Knowing what you are buying: Things may not be what they seem to be (Part 2) 

This is Part 2 pointers on how to deal with problems after purchasing your dream property. Part 1 in our April issue dealt with Defect Liability. Part 2 deals with Tribunal for Homebuyer Claims, Legal Fees and getting the right information

Tribunal for Homebuyer Claims
Q: What if I got someone to carry out the repairs but the developer refuses to pay for it?
A: You will then have to file a complaint with the Tribunal for Homebuyer Claims which has been specially set up to help out house buyers.
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Q: How do I file a claim with the Tribunal?

A: For a claim to be heard by the Tribunal, it must fulfill certain conditions.

Firstly, the tribunal will consider a claim if it is based on a complaint arising from the Sale and Purchase Agreement (SPA). Such a claim can be technical or non-technical in nature. Sub-standard workmanship is considered a technical claim. So is non-adherence to the specifications as stated in the SPA. A non-technical claim is one that does not fall into the technical category, for example, late delivery of vacant possession of the property.

Secondly, the claim must be made within the required time-frame. It must be brought to the Tribunal no later than 12 months from the date of issuance of the CFO (Certificate of Fitness for Occupation) or from the expiry date of the defect liability period (i.e. 18 months/ 24 months) which means the defects must be brought up within 30 or 36 months, as the case may be.

Thirdly, it must be a housing unit meant for domestic purpose.

Lastly, the claim must not exceed RM50,000 per cause of action.

Q: What about defects that show up after the 18 or 24 months liability period, will I have any recourse against the developer?

A: It does not mean that if defects appear after the 18 or 24-month period, the developer can no longer be held responsible. This is especially so if they are structural defects.

Clause 14 of the SPA states that the “the Building shall be constructed in a good and workmanlike manner in accordance with the description set out in the Fourth Schedule . . .”

Thus the developer should be liable for serious defects that arise even after the defect liability period. It’s classified as ‘latent defects’.

Free Legal Fees
Q: Why do I need to use my own lawyer

Property development is a competitive game and unfortunately for the industry, it can no longer just build and wait for the buyers to come like they did in the past.

Choice is in abundance now and the buying process has as a result slowed, tying up developers' cash in the bricks and mortar of their projects. To stimulate sales, industry players are adopting strategies to make the buying process as financially painless as possible for prospective buyers.

One such strategy that has emerged is where developers proclaim free or subsidised legal fees for those who purchase their properties. The question is: are buyers really enjoying a waiver of such fees?

The solicitors on the developer's panel may be acting for it (the developer) and not the buyer. So the fees due are to be paid by the developer and not the purchaser. Therefore there is nothing free about it as far as the buyer is concerned. It can only be considered free if the buyer receives legal representation and does not have to pay for it." We must admit that such strategies are indeed gimmicks to entice buyers. The moral of the story is “don’t be penny wise pound foolish”. Don’t try to save on legal fees and end up paying more if your rights and interests are somewhat compromised.

The first rule of Conveyancing is 'buyer must engage own lawyer'. Consult a lawyer right from the start and not after you have paid the deposit. What are the reasons to use your own lawyer:

Under the law, you are deemed to have read and understood every document you signed. Furthermore, promises made by the seller or someone else about the deal may not be enforceable if the promises are not in writing.

Lawyers cannot represent both Vendor & Purchaser - if you are using the Vendor's panel lawyer, often, when disputes happen, the lawyer is unlikely to represent you against their bigger client.

A lawyer in general practice will be able to complete your purchase; however, lawyers with a focused real estate practice may prove a better tool if you are unsure of what to do, or have complications in your purchase agreement or mortgage. While you may think that you cannot afford the services of your own lawyer, consider whether you can afford not to.

Information Pays

Buyers who invest in the knowledge of how to purchase properties can avoid pitfalls. Caveat emptor, or "Buyer beware"! This is the axiom in commerce that means buyers alone are responsible for assessing the quality of their purchases before making payment.

How true is this in the property sense? It works well for buyers of completed units, but not if you buy based on plans, where construction has yet to be completed and there is nothing for you to inspect or assess yet.

