License And Permit
Housing developers in Peninsular Malaysia are regulated under the housing developers Act (Control and Licensing) 1996 and housing developer Regulations (Control and Licensing) 1989.
The Housing and Local Government Ministry has been entrusted with the tusk of enforcing these laws to safeguard the interests of house buyers.
Under the act/regulations, it is compulsory for housing developer building and selling more than four unit of houses to obtain the licence to build and permits to advertise and sell those houses.
However,only private developer are require to adhere to such regulations. Government-backed companies such as the respective State economic Development Corporations and cooperatives are exempted from the ruling. These agencies have their own mechanisms to save guards the interests of their house buyers.
Housing developers are also exempted on the following conditions:
- When they built fewer than four units of houses,
- They built more than four units but the units are not for sale;
- They sell the houses only after a full certificate of fitness has been issued(to encourage the built- and-sell concept).
In line with this, the ministry will only issue licenses and permits for advertising and sale to developers who have proven to be credible and capable of completing their projects
Several criteria must be met before this Ministry issues licenses and permits. These are :
- The land title has been transferred to the housing developer;
- Approval for new demarcations has been given for the land marked for development;
- Building plan has been approved by the local authority concerned, and
- The developer has enough capital to complete the project.
These conditions have been set to save guards the interest of houses buyers.
In addition to such measure, since1991, the ministry has made it compulsory for all housing developers to open an account with the bank or financial institutions specifically for each project.
This is to ensure the money collected from house buyers are properly managed and not used for other purposes. According to the regulation, all monies collected from buyers and withdrawal of that money from the bank and financial institutions will be controlled by the respective banks and financial institutions.
To ensure the move is effective and beneficial to house buyers, the ministry will allow a housing developer to close his account after the project has been completed and separate titles have been issued.
The ministry has also imposed conditions for housing developer to provide relevant information on their advertising and sale permits. Such information include;
- License number of housing developer;
- Advertising and sale permit number;
- Name and address of housing developer;
- Tenure of the land and encumbrances, if any, to which the land is subjected
- Description of the house
- Name of the housing project;
- When the project is scheduled to be completed;
- Price for each type of house;
- The number of units built for sale
- Name of the local authority that approved the building plan and the reference number.
All this information is vital in giving the potential house buyers a clearer picture of the development.
With such information available, house buyers are advised to ensure that the respective private housing developers have the valid license and advertising and sale permits before purchasing a house.
The information can be verified against the advertisement in brochures, the various media and billboards. These brochures are also available, free of charge, from housing developers
Legislation To Protect House Buyers
The Housing Developer Act (Control and License) 1966 (Act118) was enforced on Aug 29, 1969 while the Housing Developers Regulations came into force on April 1989.
Both the act regulations are aimed at safeguards the interest of house buyers.
However, such laws are only applicable in Peninsular Malaysia and do not cover housing development by cooperatives, government agencies and bodies, or commercial units such as hotels and business premises.
Monitoring and enforcement of the act is done by the Housing and Local Government Ministrys Monitoring and Enforcement Division Located on the fourth floor, Blok K, Pusat Bandar Damansara.
Monitoring and enforcement are handled by the housing Controller, Housing Inspector and Officers, who are appointed by the Housing and Local Government Minister.
The division conducts regular monitoring to ensure:
- Housing projects which have been given the Housing Developers License by the housing controller are progressing as scheduled, without problems.
- Housing developer conform with the laws stipulated under the Act/Regulations such as possessing housing developer license and the conditions in the permit for advertising and sale; proper maintenance of the Housing Developer Account, standardisation of the sale and purchase agreement in accordance with the sale and purchase agreement regulations as in Schedule G (land and building). These include bungalows, terrace houses and semi-detached units.
They also need to adhere to Schedule H (multi-unit buildings such as flats, apartments, condominium and town houses).
The monitoring of the projects are done through:
- Inspections and survey reports received from the housing developers. Under the Housing Developers Act (Control and Licensing) 1966, the developers must submit progress reports by filling form 7(F) to the Monitoring and Enforcement Division twice a year.
- Inspections at the project site, area and office. This covers various aspects such as advertising, progress of projects, payment and collections of monies by the housing developer, implementation of the sale and purchase agreements and other related matters. Developers are not allowed to amend, insert new clauses or cancel any part of the approval of the Housing Controller.
- Review of advertisements published by developers through newspapers, brochure, advertisement board and other channels to see whether they comply with the law.
- Monitoring of projects based on the information and complaints received from the public through letters, telephone calls, e-mail, whether published or aired in the mass media.
From the enforcement aspect, the Monitoring and Enforcement Division will take the necessary steps, including legal action, against the housing developers who flout the law.
The violations can include proceeding with project without having obtained a valid license and necessary approvals violation of licensing conditions and failure to properly maintain their Housing Development Accounts.
Those who proceed with construction activities without a proper license can be fined RM 100,000 or five years imprisonment or both. The same goes for housing developers who fail to open a Housing Development Account. For this offence, imprisonment is three years.
For other offence, the housing developer can face up to RM10,000 fine or three years imprisonment or both depending on the rules they violate.
The Act also empowers the Minister to direct developers on matters related to save guarding the interest of house buyers.
The housing controller can also revoke or suspend the housing developers license if he/she regards the offence as endangering the interest the house buyers or the public.
