Housing developers in Peninsular Malaysia are mainly governed by the Housing Development (Control & Licensing) Act 1966 and its related regulations and guidelines issued by state authorities from time to time.
The HDA 1966 plays a dual role whereby its provisions detail the licensing rules of housing developers and their associated duties and responsibilities which in turn serve to fundamentally protect purchasers of housing accommodation.
Since its implementation, the HDA 1966 has undergone a number of amendments in the effort to better regulate residential developers and tackle the many issues arising in the industry. To a great extent, each amendment has always resulted in stricter rules being imposed on developers and greater protection of purchasers. This is precisely, again, the impact of the latest amendment of HDA 1966;
The Housing Development (Control & Licensing) (Amendment) Act 2012 has recently come into force on 1st June 2015. Implementation of the HDA 2012 is supplemented by the Housing Development (Control and Licensing) Regulations 2015 which will come into effect on 1st July 2015. A relatively brief Act, HDA 2012 together with HDR 2015 has shifted certain salient aspects of housing development, as discussed in the following paragraphs;
Deposit for Developer’s Licence
In order to obtain a developer’s licence, developers are no longer bound by the ‘one-size-fit-all’ deposit amount of RM200,000.00. The revived s.6(1) HDA 1966 provides for developers to make deposit of a sum equivalent to 3% of the estimated cost of the construction of a housing development of their respective projects. This new amount of deposit is hoped to be fairer on small-scale housing developers and also act as an effective mechanism to weed-out ‘weak players’ from entering the industry from an early stage.
However for developers who were granted the licence immediately before 1st June 2015 but have not paid any deposit, the old law on payment of deposit will still apply i.e. developer to pay a deposit of not less than RM200,000.00.
Renewal of Developer’s Licence
Under the amended Regulation 4 of Housing Development (Control & Licensing) Regulations 1989, the time limit within which developers must renew their licences has been shorten from 60 days to 14 days before expiry of the same. Developers must also ensure that their licences are kept active (i.e. renewed) until the certificate of completion and compliance is granted for their projects.
Advertisements by Housing Developers
The contents allowed in “any advertisement made by any licensed housing developer” are further restricted with the insertion of Regulation 8(1A) in HDR 1989, which prohibits the following:
(a) offer of free legal fees;
(b) projected monetary gains and rental income;
(c) claim of panoramic view;
(d) travelling time from housing projects to popular destinations;
(e) any particulars to which a housing developer cannot genuinely lay proper claim”
Collection of Payment Outside a Sale and Purchase Agreement
Previously only developers were prohibited to collect any payment such as ‘booking fees’ or ‘earnest deposit’ before signing of a sale and purchase agreement. To further protect purchasers the amended Regulation 11(2), HDR 1989 expressly expands this prohibition on stakeholders:
“No person including parties acting as stakeholders shall collect any payment whatever name called except as prescribed by the contract of sale”
Prescribed Sale and Purchase Agreements
HDR 2015 also provides substituted versions of the prescribed sale and purchase agreements (or more commonly known as Schedule G and Schedule H). Therefore, housing developers who will obtain their licences and advertising permits on/after 1st July 2015, must duly adopt the amended Schedule G and Schedule H.
For housing developers with on-going housing projects, Regulation 13 of the HDR 2015 is clear in providing that pre-amended Schedule G and Schedule H should be adopted;
“Notwithstanding the provisions of these Regulations, any licensed housing developers who before the coming into force of these Regulations was carrying on the business of housing development, may continue to carry on such business for such period and subject to such conditions as may be specified in the licence.”
These amendments are in line with the new Strata Titles (Amendment) Act 2013 which necessitates the passing of strata title upon delivery of vacant possession. Amongst others, key clauses in the new Schedule H worth highlighting are:
Clause 3(4): Parcel free from Encumbrances
Clause 6: Financial Facility
Clause 10: Interest on Late Payments
Interest on late payment cannot be charged for a period of 6 months on purchasers who obtained financial facility from Government.
Clause 12: Separate Strata Title & Transfer of Title
Clause 25: Time for delivery of vacant possession
Clause 27: Manner for Delivery of Vacant Possession
Purchasers shall be deemed to have taken vacant possession upon the expiry of the 30 days from the date of notice of delivery of vacant possession.
Clause 28: Strata Title Not Yet Issued and Transfer of Title
Clause 30: Defect Liability Period
The developer is entitled to replace the named solicitor before stakeholder sum for the defect liability period has been paid to the named solicitor and prior written notice is given to purchaser/purchaser’s financier.
Clause 33: Cost to be Borne
Statutory Termination of Sale and Purchase Agreement
In relation to the new prescribed sale and purchase agreement, Section 8A HDA 1966 provides purchasers with unilateral right to terminate the said agreement, at any time, provided:
- It is certified by the Controller of Housing that the developer has refused, delayed, suspended or ceased work for a continuous period of 6 months after execution of the agreement; and
- Purchaser has obtained a written consent from financier.
Definition of Housing Developers
Definition of ‘housing developer’ is further expanded to also cover liquidator(s) of insolvent developers.Section 3 of the HDA 1966 now reads as:
“any person, body of persons, company, firm or society (by whatever name described), who or which engages in or carries on or undertakes or causes to be undertaken a housing development and in a case where the housing developer is under liquidation, includes a person or a body appointed by a court of competent jurisdiction to be the provisional liquidator or liquidator for the housing developer”
Expansion of this definition is surely welcomed in providing security to bridging financiers, purchasers and other stakeholders in the building industry, especially in light of the escalating phenomena of abandoned housing projects.
Offences relating to Abandonment of Housing Development
To address the issue of abandoned housing developments, a new section s.18A is inserted in the HDA 1966. Scope of this section is rather wide in that a development will be considered as abandoned the moment a developer “refuses to carry out or delays or suspends or ceases work continuously for a period of six months or more or beyond the stipulated period of completion as agreed under the sale and purchase agreement.”
A developer convicted under the new s.18A shall face punitive punishment of fine between the range of RM250,000and RM500,000 or imprisonment for a term not exceeding 3 years or both.
Viewed in totality, it is undeniable that the recent amendments on HDA 1966 are strict against developers. This is crucial in view of the fact that majority of buyers of houses in Malaysia are first time purchasers who utilise their lifetime savings to secure a home for themselves. Such purchasers are usually not aware of or do not understand the procedures and intricacies involved in a typical sale and purchase transaction; most often than not, they do not have an equal bargaining power against housing developers who are normally ‘repeat-players’ in the field of housing development. As such, it is only the law that can be the protective shield for purchasers against potential risks involved in purchasing a property, especially those under construction, from housing developers.