construction work has been carried out for the following stages:
Foundation and footing;
Reinforced concrete framework;
Completion of walls and placing
in position of doors and window frames;
Roofing, electrical wiring,
plumbing (without fittings), gas piping (if any) and internal telephone
trunking and cabling (if any);
Internal and external plastering;
Work on drains; and
Work on roads
Notice of near-completion
In anticipation of the near
completion of the building, the developer shall give not less than six
months prior notice to the purchaser of the scheduled completion. During
this period, the purchaser shall obtain a housing loan from a financier.
The developer shall
notify the purchase of the join pre-delivery inspection of the property,
during which all observable defects shall be noted and rectified before
delivery of vacant possession.
The purchaser shall
deposit the balance of the purchase price, minus the loan sum, with the
purchaser's lawyer, who shall notify the financier. The legal documentation
would have been completed by such time and thus the loan sum would be ready
Settlement and Completion of
Notice of vacant
The developer shall give the
purchaser and financier notice of delivery of vacant possession, and provide
21 working days for payments to be made. The mode of payment shall be:
85 per cent to developer
5 per cent to stakeholder's
2.5 per cent - after 6 months
2.5 per cent - after 18 months
The purchaser will then take
vacant possession, or is deemed to have done so upon expiry of 14 days.
The building shall come with
either a Certificate of Fitness or Certificate of Completion and Compliance,
the keys, ownership papers (strata or individual titles) and be habitable,
with electricity and water connection.