Housing Development Act: A walk down the memory lane (Part 1)

CONVENTIONALLY, there are certain milestones in an adult’s life which has a lasting impact throughout one lifespan. This includes getting employment, marriage and purchasing one’s own residential property.  

In fact, it would be apt to say that purchasing one’s residential property is probably the biggest purchase in the life of a common man, which liability and responsibility perpetuates for an average of 30 years of a working adult. I use the “30-year period” as this is a conventional period of a housing loan.

Some may even say that these days with the increase of housing prices and disparity in the average income, it would not be surprising that liabilities for housing loans increase to 40 years.  

It is due to this rational, that the Government back in 1999 amended the Housing Development (Control & Licensing) Act, 1966 (HDAct).  At that time, the Housing Ministry was headed by Tan Sri Ong Ka Ting, who was also the president of MCA.  

The minister at that time took an unprecedented progressive step in inviting non-Government stakeholder’s active participation in drafting a Government’s legislation, and this was when the House Buyers Association (HBA) was formed by a group of apolitical Malaysians to speak up and fight for house buyers rights on a pro-bono basis. 

Ong said: “I want laws to be written in black and white and in no uncertainty. I don’t want any abuse by my officers to have unfettered and discretionary powers: it may lead to abuse and biasness”.  

Housing Development Act’ rational 

Essentially, the HDAct is the mother of all housing development regulations in Malaysia that protects the interests of residential title home buyers against developers for a specific period.  

Protections include defect liability period, management of strata title issues and safeguard of buyer-related conflicts, disputes, and claims against unscrupulous developers.

This legislation also brought about the formation of the Tribunal for Home Buyers Claims, which enabled house buyers to obtain legal redress in an affordable, transparent and speedy manner. 

Collectively, one common theme that flows throughout the HDAct as a social legislation was that of “certainty”; – certainty as to obligations of both contracting parties; certainty of the price of a property; certainty as to when and how title is to pass to buyers; certainty as to quality of housing that the buyers gets after signing half his financial life away and certainty as to the terms and conditions in the Sale & Purchase Agreement (SPA) and the house buyers rights and entitlements. 

This was crucial because, notwithstanding the amount of financial liability a house buyer takes on when purchasing a new home, he enters into a contract without having the privilege of having a certainty of when the house will actually be passed to him to occupy.  

There were many instances when house buyers continue to pay for their homes even they are yet to receive the keys to their assets. This is a common feature for abandoned projects usually undertaken by unscrupulous developers. 

So, for the house buyers who buys a brand-new residential property, the Government regulates the component of “certainty” of obligations in the statutory Contracts in Schedule G (landed property) and H (stratified property) of the legislation, which means, no amendments or variations are allowed to the standard form contract as to the completion date, no variation of price are allowed mid-way, and liquidated damages imposed in the event that there is unwarranted delay.  

Now in Malaysia this is very crucial because our housing laws has not fully adopted a “Built and Sell (BTS)” approach to residential property which is common a most developed countries like Australia and United Kingdom.

In fact, what is not known to many is that when the HDAct and its regulations were amended in 2012 with the introduction of Schedule I (landed property BTS 10:90 concept) and Schedule J (stratified property BTS 10:90 concept), there was a move by the Government to progressively move to a Built and Sell concept.  

A compromise was reached that between the stakeholders that the system would progressively change and by 2015, Malaysia ought to have fully adopted the BTS 10:90 concept and the sole method of residential development. Unfortunately, perhaps due to “convenient selective institutional dementia”, these promises were not kept.    

In our country, we purchase property that are yet to be built; and the financial obligations to pay for these properties start progressively upon the house buyer signing the contract. In short, the house buyers fund the development of his house, pays for interests on an uncompleted property and bears the full brunt of financial risk in the event that the project is abandoned.    

Allegations of abuse and corruption 

Notwithstanding the statutory protection afforded by the Government in the form of statutory standard form contracts, there were numerous instances recently where certain housing developers would lobby the Housing Ministry to grant an “Extension of Time” (EOT) varying the obligation of the developer to complete the property to which it was originally agreed.  

When such EOT were granted, the house buyer would then be prevented from seeking “late delivery damages” for the property that was meant to be completed within either a 24 month (landed property) or 36 months (stratified property).

So, at the end of the day, with a stroke of a pen, the house buyer’s then forks out an additional premium (in the form of interest to his banks) to gain access to his property.

This was the common topic in 2017, in Parliament as well as in the media, where allegations of abuse of power and exercise of discretionary power were invoked within the Housing Ministry were allegedly apparent and rampant, as alleged by certain groups and political leaders. – Feb 20, 2022.  

Vicknaraj Thanarajah is a legal adviser of the National House Buyers of Malaysia.