N E W S L E T T E R

VOL 7 NO 3.0 SEPTEMBER 2008

KDN NO. PP 12544/10/2008



R E A L E S T A T E

Housing Development (Control and Licensing)
(Amendment) Regulations 2007


IN THIS ARTICLE, CYNTHIA CHAN DISCUSSES THE RECENT AMENDMENTS TO THE SCHEDULE G
AND H SALE AND PURCHASE AGREEMENT AND THE INTRODUCTION OF THE SCHEDULE I AND J
SALE AND PURCHASE AGREEMENT FOR 10:90 BUILD THEN SELL CONCEPT.


The Housing Development (Control and Licensing) (Amendment) Regulations 2007 (Regulations)
came into effect on 1 December 2007
1
. The Regulations brought into effect the various changes made
to the Housing Development (Control and Licensing) Act 1966 (the Act) in April 2007. In line with
the long title of the Act, the amendments to the Regulations aim to further protect purchasers which
includes the extension of the defects liability period to twenty-four (24) months, the purchasers right
to initiate and maintain action on his own volition and the assignment of the property without prior
consent of vendor/proprietor.

The most significant amendment is the introduction of legislated sale and purchase agreements to
cater for the build-then-sell concept. Under Regulation 11(1A), it is provided that notwithstanding
paragraph (1)
2
, every contract of sale for build then sell relating to a housing accommodation
together with the subdivisional portion of land appurtenant thereto shall be in the form prescribed in
Schedule I (Schedule I Agreement), and where the contract of sale for build then sell is for a
housing accommodation in the form of a parcel of a building or land intended for subdivision into
parcels, as the case may be, it shall be in the form prescribed in Schedule J (Schedule J
Agreement).The build-then-sell is essentially a 10:90 concept whereby the purchaser pays 10% of the
purchase price upon the signing of the sale and purchase agreement and then pays the remaining
90% of the purchase price upon the issuance of the certificate of completion and compliance for the
property. It is to be noted that the clauses in the Schedule I Agreement and the Schedule J
Agreement are almost identical to the clauses in the Schedule G Agreement and the Schedule H
Agreement respectively save for the schedule of payment clause (Clause 4 and Third Schedule), and
save that the Schedule I Agreement and the Schedule J Agreement do not provide for the last 5% of
the purchase price to be held by the developers solicitors as stakeholders until the expiry of the
defects liability period.

In the build-then-sell concept the developer will have to obtain more financing from financial
institutions to finance the project up to the stage of completion. This way, the purchaser is protected
even if the developer abandons the housing development before completion.

In addition to the introduction of the Schedule I Agreement and the Schedule J Agreement, the
clauses in the Schedule G Agreement and the Schedule H Agreement are also substantively
amended. Some of the significant amendments made to the Schedule G Agreement and the
Schedule H Agreement are highlighted below.

Significant amendments to the Schedule G Agreement

Undertaking to refund from the vendor
There is a provision now for the vendor to deliver to the purchasers financier a letter of
undertaking to refund the loan sum in the event the memorandum of transfer (MOT) cannot be
registered in favour of the purchaser for any reason which is not attributable to the purchaser.

Right to initiate proceedings
With the amendment, the purchaser can now institute proceedings against the developer in his
own name with a notice in writing to the financier either before or within 14 days after the action
has been filed.

Interest on late payment
Clause 9(2) of the Schedule G Agreement sets out the circumstances
3
whereby the developer is
not entitled to charge interest on late payment of any progressive payment installments. In
addition to the present circumstances, the developer is also not entitled to charge interest on
late payment in the event a separate title has been issued on the date of the agreement and the
purchaser has obtained a loan from the financier and the developer delays or fails to execute and
deliver a valid and registrable MOT to the purchaser. It is noted that this amendment is only
applicable to the Schedule G Agreement.

