HOUSE BUYERS’RIGHTS DEPRIVED BY HOUSING CONTROLLER?First the current Housing Minister turned his back on house buyers by refusing to make the build-then-sell

(BST) 10:90 mandatory come year 2015 as committed by his predecessor. Now, we hear the Housing Controller has given an extension for delivery of vacant possession to certain developers, thus depriving all the house buyers of their rights, benefits and entitlement to Liquidated Ascertained Damages (LAD) for late delivery. What is happening to the Housing Ministry? The ministry should be an outlet aggrieved house buyers can turn to in times of despair, for advice, guidance and for desperately needed intervention and assistance when a housing projects is delayed or abandoned.

What does it mean when an extension of time for delivery of vacant possession is given by the Housing Controller? Effectively it means that the house buyers’ rights, benefits and entitlements for compensation due to late delivery have been robbed by the Housing Controller.

The very rights and protection given by Parliament has simply been extinguished with a stroke of the pen.

Under the terms of the regulated Sales and Purchase Agreement (SPA) the developer is under a legal obligation to complete and deliver vacant possessions to house buyers within 24 months for landed properties or 36 months for apartments or other stratified dwellings.

If the developer fails to complete and hand over within this stipulated time, then the developer has to compensate the house buyers in the form of LAD for the delay. On the same token, if a house buyer is late in making payment to the developer, he/she has to compensate the developer for the delay. It does not take a rocket scientist to decipher that delay by one party result in losses to the other party, hence the protective compensation.

The SPA for housing projects is neither a commercial agreement nor an ordinary contract. This SPA is a statutory contract and, as was stated by the Court of Appeal in Raja Loh Sharuddin Bin Raja Ahmad Terzali and Other vs Sri Seltra Sdn Bhd [2007] MLJ 617- “….all the provisions…. Are actually statutory requirements which must be strictly complied with”.

These statutory requirements, including the provision for LAD to be paid to house buyers in the event of late delivery, were established by Parliaments as part of its effort to protect house buyers and the naïve and unwary rakyat.

Extension and its ramifications

The Federal Court in the landmark case of S.E.A Housing Crop Sdn Bhd vs Lee Poh Choo [1982] CLJ Rep 205 decided that

attempts by housing developers to get around the housing rules so as to remove the protection for house buyers would not be

allowed. This principle has been followed in countless cases whereby developers were made to pay LAD for delay in delivery of

vacant possessions despite their contention that the delay was due to special circumstances beyond their control.

For example, in Tang Kam Thai & Ors vs Langkah Cergas Sdn Bhd & Ors [2006] 1 AMR 731, the developer attempted to

avoid payment of LAD on the ground that the palnning authorities had imposed new demands. The High Court decided that it

was a matter for the developer to deal with and “The Responsibility cannot be passed onto the purchasers as an excuse for

payment of liquidated damages”. In Daiman Development Bhd VS Avesta Sdn Bhd [1996] 1 LNS 36, the High Court stated. “If

there are constraints in the fixing of the meters, then they should be sorted out with the relevant authorities by the appellant

(Developer).” This is yet another example of a failed attempt by the developer to avoid payment of LAD.

Rights to LAD as compensation for late delivery

In Sentul Raya Sdn Bhd vs Harisiam Jayaram & Ors And Other Appeals [2008] 4 CLJ 618, the developer also failed in its attempt to

avoid payment of LAD on the ground that the delay was due to the 1997 financial crisis which rendered impossible the execution of the

building work or the completion of the houses.

That these statutory requirements are for the protection of house buyers in general was made crystal clear in 2007 when Parliament

amended the long title to the Housing Development (Control & Licensing) Act1966 to read “An Act to provide for… the protection of

the interest of purchasers…” This is definitely in line with the Federal Court’s decision in City Investnment Sdn Bhd vs Koperasi

Serbahuna Cuepacs Tanggungan Bhd [1985] 1 MLJ 285 whereby:-

“Having regard to the policy and objective of Housing Developers Act 1966 and the 1970 Rules made thereunder the protection afforded

by this legislation to house buyers is not merely a private right but a matter of public interest which Parliament has intended to protect

from being bargained away or renounced in advance by an individual purchaser.”

