News and Views

Developers should provide purchasers with a full disclosure of detailed approved documents, says HBA’s Datuk Chang

March 24, 2024
MALAYSIA

The National House Buyers Association (HBA) 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.

Infact, this has all along been a legal requirement. As far as landed properties are concerned, the approved layout plan and the approved building plans are to be included in the sale and purchase agreement (SPA) as the first (1st) schedule and second (2nd) schedule respectively.

With respect to the strata titles, there are the site plan, layouts, floor plan of the parcel, storey plan of the building, accessory plan and common facilities - all of which have to be all approved.

The Housing Ministry (now renamed Ministry of Local Government Development) has 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 an electronic format, 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

Unscrupulous 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, making changes in the wiring and plugs, plumbing and other cost saving measures in the hope the purchaser will not discover these in time, or at least during the duration of the defects liability period. Without detailed knowledge on these matters, purchasers are at a disadvantage in their claims against 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 a playground and open space in the area.

Young couples and first-time homebuyers are vulnerable to advertised common areas 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?

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 for items 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.

Another factor of importance is the density of the area is the number of houses allowed to be built in the housing estate makes all the difference between spaciousness and over-crowding. Unscrupulous developers, when they see houses are selling well, sometimes add more houses than was previously 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. Purchasers can no longer be told by the developer to stick to only about what he has paid for in the SPA.

Furthermore, 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.

Advertisement should not contain certain description

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 through their physical brochures by developers, and to see if there are any deviations from the approved versions.

However, there are several errant housing developers or their appointed agents who aid, abet and continues, wilfully or otherwise, to flout the laws with their accompanying verbiage which is seriously misleading through electronic media, digital visual images and other means of alternative advertisements. There are those which give amazingly short travelling time to important places without mentioning the mode of transport.

For example, proximity to upmarket areas such as Mont Kiara even if the property is closer to Segambut. Or that the Petronas Twin Towers are within sight of the property. Even guarantees of return on investment are promised provided purchasers 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. Under the amended 2015 Regulation 8(1A): ‘Any advertisement made by any licensed housing developer shall not contain:

(a) offer of free legal fees;

(b) projected monetary return gains and rental income;

(c) claim of panoramic views;

(d) travelling time from housing projects to popular destinations; or

(e) any particulars to which a housing developer cannot genuinely lay proper claim

On conviction, they can be fined a sum not exceeding RM50,000, or face imprisonment not exceeding 5 years or both. So far, there have not been any prosecutions, not that there have been no violations.

This article is written by Datuk Chang Kim Loong, the Honorary Secretary-General of the National House Buyers Association (HBA), a non-profit, non-governmental organisation manned by volunteers. He was also a Councillor with the then Subang Jaya Municipality Council (now conferred Subang Jaya City Council status) in years 2008 – 2018.

Disclaimer: Any opinions expressed are entirely the author’s own and do not necessarily reflect the views of PropertyGuru and its entities.

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