Protecting Homebuyers’ Rights When Purchasing Off-The-Plan Property
Buying Off-The-Plan Residential Property From a Developer – Schedule G and Schedule H
According to the Housing Development Act 1966 (HDA) and the Housing Development Regulations 1989 (HDR), developers selling off-the-plan residential property are mandated to follow a standard Sales and Purchase Agreement (SPA). This is found in Schedule G for landed properties such as bungalows and terrace houses, and in Schedule H for stratified properties.
Vacant Possession
If you are buying a landed residential property or strata-titled property from a developer, then the SPA should contain clauses to protect your rights. These provisions, whether incorporated by the standard SPA template or in a bespoke SPA drafted by a lawyer, will include clauses governing the delivery of vacant possession (VP).
For landed homes with individual titles, the developer must deliver VP within 24 months while for strata-titled properties like apartments and condominiums, it should be delivered within 36 months.
If the developer fails to comply with the time frame stipulated in the SPA, the purchasers are entitled to claim liquidated ascertained damages through LAD clauses. However, the latest Federal Court ruling in GJH Avenue has ruled that LAD only covers the predicted losses suffered by the purchasers for every day that the building project overruns the vacant possession date agreed upon in the SPA. This does not cover actual supply of electricity and water to the property units.
Defect Liability Period
Whether it is a strata title or individual titles, home buyers are safeguarded through the standard Sale and Purchase Agreement (SPA) mandated by the Housing Development Act to ensure transparency and accountability with zero room for misinterpretation. If there is any dispute or issue, the Homebuyers Tribunal will rule over it.
The COVID-19 Act provides relief to housing developers as the period between 18 March and 31 August 2020 (“Prescribed Period”) is excluded from the calculation of the Defect Liability Period (DLP) that was stipulated in the Statutory SPAs. Hence, this means that the DLP will end earlier than anticipated.
However, it is important to note that this does not mean that the DLP will lapse for all existing purchasers as homebuyers are still contractually obligated to make claims of defects after the DLP has lapsed. It is therefore crucial that all purchasers make sure that the SPA they sign contains the substituted Schedule G and Schedule H which was provided by the amended HDR 1989.
Late Delivery Interest
There are 2 systems for selling and purchasing houses. One is the sell-then-build (STB) system, where you buy a plot of land AND a building. The other is the partial BTS model, where you buy a building only. This is a safer model for home buyers as the developer can only collect money from them while the building is still under construction.
Under Schedule G of the HDA, the developer has to deliver vacant possession within 24 months from the date of the SPA. If they do not, the developer must pay late delivery interest to the homebuyers for every day that is exceeded. This is a great protection for the homebuyers as it will motivate the developers to complete their projects on time. The Court of Appeal in GJH Avenue Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & 2 Ors [2019] 1 LNS 1184 resolved the controversy over the meaning of this clause. The court held that the phrase “within 24 calendar months from the date of this Agreement” means the date of the SPA, not the date of the booking fee.
Indemnity
Developers are required to obtain fidelity bonds from reputable surety companies for all employees who might have access to funds related to the project. In addition, Developer agrees to indemnify and save Crescent Member harmless from and against any losses suffered by the latter due to any fraud, dishonesty or other wrongful acts committed by the former or any of its servants, agents or subcontractors.
Schedule G SPA applies to landed residential properties and H SPA is used for high-rise properties such as condominiums, apartments or flats. Homebuyers are protected by these standard agreements as they provide an avenue for them to file claims against developers if the development is not completed within stipulated time frames.
As such, it is important for home buyers to check whether the SPA they sign contains the relevant terms. If not, it may be wise to engage a lawyer to review the contract. If they are not happy with the building quality or late delivery, homebuyers can file complaints with the Controller of Housing’s Tribunal for Homebuyers Claims.