But while caveat emptor does not apply to "yet-to-be-built" properties, another maxim that is pertinent is: "Investment in knowledge pays the best interest".

Nobody is born with the knowledge on how to buy properties, but once it is acquired, the world of homeownership can be entered with greater confidence.

In the quest for enlightenment, there is some homework for you to do, and these are some sources of information you can turn to:

a) Ascertain whether a developer has a valid developer license as well as a permit to advertise and sell properties, which is issued by the Ministry of Housing and Local Government. After that, you should check with the ministry on the validity periods of both documents; and
b) Check the financial status of a developer; its directors and its audited financial statements.

It is compulsory for a developer to display such information at its headquarters and branch offices as stipulated under Section 7(b) of the Housing Development (Control & Licensing) Act. Take note that the law does not include temporary sales booths.

a) A land's proprietor;
b) The land's usage and any restrictions in interest it might possess;
c) The land title, and whether the tenure is freehold or leasehold, and if the latter, the date of its expiry; and
d) Whether the land is mortgaged to a financial institution

a) A project's approved plans;
b) Its approved overall layout plan;
c) Its approved building plan; and
d) The developer's submission of Borang "E", which is the application for Certificate of Fitness for Occupation. NB: The current Certificate of Compliance and Completion (CCC) issued by Architects/ Engineers are now applicable for new developments.

a) A developer's details;
b) A project's details;
c) Progress details;
d) Statistics; and
e) A host of frequently asked questions on purchasing and related problems.

The website requires a fair bit of navigation to get the information, but to be fair, the site's administration has done a good job of keeping the information up-to-date.

A word of caution though: When it comes to sizing up a developer, you may not be able to undertake a comprehensive background check, especially since it is common practice for many outfits to form a new private limited company for every project they undertake. As such, one big name may have many subsidiaries, which you will need to know to assess the group's reliability.

The only thing that might be of interest to you here is a guidebook on Management Corporation which can be downloaded to acquaint yourself with the manner in which stratified properties will be run after issuance of strata titles.

Information service
Despite the availability of all the above-mentioned resources, there are still a lot of purchasers who don't have the confidence to make an informed purchasing decision.

Gauging from the number of queries we at the HBA have been receiving, answers to a multitude of questions are still lacking.

In this digital age, it is high time that the authorities create a convenient one-stop portal containing guidelines, warnings, black-listings and other important information for all to see.

Once buyers are armed with this powerhouse of knowledge, they will be able to make acquisitions with conviction and accelerate the flow of transactions, which is good for the overall economy.

So far, the failure of various Government agencies, authorities and ministries to provide such a portal has made the public rely largely on word-of-mouth, gut instinct and face value in order to assess whether a developer will deliver a property in the manner, style and timeliness as promised.

Help from HBA

To help buyers ask the right questions before purchasing their homes, we at the HBA have published a "House Buyers Guide Book" containing nuggets of valuable information. In it, we explain to you your rights as buyers, and your need to be vigilant to avoid future pitfalls.

We also participate in seminars and dialogues, hold regular meetings with many groups of disgruntled house-buyers, help in the formation of pro-tem committees, resident associations, JMB and MC as well as conduct house-buying workshops, one of which was held in Kuala Lumpur 3 months ago.

We have also come up with our book on ‘Tribunal for Home Buyers Claims’ guide book that is available in two (2) languages namely: English and Bahasa. The simple guide book allows the intended user to understand the intricacies of the the Tribunal which has the advantage of being speedier and much more informal.

We, at HBA have our own 'Meet the Public Sessions' that is conducted on Saturdays from 1- 5pm at our Secretariat where the public can just walk in for consultation and advice. The services are free from our volunteer lawyers, property managers, architects and those involved in the property industry. HBA website at http://www.hba.org.my/ has our Forum Board that surfers could participate and make their postings and exchange of knowledge.

By adopting a pro-active attitude, we hope to inspire a population of informed and astute buyers who will not fall prey to errant developers.

The National House Buyers Association (HBA) is a non-profit, non-governmental, non-political organisation manned by volunteers. For more information, check out its website at www.hba.org.my or email http://info@hba.org.my