In conclusion, the house buyers’ rights under the SPA are not private rights but created by Parliament as a matter of public interest for

the protection of the rakyat. They can neither be taken away by the developer nor given away by any house buyer individually (see also

the Federal Court’s decision in Kimlin Housing Development Sdn Bhd (Appointed Receiver And Manager) (In Liquidation) vs Bank

Bumiputra (M) Bhd & Ors [1997] 2 MLJ 805 for an analysis of whether rights conferred by statute can, or rather cannot, be waived).

Regulation 11 （ 1 ） & （ 2 ） of the regulations makes it mandatory for the SPA to be in the format prescribed by the Regulations (in Schedule G, H, I or J, as the case may be) and it is well-established that the format as prescribed cannot be modified or changed other than with the sanction of the Housing Controller. The Housing Controller’s power to allow modification or changes to the prescribed format is contained in Regulation 11(3) which provides that:-

“Where the Controller is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing, wavier or modify such provisions: Provided that no such wavier or modification shall be approved if such application is made after the expiry of the time stipulated for the handing over of vacant possession under the contract of sale or after the validity of any extension of the time, if any, granted by the Controller”.

So it would appear that we have a scenario whereby only the Housing Controller has the power to waive or modify the provisions of the SPA. So what is wrong with the Housing Controller has the power to waive or modify the provisions of the SPA. So what is wrong with the Housing Controller giving an extension of time to the developer? Under Regulation 11(3), doesn’t he have a right to?

What about regulation 11(3) of the Housing Development (Control & Licensing) Regulations 1989 (Regulations)?

First and foremost the power given under Regulation 11(3), just like other discretionary powers, must not be misused and abused. Secondly, the Housing Controller must understand and be mindful of the purpose of the housing legislations so as not to defect such purpose and make a mockery of Parliament. By giving the extension of time and depriving house buyers of compensation under the SPA, has the Housing Controller not used the powers given to him by Parliament to take away rights conferred by Parliament?

The learned honorable judge in Wong Thai Kuai & Anor vs Kansas Corporation Sdn Bhd [2007] 3 CLJ 263 said that:-

“It would be against public policy if the ordinary house buyers, having paid the entire purchase price, were to be effectively deprived of their rights under the sale and purchase agreement”.

Has the Housing Controller not just acted against public policy when he sanctioned the extension of time thus effectively depriving house buyers of their rights under the SPA to be compensated for the delay in delivery of vacant possession?

Example: Purchase price of RM 700,000

Completion date extended by 6 months, thus LAD waived – RM 35,000 per house.

Project has 200 units, thus LAD waived RM 35,000 200 units= RM 7 million

That’s n enormous savings of RM 7 million by the developer.

Has “Granting of extension” been exercised in a just manner?

Third, besides what is reasonably expected of a prudent Housing Controller, it must be borne in mind that the power given under Regulation 11(3) is not an absolute one. It can only be exercised where there are “special circumstances or hardship or necessity which make it impracticable or unnecessary for the relevant provision in the SPA to be complied with” and the application for modification has been made before the contracted date for delivery of vacant possession.

A good example for exercise of this power will be cases where the housing project is approved before year 2007 but the SPA is post-2007. In such cases some local authorities still require a Certificate of Fitness for Occupation (CFO) as opposed to the Certificate of Completion and Compliance (CCC) to be issued. (Note: the CFO for certifying a dwelling fit for occupation was replaced with the CCC n impossible, for the developer to obtain the CCC as opposed to the CFO which serves the same purpose of certifying that the building is fit for occupation. In such cases the Housing Controller can, and should exercise his power under Regulation 11(3) and allow modification of the SPA by replacing all references to CCC with CFO.

No reasonable-minded person however, more so the Housing Minister and those under his charge, can possibly imagine that the powers given under Regulation 11(3) is meant to be used against the interest of house buyers, let alone blatantly take away the buyers’ rights which are expressly and clearly conferred on house buyers by Parliament, rights which are expressly stated to be for the protection of house buyers and created to serve and protect public interest.

Tireless efforts have been made by many stakeholders and Parliament to improve the housing legislations and to protect the innocent house buyers. If discretionary powers are not exercised with prudence, perhaps it is time to relook the position of those in power.