Changes to benefit house buyers

NST-PROP 03/02/2001 By Zoe Phoon

THE proposed amendments to the Housing Developers Act are expected to impact the sale and purchase agreement in away that will give house buyers better protection.

In fact, industry sources have hinted that while the SPA is expected to remain the same in form, in substance the amendments would slant it in favour of house buyers.

Among the proposed amendments is one where the developer would be required to obtain an undertaking from its bridging financier that the property charged for the loan would be excluded from foreclosure action if the developer is subsequently unable to pay off the loan.

This will bring cheer to many house buyers, as it offers them the guarantee that the property they have paid their hard earned money for will not be whisked away by a bank on the grounds that the developer has defaulted on the loan.

There could also be a new provision regarding assignment of the buyer's rights to his financier where the buyer will not be deprived of his right to enforce the SPA against the developer merely because of such an assignment.

This is expected to remove the inconvenience for the buyer of having to obtain the bank's consent before enforcing the SPA against the developer.

The proposed amendments are also expected to give the buyer more time to make progressive payments under the schedule of payments outlined in the Third Schedule of the SPA.

Instead of the current 14 days, purchasers will be given 21 interest-free days to pay any of the instalments once they are notifiedby the developer, after which interest will be charged on the unpaid amount.

Industry sources have also speculated that the amendments will give rise to some changes in the payment structure.

Under the SPA's Third Schedule as it currently stands, purchasers are required to pay 15 per cent of the property's price upon completion of the roads, drains and sewerage works serving the property. In the proposed amendments, this amount would be broken up into three separate payments of five per cent at each stage of the infrastructure work.

In a departure from the existing practice, it is also believed that under the proposed amendments, the developer will no longer be obliged to complete the construction works for the building in the order presently stated in the Third Schedule.

Another suggested amendment pertaining to defects states that if the developer fails to carry out remedial works and the buyer has to rectify the defects at his own cost, he can claim payment from the developer, which will have to pay up within 14 days of receiving the claim.

The proposed amendments would also address the issue of the developer's consent to an assignment and the administrative charges it can claim. In the case of resale by a buyer to another party where the document of title for the property is yet to be issued, it is proposed that the developer's administrative charges be limited to RM500 or 0.5 per cent of the resale price.

Besides these changes to the SPA, the revamp of the Housing Developers Act is expected to see it renamed to better reflect its function. In January this year, Housing and Local Government Minister Datuk Seri Ong Ka Ting had said the proposed amendments would suggest that the legislation be called the Housing Development Act to make it more comprehensive.

Ong said the new name is necessary, as the public tends to misunderstand the existing Housing Developers Act and think that it benefits only housing developers and not house buyers. With the name change, the Act would apply to all parties.