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Friday, February 15, 2008

Significant changes to Housing Act

Last month, we examined some of the significant changes made to the statutory sale and purchase agreement for a housing accommodation comprising land and building. In part two this month, we look at significant changes made to the statutory agreement for a housing accommodation comprising a building or land intended to be subdivided into parcels held under strata titles, brought about by the recently amended 1989 Regulations, which came into operation on Dec 1, 2007.

Agreements for buildings or land intended for subdivision into parcels (Schedule H)
The title to the Schedule H agreement has been changed to “Building or land intended to be subdivided into parcels”. A recent amendment to the Strata Titles Act, 1985, has permitted land with buildings of not more than four storeys to be subdivided into land parcels to be held under strata titles. This new strata scheme will meet the needs of a new housing development concept referred to as Gated Community Schemes.

Parcels free from encumbrances before vacant possession
In the event the land upon which the development is taking place is encumbered to any bank, the amended Schedule H requires the proprietor/developer to deliver to the purchaser or his financier, a copy of the redemption statement and undertaking issued by such bank, in respect of the purchaser’s parcel, immediately after the date of the agreement. Previously, the time period to deliver such redemption statements and undertakings was not specified.

The purchaser’s financier is now required to furnish to the developer an unconditional undertaking to pay the loan sum and in return the developer will undertake to refund the loan sum in the event the transfer of the parcel cannot be registered in favour of the purchaser for any reason that is not attributable to the purchaser.

Right to initiate and maintain actions
The purchaser may now initiate and maintain any action or suit in any court or tribunal provided that his financier is notified of the action or suit within 14 days after the action or suit has been filed.

Defaults by purchasers
A new event of default has been added. If the purchaser fails to pay any sum or sums payable (other than any instalment payable and any interest thereon) for any period in excess of 28 days after the due date, the developer may take steps to annul the sale of the parcel.

Strata title and transfer
The duty and obligation of the proprietor/ developer to execute an instrument of transfer in favour of the purchaser, within 21 days upon issue of the strata title to the parcel has been extended. The executed instrument of transfer shall now be forwarded to the purchaser together with the strata title. This is, of course, subject to full payment of the purchase price and
observance of all terms and conditions by the purchaser.

Position and area of parcel
The purchaser is entitled to an adjustment of the purchase price if the area of the parcel shown in the strata title is less than the area shown in the building plan by more than 2% instead of 3%.

Infrastructure and maintenance
Under the new Building and Common Property (Maintenance and Management) Act, 2007 (Act 663), a Joint Management Body (JMB) is to be established if the management corporation is not in existence at the time of delivery of vacant possession.
The purchaser will contribute to the infrastructure maintenance costs, until they are taken over by the appropriate authority or the JMB and the developer shall provide to the purchaser a list and description of the infrastructure and the expenditure incurred in the maintenance thereof.

Service charges
The purchaser shall pay to the developer service charges for the maintenance and management of the common property and for services provided by the developer until the establishment of the JMB. Thereafter services charges shall be payable to the JMB.

In respect of such service charges, the purchaser will pay four months’ in advance instead of one month’s deposit and three months in advance. All services charges received by the developer shall be paid into a Building Maintenance Account established under Act 663.

The service charge statement prescribed in the Fifth Schedule has been slightly modified. Service charges shall be paid within fourteen days, instead of seven days.

Sinking fund
From the date the purchaser takes possession of his parcel, he is liable to contribute a sum equivalent to 10% of the services charges to a sinking fund established under Schedule H. All funds accumulated in this sinking fund, which is maintained by the developer, are held in trust for all purchasers, and the developer is required to transfer any accumulated funds into a sinking fund established under Act 663.

It is pertinent to note that before the establishment of the JMB, the contribution to the Schedule H sinking fund is a separate and additional payment. Once the JMB is established, the sinking fund established under Act 663 will comprise such portion of the contribution to the Building
Maintenance Fund as may be determined by the JMB and the purchaser is no longer required to make a separate and additional payment to such sinking fund.

Delivery of vacant possession
The purchaser may now occupy the housing accommodation when the certificate of completion and compliance has been issued, water and electricity supply are ready for connection, and the purchaser has paid all monies payable and due. The certificate of fitness for occupation is no longer required.

Wong: The defect liability period has been raised to 24 months

Defect liability period
The defect liability period has been increased from 18 months to 24 months and a purchaser may make a claim before the expiry of 18 months or 24 months after he takes vacant possession. Once a notice of claim by a purchaser has been made, the developer’s solicitors may not release the monies held by him until the developer’s architect has certified that the defects, shrinkage or other faults have been repaired and made good by the developer.

The purchaser may assign all his rights and interest in his parcel to a third party without the consent of the proprietor or the developer, provided he has fully paid the purchase price and complied with all terms and conditions of the agreement, or if before full payment, the developer and the purchaser’s financier have exchanged undertakings mentioned earlier.
Additional Plans
Two additional plans are required to be attached: the layout plan and the common facilities plan.

Transitional provisions
In the case of the Schedule G discussed last month and the Schedule H discussed in this part, the amended 1989 Regulations do not affect the validity of any contract for the sale and purchase of a housing accommodation entered into after April 12, 2007, but before Dec1, 2007, and such
contract shall continue to have full force and effect even if inconsistent with or contrary to any provisions of the amended Schedule G or H. Further, if on Dec 1, 2007, a contract of sale has been signed in any phase of a housing development, the developer may continue to use the previous Schedule G or H agreements until all the housing accommodation in the said phase of housing development have been sold.

The writer is the deputy chairman of the Conveyancing Practice Committee, Bar Council, Malaysia

Note: This column is brought to you by the Malaysian Bar Council for your information only. It does not constitute legal advice. You should therefore seek professional legal advice for your specific needs. Neither the Malaysian Bar nor the Sun Media Corporation Sdn Bhd shall be liable to any reader who suffers losses as a result of relying on this column.

Article by theSun (by Andrew Wong)

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