Offer defects warranties to buyers who purchase from the developer post CCC

By Chang Kim Loong

Scenario 1: Cindy has just graduated from a foreign university and was ready to buy a terrace house with separate title deed available from a housing developer. She has heard of plenty of abandoned housing projects in Malaysia and did not want to take the risk buying those newly launched and still under construction. She waited for the developer to complete the housing development and subsequently decided to buy a terrace house from the developer after she was able to physical see the house. In the usual way, she asked her lawyer to assist her with the sale & purchase contract and acquisition process.

She found that although the house was new, it had multiple defects such as cracks on the ceilings and walls and she then asked the developer to rectify them. Much to her dismay, the developer told her the defects liability period (DLP) has expired already and their sale to her was on an ‘as is where is’ basis. The developer said that DLP was not mandatory after the Certificate of Completion and Compliance (CCC) was issued (which is true).

Scenario 2: Abd Latiff was ready to buy an apartment in Subang Jaya from an established housing developer. This was his first time buying a property in a stratified development. He knows practically nothing of the selling and buying process and sort the professional services of a lawyer. The lawyer attended to the usual ‘sub-sale’ transaction with Abdul Latiff eventually taking possession and keys of the property from the housing developer.

After shifting into his apartment with his family, he realized that there were water-leakages to his ceiling and walls. He consulted his lawyer and was informed that the purchase was on an ‘as in where is basic’ and that the purchaser was deemed to have inspected the property and was satisfied with the conditions. He felt let down with the course of events where he had to pay for the repairs and repainting works of RM7,850 when the apartment was barely 6 months old.

The language of the Housing Development (Control & Licensing) Regulations, 1989 is clear enough. The statutory contracts of sales do not apply to a sale in a secondary market (sub-sale) after the issuance of the certificate of completion and compliance (CCC).

In a nutshell, Cindy and Abd Latiff had thought by purchasing their completed properties directly from the developer, they would have a right to ask the developer to rectify the defects.

They were not aware that the developer was selling through the secondary market via a sub-sale and was not under any legal obligation to rectify any defects as their sub-sale contracts were silent on the defect liability period (DLP) warranties that would appear in the statutory contracts of sales.

Sub-sales are not within the purview of the Ministry of Housing & Local Government and do not enjoy the protection accorded to a purchaser who purchases properties under construction.

Hence, there is no DLP in their sale and purchase contracts though such terms are sometimes negotiated depending on the ‘goodwill’ and benevolence of the housing developer.

Goodwill in this context means it is the developer’s prerogative and at their sole discretion.

Defects Liability Period (DLP)

The statutory Schedule contracts of sale carries a mandatory warranty period of 24 months after the date the purchaser takes vacant possession of the subject property against any ‘defects, shrinkage or other faults’ which becomes apparent and which are due to defective workmanship or materials and not having been constructed in accordance with the approved plans and descriptions.

Such faults should be rectified by the developer at their own cost and expense within 30 days from the date of the purchaser’s written notice.

However, this clause on DLP is missing in most of the ‘sub-sale’ or ‘sale in secondary market’ contracts. It is a case of ‘caveat emptor’ or let the buyers beware.

There is no protection from the defects, shrinkage and other faults. These defects may include cracks in the walls, water leakages, water marks, molded ceiling panels, clogged piping, loose floorboards or tiles, unusable fixtures (such as electric connections, light switches and water tapes) and even misaligned doors, windows and safety grills.

Generally, it is a case of ‘what you see is what you get’. Those contracts even have the audacity to state that the purchaser has conducted independent checks and is satisfied with the state and conditions.

House buyers’ rights to better protection

Legal rights are created by the terms and conditions embodied in the contracts between two covenanting parties. House buyers who purchase a new property from the housing developer will establish a contractual relationship with the developer via the sale contract.

Hence, the buyers will have contractual obligations and entitlement upon the developer in the event of defects.

Why not offer the protection to buyers who purchase from the developer post CCC? As long as the purchase is from licensed housing developer especially, the buyer should be entitled to DLP warranties. 

After all, the defects warranties from the developer’s contractors/ builders are still subsisting depending again on the balance of the unexpired warranty period given by the contractors/ builders of the housing developer.

That being the case, we propose that a new scheduled contract (of sale) be formulated to protect the rights and entitlement of those house buyers who buys after the issuance of the CCC from their licensed housing developers.

This is to ensure that the buyers will not be shortchanged in terms of quality and compliance with the specifications of constructions as stipulated by the authorities.

Also, it is an extension of consumer protection who should also be accorded rights to enforce warranties under the defects liability period or whatever balance thereof.

Like buyers who purchased property in a primary market, these sub-sale buyers should also have access to justice by being given the right to make a claim at the Tribunal for Home Buyers Claim, which is a more affordable, fast and expedient legal process.

New Schedule K & L

Perhaps, a new set of contract of sale should be prescribed in the proposed new Schedule K (Post CC: Land & Building), Schedule L (Post CCC: Stratified Property) to be included to the HDR.

These new contracts are intended to cater for provisions post CCC with a new prescribed schedule of payments considering that some properties are leasehold with ‘restrictions in title’ as compared to freehold status. But, the main objective is to design a new contract of sale to include DLP for those buyers of post CCC properties whether they are landed or stratified housing properties.

Perhaps, the Minister of Housing should ponder over this proposal that will accord better or ‘extended’ protection to house buyers post CCC.

Datuk Chang Kim Loong is the Hon. Sec-Gen of the National House Buyers Association (HBA), a non-governmental and not-for-profit organisation.

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