The New Enhancement of Protection under HDA

 

Property Law and Institutional Framework

Recent legislation (Housing Development (Control and Licensing) Regulations 1989) (HDCLR 1989) has seen significant changes in safeguarding the homebuyers’ interests as the previous Housing Developers (Control and Licensing) Act 1966 (Act 118) only protects up to a certain point and widely known for its incomprehensive law in governing the housing industry. 

To begin with, HDCLR 1989 only applies to Peninsular Malaysia, while East Malaysia is governed under Sabah Housing Development (Control and Licensing) Enactment, 1978 and Sarawak Housing Developers (Control and Licensing) Ordinance of 1993 due to the status quo that remains until today.

The Federal Court’s decision in Khau Daw Yau v Kin Nam Realty Development Sdn Bhd [1983] 1MLJ 335 has substantiated that HDCLR 1966 is designed to protect the homebuyers against irresponsible developers. 

Essentially, the act mainly protects the purchasers from the risk of abandoned project or delay in completion, enforce duties and responsibilities as a licensed developer, liability period, or any misleading advertisement and information. All of which are the provisions that protect house buyers’ interest against unscrupulous developers, especially when it comes to purchasing the first residential property.

The New Enhancement of Protection

1. Abandoned Housing Projects

The abandoned housing project is a global phenomenon that cannot be disregarded, and the number of abandoned projects is expected to climb as the pandemic continues. As a result, the Malaysian government amended the laws to safeguard homebuyers from unscrupulous developers through high entry barriers, increase fines and initiate criminal proceedings against any Licensed Housing Developers (LHD) who abandon any housing project under new section 18A. As in the case of Mahfar bin Alwee v Jejaka Megan Sdn Bhd & Anor [2007] 4 MLJ 175 is a real-life case of an abandoned housing project that face the consequences of its actions.

 

Furthermore, the local authority may also intervene and become a knight in shining armour through facilitation and negotiation to restore the abandoned projects to protect the purchaser’s interests (Bernama, 2021). A great example would be in the case of Loh Hoon Loi & Ors v Viewpoint Properties (Sabah) Sdn Bhd [1995] 4 MLJ 804, the intervention of local authority on an abandoned housing project in Sabah. 

2. Housing Development Account

Moreover, it is mandatory for all LHD to set up a Housing Development Account (HDAC) with a bank for the purpose of safeguarding the homebuyer’s rights. To scrutinize, all the funds received from the homebuyers and banks are channeled properly into HDAC as the only payment channel to pay the cost of constructions, stamp duty, taxes, insurance premium or any other charges that are appropriate by the state government. In fact, the funds collected from the sales of properties are also protected from any misuse or unauthorized withdrawal that is subject to the Terms & Conditions (T&C) under the HDCLR 1989. With these in mind, it protects the homebuyers from any hidden charges or separates additional items after making the scheduled payment under the SPA. 

3. Misleading Advertisement

The homebuyers are also protected under HDCLR 1989 from any misleading information advertised by LHD, and all LHD are required to obtain an Advertising Permit and Developer’s License (APDL) from the local authority in order to closely monitor that all LHD are in compliant with the rules and regulation. On top of that, LHD is required to provide essential and accurate information on their advertisement and has to be approved by Housing Controller in pursuant to Regulation 5 and 6 HDCLR 1989. In case there is any complaint from the public and information provided are claimed to be deceptive, the LHD could be fined, imprison or face both charges. Other countries also apply the same consequences such as in Australia, in reference to Australian Competition and Consumer Commission v Metricon Homes Queensland Pty Ltd [2012] FCA 797 and the case of Tropika Istimewa Development Sdn Bhd that misrepresented to 107 homebuyers, and also granted an order for Liquidated Ascertained Damages (LAD) for late delivery of vacant possession.

4. Defect Liability Period 

Under the HDCLR 1989, all newly developed residential projects are protected with Defect Liability Period (DLP) for the next 24 months, from the moment the new homeowners received the key to the property. This protection allows the new homeowners to raise a report for any defects, cracks or leaks in the property from the workmanship, and it is mandatory for LHD to repair it at no cost to the new homeowners. 

However, there is some temporary adjustment made to HDCLR 1966 to protect both LHD and homebuyers under Section 32 of the 2020 Coronavirus Bill. The DLP is extended for an additional 166 days or the period from 18 March to 31 August 2020, with an extension period until the end of 2020. This relief is to protect the homebuyers even during the pandemic that took place that exclude the Prescribed Period, since there is no force majeure clause on the Statutory SPA.

5. Homebuyers Tribunal

Homebuyers Tribunal is a special set-up pursuant to the HDCLR 1989 to simplify homebuyers to make claims against LHD for any conflicts and disputes elements arising from SPA. For instance, property that is not constructed in accordance with the SPA, homebuyers has the right to file a case for any buyer-related issues to the Homebuyer Tribunal through an amendment of HDCLR 1966 in 2002.

This was decided in a recent case PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor and other appeals [2021] MLJU 41 delayed of delivery vacant possession within the stipulated time on SPA is entitled to LAD under Regulation 11(1) for Clause 20(2) of Schedule G and/or 22(2) of Schedule H, followed by the case of Hedgeford Sdn Bhd v Jennifer Fu Woan Lin & Ors [2019] 10 MLJ. Furthermore, under Section 35 of the 2020 Coronavirus Bill, the homebuyers are also protected against any late payment charges imposed by the LHD who fails to make instalment payment between 18 March 2020 to 31 August 2020, with an extension up to the end of 2020 due to the pandemic.

6. Sales & Purchase Agreement (SPA)

Apart from its stringent in controlling licenses, all LHD has to follow a standard format for all SPA in which all details are laid out clearly with a simple term that is made under the HDCLR 1989. Both homebuyers and LHD may have different expectations or interpretations on the signed agreement, thus, all SPA contains a special schedule; H, G, J & I, that is issued to encourage accountability and transparency to avoid any misinterpretations. Moreover, LHD has no right to remove or insert any T&C in the standard agreement, and this also applies to Housing Controllers that has no power to modify or waive any provision of the agreements as stipulated under regulation 11(1) and (2) of HDCLR 1989. If the developer breaches the agreement on SPA, such as delay in completing the project within the stipulated period, the homebuyer can sue and seek compensation that has been made clear in the case of SEA Housing Sdn Bhd v Lee Poh Choo (1982) 2 MLJ 31.

My Opinions

In a nutshell, it is clear that HDCLR 1989 is indeed favoring more towards homebuyers with all the available powers that provide a protective shield against risk from buying a property, especially those under construction that has the highest risk of being abandoned. 

It is has been observed that many developers are repeated players in the field of housing development such as Eco World Development Group, Gamuda Land & IGB Berhad that contribute significantly to the residential properties. As homebuyers are often victimized from abandoned projects and do not have equal bargaining power against LHD, and to strengthen the trust to the public that their interest is protected under the HDCLR 1989. With the hope to create more demand in the market, and reduce the properties issues in the market such as overhang and oversupply of properties, all the decisions made by the Federal Court could be used as proof that favors the public and the law has more room to bend. Without actual demand, there is no economic sense for LHD to supply into the market, let alone having low-quality construction material that is priced top dollar. 

Hence, in order to benefit all the market actors, the main objective of the law is to govern the market activities and protect the interest of homebuyers. This position was made clear in the recent case between Wawasan Rajawali Sdn Bhd with 122 homebuyers, where the court retained its favor to the homebuyers’ interest.

The theory of homebuyers often finding themselves at the mercy of LHD can be seen as obsolete as the law evolves over time in providing justice to both LHD and homebuyers.

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