12/14/2017 Law Speak - Housing developers and deposits

Home Contact Us RSS Archive Advertise with Us Private Policy Thu, Dec 14, 2017 Search

Local World Business Sports Style/Life Opinion Property Education Media & Marketing Community Photos

Education

Post Grad

Law Speak - Housing developers and

deposits
Posted on 12 April 2015 - 07:59pm
Last updated on 12 April 2015 - 11:54pm
Gurdial Singh Nijar

TODAY I narrate a personal story. It relates to housing developers – and their selling "antics". It
needs to be told so that you will be on guard when you face a similar situation. I am not indicting all EXCLUSIVE STORIES
developers of course. 'We didn't get any watches'
Fake milk producers to be shames
First, the developer announces the launch of a project over a weekend. The roads to the launch site
are well signposted with fancy boards and bunting. A lavish spread awaits you at the site –
complete with a professionally-designed show house. Christmas Special

An elaborate model of the entire location is placed at the centre. Replete with eco-forested areas,
exquisite landscaping, a fancy club house, ponds and pools galore.

It's a contrived carnival atmosphere – to lure you into making possibly the biggest financial
commitment in your life.

Officers from a coterie of banks sit alongside the developer's representatives. To show you how
incredibly easy it is to make a purchase and how little it will eat into your budget. There are profuse
promises – getting the loan approved? After a quick calculation of your income – an assurance: no
problem, lah!

The developer's rep then assures you – if any problem in getting the loan the money "can sure
refund".
Today's Popular and Most Shared
And then the infamous – "only few lots left" – better confirm now – pointing to the red "sold" dots on
Most Viewed Most Shared
the plan. A sense of daring overcomes you. You abandon your "hum and hah" as you are gently
nudged into signing a document headed "Option to Purchase". Boy tells of murders before Tanjung Sepat
fire which claimed four lives
Fast forward to some time ahead – you can't get the loan; or you realise that the property is not
13-year-old girl raped by a cross-dressing
affordable. What then? No problem – you ask for your money back. It is then that you crash into a
man
barrier.
We will name and shame those behind fake
baby formula: Hamzah
Whatever you do – even beg or plead – these (few) developers will not return the money. They will
JB power outage: Supply restored 95%
give every possible reason to avoid a refund. They will ask you to put your money as a deposit for
Employers must allow female staff 90 days
another house in their other project. Or that they have suffered a loss – even though the same
maternity leave
house has been now sold to someone else.

You can sue for your money – but if lack of money prevented you from making the purchase – how
sentifi.com
can you possibly afford a lawyer? And how will you match the deep pockets of these fat cats and
their legal officers? thesundaily_my Sentifi Top 10
talked about stocks
After a while you let the matter rest in utter despair. You are left to little else than telling your sad
story to your friends and others.
Opinion
In my case I even knew the top echelon "owner" of this development company – a former college Labour market in need of reform
mate. We don't cheat people of their money, he declared glibly when first told of my plight in not POLICY MATTERS

getting the refund from his company. But after almost three years of phone calls and several stories THE labour market in Malaysia is in
need of reform. The figures suggest
of how it was his employees and not he who was refusing the refund – the reality dawned of how that something...
much more difficult it must be for others less well-connected to get a refund.

What is the legal position then? First, there is a difference between paying this money for a Football Fixtures & Results
"residential" property and a "commercial" property, even an inexpensive shop lot.

It is illegal for a developer to collect any money before signing a sale and purchase agreement
(SPA) in respect of a residential property. It can be labelled by any name – deposit, earnest money,
option to purchase, advance, stakeholder sum or whatever other name the developer's fertile

http://www.thesundaily.my/node/304459 1/2
12/14/2017 Law Speak - Housing developers and deposits
imagination creates. The developer cannot take this money until the purchaser has signed the SPA.
If he does so, he commits an offence under the Housing Development (Control and Licensing)
Regulation 1989. The developer commits a criminal offence punishable with a fine up to RM20,000
or jail up to five years or both.

Further all monies collected must be refunded – in full and without any deduction. As long ago as
1981 the Privy Council (then our highest court) brought to book a developer in Johor Baru. The law,
said the court, was there to protect house buyers; and developers would be punished for flouting it
(Daiman Development Sdn Bhd v Mathew Lui Chin Teck).

Then the lawyers got into the act. They started collecting the monies on the developers' behalf as
"stakeholders". And they called it an "option fee". A genuine stakeholder holds money (or anything
else) pending the fulfilment of an event – such as approval from some authority. The court struck
down this forensic devious device in a 2013 decision: Wan Ming Sun v Planet Uno Sdn Bhd. It was
illegal, the court declared.

But then there are lawyers who continue to flout this provision. And despite a clear Bar Council
warning against this practice. Should not the Bar Council turbo-boost its enforcement machinery;
and at least alert the authorities to prosecute the lawyer(s) under the housing regulations? Surely
the knowledge is in the legal fraternity's public domain.

What of those who buy a commercial shop lot and end up in the same predicament? There is no
similar protection in this case. The only recourse is to argue that the contract has not come into
existence because the precondition of signing the SPA has not materialised. This is a lot harder as
the developer will argue that the basic terms – set out in the sheet that he got the purchaser to sign
– are clear (property, price and such like). And without doubt, the unethical developers will likely get
their favourite obeisant legal eagle to include a clause that says that the money will not be refunded
if the SPA is not signed.

Should not the government consider enacting a law similar to that for residential properties to
protect the buyers of commercial property – especially now that the volume of the sale of small shop
lots has grown so large?

Gurdial is professor at the Law Faculty, University of Malaya. Comments:

letters@thesundaily.com

Related articles
Sub-sale property market - Part 2
Pre-owned – pros and cons
'Religious freedom' rules sought for opponents of gay marriage
Official launch of Platinum Splendor Residence in Setapak
The true cost of convenience

Local World Business Sports Style/Life Opinion Property Education Media & Marketing Community Photos

Home Contact Us RSS Archive Advertise with Us Private Policy

Copyright © 2017 Sun Media Corporation Sdn. Bhd. All rights reserved.

http://www.thesundaily.my/node/304459 2/2