House buyers in the meantime are reminded to ensure that housing developers have the valid licenses and permits to advertise and sell
Pitfalls To Avoid After Taking Vacant Possession
The role and responsibilities of a house buyer at the survey stage and when the sale and purchase agreement is signed were discussed in our last article. This week, in the sixth of our series, we will focus on what is expected of the buyer after the SPA is signed and the handover of the vacant possession completed.
Once the sale and purchase agreement (SPA) is signed and the deposit is paid, the house buyer automatically has the right to ownership of the property before the individual ownership title is issued.
He is advised to insert an individual caveat on the main ownership to safeguard his rights and interests. This caveat can be lodged at the Land Office.
For the buyer who is taking up government or bank loans, his caveat will be handled by the respective financier.
However, if the buyer is using his savings and the Employees Provident Fund, he is advised to have the individual caveat made on the main ownership to safeguard his rights in case the project is auctioned off.
The buyer needs to ensure that the land transfer from A and Mortgage from are completed.
The ownership from must be signed in front of a lawyer except for Malay reserve land which must be signed in front of the administrator.
This is important in order to avoid any problems arising from ownership transfer in future.
In order for the buyer to avoid the 10% interest payment, the buyer is advised to:
- Settle the work progress fee to the housing developer within 14 days from the time he receives the notice, and
- Contact the lawyer to expedite the progress of transferring mortgage ownership from time to time to ensure the loan payment are made according to schedule.
To avoid from being charged interest, the buyer is advised to contact the financier, which is the bank or the governments loan division as soon as he receives the notice to settle the work progress fee from the developer.
He is advised to ensure that each work progress payment claim by the developer is accompanied by certification from the developers architect or engineer to ensure that the claim is genuine.
In case there are doubts about the claims, he can report to the Monitoring and Enforcement Division, Ministry of Housing and Local Government, Level four, Block K, Damansara Town Center, 50782 Kuala Lumpur or telephone 03-2547033 or e-mail firstname.lastname@example.org.
The house buyer has the right to visit the project to check on the state of the development but he is advised to apply for permission from the developer.
In case the housing project is running behind time from the fixed schedule, the buyer is advised to notify the ministrys monitoring and enforcement division and the local government so that the necessary action can be taken.
It is also the buyers responsibility to make all the fixed payments such as land tax, assessment fee and other property related charges.
Handover Of Vacant Possession
The handover of vacant possession is also referred to as the delivery of keys.
It is allowed only after the following conditions are met:
- The developers architect has certified that the building has been completed according to specifications and connected with water and electricity supply.
- The developer has applied and certified that Form E (Article 25 of the Uniform Building By-law 1984) has been sent to the local authority for the issuance of a Certificate of Fitness for occupancy purposes.
- The house buyer has made all the necessary payments, paid according to Clause 4 (1) schedule Three and all other payments stipulated in the SPA.
- The buyer has implemented and adhered to all the terms and conditions on his part.
After receiving the notice for vacant possession from the developer, the buyer has to take deliver of the keys within 14 day.
He should make the utmost of this opportunity to conduct an inspection of the building or house with the developer and down all the defects writing to the later.
The buyer is advised to make a copy of the defect that he has listed for future reference.
If the house buyer unable to the take possession of the keys within the required time given, the keys are considered taken.
Should any break-I occur after the 14 days the buyer will be help responsible.
The type of defects that are commonly reported are :
- Defects caused by shoddy workmanship.
- Use of inferior quality building materials.
- The building did not for low the specifications is the SPA.
- The property was not built according to plan any.
- Matters stated in SPA.
That have been approved or amended by the relevant authorities.
The buyer has a 18-month warranty period to lodge any complaints after receiving the keys.
The developer is required to rectify the defects within 30 days from the time they receive the complaint.
If the defects are not rectified within the stipulated period, the buyer must notify the developer of the cost required to rectify the defects.
He is advised to send a written notice by registered mail or to go through the developers solicitor.
If the developer fails to take any action after 14 days from the time the notice is served on the cost involved, the buyer has the right to get his money reimbursed from the developer through the 5% deduction stated in schedule Three Article 4 (1) of the SPA that is held by the developers solicitor.
The buyer has the right to claim for compensation if the developer fails to deliver the vacant possession as stated in the SPA.
The calculation is based on 10% of the house price per annum.
Total of delayed days x cost of house x 10% divided by 365 days.
For example, if the total number of days delayed is 240 days and the price of the house is RM185,000, the calculation is as follows :
240 x 185,000 x 10% divided by 365 days = RM12,164.38.
For subdivided properties, the developer is responsible to provide the facilities such as parking bays, corridor lights and a multi-purpose hall.
If the developer fails to provide such facilities within the stipulated time, he has to pay compensation to the buyer as spelt out in the SPA Article 24 (2) schedule H.
The calculation is worked out as follows:
Total number of delayed days x 20% x last purchase price x 10% divided by 365 days.
If the delay is 90 days and the house price is RM25,000, 90 x 20% x 5,000 x 10% divided by 365 days is RM24.68, the amount that the developer is required to pay the owner.
If the developer refuses to pay compensation, the buyers can seek the services of a lawyer and file the case in court.
However, if the claim is less than RM 5000, he can make a small claims by filling up form 164 at the magistrate court.
Please refer to our second series where the buyer can also lodge his complaint to the ministry.
He is advised not to rectify the defects or make any renovations to the house or building before the CF is issued.