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Housing Development Act / Housing Development Regulation / Strata Management Act

Full-disclosure by developers

Full-disclosure by developers

THE National House Buyers Association seems to have finally succeeded in persuading the Government to make developers provide purchasers with a full set of detailed approved documents of the property.

In fact, this has all along been a legal requirement. As far as landed properties are concerned, the approved layout plan and the approved building plan are to be included in the sale and purchase agreement (SPA) as the first schedule and second schedule respectively.

With respect to the strata titles, there are the site plan, layout plan, floor plan of the parcel, storey plan of the building, accessory plan and common facilities plan, all approved, which comprised the first and second schedules.

The Urban Wellbeing, Housing and Local Government Ministry has now agreed with HBA that the detailed dimensions of the property and its facilities are to be given to the purchaser at the outset as part of the building plan attached to the statutory SPA. These may take the form of copies of the approved plan on paper no matter how thick it makes the SPA or in electronic form, for example, as a compact disc with readable format accessible through the ordinary computer.

Internal features of the property: the building plan, measurements, materials and setting

Developers have taken advantage of purchasers’ lack of knowledge and may be making unauthorised alterations in the measurements, using sub-standard or alternative building materials, changes in the wiring and plugs, plumbing and other ways of saving costs in the hope the purchaser will not discover these in time, at least during the duration of the defects liability period. Without detailed knowledge, purchasers are at an disadvantage in their fight with developers.

External features: Is the playground not part of your property?

Although this is important, the SPA gives the purchaser the impression that they are entitled only to what they have purchased. But often, purchasers may be persuaded by the external features too like playground and open space in the area. Young couples are vulnerable to advertised features such as playgrounds and open spaces but they are blindsided about the existence of an “active” graveyard nearby or the location of the oxidation ponds.

The purchaser buys into the atmosphere or concept of living of the whole housing estate. Is the developer then entitled to mislead purchasers with pictures of a spacious housing estate, only to dig up the children’s playground for a condominium immediately after the houses are sold?

If the developer promotes such features as the playground at the time of sale, then you (as the house buyer) should take down the answers, the name of the developer’s staff and designation and have your solicitor confirm this in writing.

It may constitute what is known in law as “a collateral oral warranty to the transaction” and may be read into the SPA to make it binding on the developer. These matters are not provided for in the SPA because the SPA is a standard form to be used in a whole range of property transactions where the details vary.

However, it does not mean these details cannot be added; the law allows it (Tun Suffian in Lee Poh Choo v SEA Housing Corp) but rare is the developer who would allow it. That is why the purchaser must have his own lawyer, not the legal firm chosen for the purchaser by the developer.

Even with the new requirement, the purchaser may still have to rely on the collateral warranty argument with respect to things not mentioned in the SPA which the developer does not include in the approved layout plan but may still try to give the impression that it is meant to be part of the housing estate.

The density of the area is the number of houses allowed to be built in the housing estate; it makes all the difference between spaciousness and over-crowding. Developers, when they see houses are selling well, sometimes add more houses than was approved.

As this affects the quality of life, the purchaser believing that only a certain number of houses is going to be built, has a cause of action against the developer. He can no longer be told by the developer to talk only about what he has paid for in the SPA.

The quality of a housing estate may also be affected by the types of houses and other buildings. A matter of particular concern may be the number and type of houses and shop houses. Their distribution is also to be taken note of as it may affect the convenience to the occupants.

Advertisements not affected by the new disclosure rules

As houses are rarely built and then sold by developers, the non-existent nature of the houses requires developers to make use of artist impressions. These are not art pieces. Hence, there is the need for actual dimensions of the property and the purchase price has to be given. Developers are required to submit mock-ups to the ministry for its approval. They enable the ministry to check on the advertisements by developers, and to see if there are any deviations from the approved versions.

However, it is the accompanying verbiage which is seriously misleading. There are those which give amazingly short travelling time to important places without mentioning the mode of transport. For example, proximity to upmarket Mont Kiara even if the place is closer to Segambut. Or that the Petronas Twin Towers are within sight of the property? How long do you want to gawk at it anyway?

Even guarantees of return on investment are promised provided you spend more money on furniture and fittings.

Advertisements calculated to mislead – and which have misled purchasers – may give purchasers right to a civil suit against the developer where the ministry cannot be moved to act. In a Singapore case, the developer’s brochure had boasted of “a panoramic view of the sea”, the court held that it gave the purchasers a right to sue if they had been induced to buy because of that claim.

The law as usual is clear and strict. Under the 1989 Regulations, developers are required to give “accurate and true particulars” in the advertisements of their housing schemes. On conviction, they can be fined a sum not exceeding RM20,000, or face imprisonment not exceeding five years or both; So far, there have not been any prosecutions, not that there have been no violations.

Chang Kim Loong AMN secretary-general of the National House Buyers Association (HBA): www.hba.org.my.

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