Legal Papers : Understanding your rights
There is a saying: a vacant land of yesterday is a building of tomorrow. You probably have witnessed a vacant land across the street, suddenly replaced with lorries, contractor workers with yellow safety helmets moving in and out from the site.
Around the corner is a sales gallery and show unit. Developers spend tonnes of resources building show units so beautiful that it has enticed you to buy a unit for yourself. After checking your bank account, calculating your finances, you decide to purchase a unit.
Well, just before you were to proceed with the necessary legal paperwork, you are first required to fill in a booking pro forma with a certain amount of booking fee. The purpose of this booking fee, as the name suggests, is to book the particular unit of your interest. The booking pro forma may have specified a certain date and time on when the Sales and Purchase Agreement was supposed to be executed.
A delay from a developer to prepare and execute Sales and Purchase Agreement may amount to breach inl which a buyer could bring his claim to Court for a remedy under “Specific Performance”. In the case of Lai Mew Seng v Cosmopac Sdn Bhd, decided in 1997, the High Court ruled that the booking pro forma constitute a binding contract between the parties.
When a booking fee was paid to a developer, that would also mean that there shall be no unilateral changes as to the agreed price of the property. Any unilateral increase of price shall be deemed as an anticipatory breach of contract where the buyer has every right to take the matter to Court to claim for damages for the breach.
In the case of Cheng Chuan Development Sdn Bhd v Ng Ah Hock in 1982, the Federal Court has then decided that the acceptance of the refund of the booking fee was neither a waiver of the respondent’s right to performance nor estoppel preventing him from suing for damages.
Could the developer then decided to increase the price and sell it to another willing party, and return the booking deposit? The answer is no. Developer should take note that a booking deposit is not to be taken lightly. The moment a booking fee is deposited into the developer’s account, there is a legitimate expectation from the buyer. This principle of law was enunciated from the case of Daiman Development Sdn Bhd v Mathew Lui Chin Teck & Anor in 1981.
SALES & PURCHASE AGREEMENT
After the booking process, you then go on to sign the necessary legal papers, one of which is none other than the Sales and Purchase Agreement, which includes clauses such as the particular date or period of vacant possession.
The Sales and Purchase Agreement is a mother of all understanding between the two parties. Every clause in the agreement is a binding promise derived from its statutory act – the Housing Development Act.
Assuming that everything goes well at this point, the next challenge is to make sure the developer delivers the said unit as in accordance with the specification in the Sales and Purchase Agreement. When the building plan is annexed into the sales and purchase agreement, it becomes part of the agreement and binds the parties concerned.
The fact is that, the rights to claim compensation for any defect or non-compliance with the specification does not depend on the issuance of the certificate of fitness (more on that later), but from the common law under the breach of contract. This principle was decided in the case of KC Chan Brothers Development Sdn Bhd v Tan Kon Seng & Ors in 2001.
In some scenarios, some buyers will get their units earlier than expected; some will get it just in time. Some unfortunate ones may have to wait a little longer than what has been promised.
If the developer fails to deliver the vacant possession on time, the buyer is able to claim for LAD (Liquidated Ascertained Damage). Even though the buyer’s right has been assigned to the bank (due to the borrowing of loans), the buyer still has a locus standi to sue for the LAD without having to bring the bank as a party, unless such action would prejudice the bank.
As a matter of right, any action must be brought within six years from the date of the breach. Do note that the calculation of LAD shall be the total days of late delivery which is to be calculated from the date of the Sales and Purchase Agreement was signed and not from the date of the booking form was signed.
(If the purchase was in pursuant to Schedule G — Housing Development (control and licensing) Regulations, Clause 22 —Vacant Possession shall be within 24 Months from the date of the agreement being signed.)
Do note that the delivery of vacant possession is calculated from the date of the agreement, and not from the date of the payment of the booking fee. The principle was enunciated in Court of Appeal’s recent decision in the case of GJH Avenue Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & two others.
Why is this important? Because this is the first court decision concerning the issue and interpretation of the “date of vacant possession, in regards to the establishment of Housing Development Regulations and Schedule G.
Now, congratulations to those who manage to get their keys on time. However, it might be too early to celebrate, especially when you have yet to walk through those possible defects that may come along the way.
Vacant possession means that the particular unit is practically completed in terms of construction. A vacant possession within the terms of the agreement had to include the connection of the water and electricity to the building. However, even with the connection, it does not necessarily mean that the unit is ready for vacant possession or is fit for occupation. It must have at least being issued of Certificate of Fitness. (Syarikat Lean Hup Sdn Bhd v Cheow Chong Tai, in 1988)
As a first time buyer, it is necessary to have a joint inspection with the developer’s authorised personnel. The buyer must make sure that all defects, both visible or invisible, are clearly pointed out, and the authorised person must make a record on each of those defects. Buyers have 24 months defect liability period, and it is best to utilise this period to fix these defects.
After the expiration of this period, the developer has no obligation to make good any defects in your unit. Hence, it is wise to make good of any defects before you start your house renovation. Well, at the very least, you have to make sure that the unit was of what has been promised to you since day one of your visit to your showroom. Be sure to safeguard all the marketing and legal documents in case of problems that may arise in the future.
It may be difficult to familiarise yourself with the legal jargon being brought up when purchasing a property. But for a once-in-a-lifetime purchase, it pays to take a few days to research and understand your rights, from the day you pay your booking deposit, until the day you receive your strata title.
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