Consent to assignment/subsale
Under the new Schedule G Agreement, the clause pertaining to the payment of administrative
fee of RM500.00 for the consent of the developer for assignment/subsale matters has been
deleted. The deletion is to avoid inconsistency with the changes made to the Act under which
the consent of the developer is no longer required.

Infrastructure and maintenance
At the date when a purchaser takes vacant possession of the property, every notice to the
purchaser requesting for payment of contribution to the construction of infrastructure and the
maintenance of the same from the developer shall be supported by a statement issued by the
developer which shall include a list and the description of the infrastructure, the expenditure
incurred in the maintenance, upkeep and repair of the infrastructure and the amount of such
contribution due to the developer.

Charges for maintenance of services
There is a provision now for the refund of the balance of the maintenance services charges paid
in advance by the purchaser upon the maintenance services being taken over by the relevant
authority (after deducting the amount due to the relevant authority) within 21 days after the
date of notification issued by the relevant authority.

Claims to the Tribunal of Homebuyer Claims
In order to determine whether the claim to the Tribunal is made within time, the purchaser has
to refer to Section 16N(2) of the Act which provides that the jurisdiction of the Tribunal shall be
limited to a claim that is based on a cause of action arising from a sale and purchase agreement
entered into between the purchaser and the developer which is brought by the purchaser not
later than twelve (12) months from the date of the issuance of the certificate of completion and
compliance for the housing accommodation or the common facilities of the housing
accommodation intended for subdivision, whichever is later, the expiry of the defects liability
period, and the date of termination of the sale and purchase agreement by either party and such
termination occurred before the date of issuance of the certificate of completion and compliance
for the housing accommodation or the common facilities of the housing accommodation
intended for subdivision, whichever is later.

Housing Development (Control and Licensing) (Amendment) Regulations 2007 2
Delivery of vacant possession
The delivery of vacant possession by the developer must now be supported by a certificate of
completion and compliance certifying that the property is safe and fit for occupation and
includes handing over the keys of the property to the purchaser.

Defects liability period
The defects liability period has been extended from eighteen (18) months to twenty-four (24)
months. There is also now a provision for the developers solicitor to retain the 5% stakeholder
sum until the developers solicitors receive a certificate signed by the developers architect
certifying that the defects claimed by the purchaser (by way of a written notice served on the
developer before the expiry of eight (8) months or twenty-four (24) months after the purchaser
takes vacant possession of the property) have been repaired and made good by the developer.

Assignment
Under the Act, the consent of the developer to an assignment by the purchaser is no longer
required. This amendment has now been incorporated into the Schedule G Agreement whereby
the purchaser may assign all his rights, interest and title in and to the property without the
consent of the developer by giving notice of assignment to the developer provided that the
purchase price has been fully paid up and the purchaser has duly complied with all the terms
and conditions or if purchase price is not fully paid up, the developer and financier shall have
given each other the undertaking under Clause 5(6).

Amendment to Third Schedule (item 4)
If a separate issue document of title to the property has not been issued at the time the
purchaser takes vacant possession of the property, a sum equivalent to 2.5% of the purchase
price will be released to the developers solicitor to be held by them as stakeholders and not to
be paid to the developer until a valid and registrable MOT in favour of the purchaser has been
delivered by the developer to the purchaser.

Significant amendments to the Schedule H Agreement

Generally, the amendments to the Schedule G Agreement also apply to the Schedule H Agreement. In
addition to the amendments to the Schedule G Agreement, the following amendments apply to the
Schedule H Agreement:

The definition of management corporation
The term management corporation wherever it appears is to be substituted with the words
Joint Management Body. This is in line with the amendments to the Building and Common
Property (Maintenance and Management) Act 2007 (BCPA) which came into effect in April 2007.

Title
The title of the Schedule H Agreement has been amended to read as follows, Sale and Purchase
Agreement (Building or Land Intended for Subdivision into Parcels). The amendment has taken
into consideration Section 6(1A) of the Strata Titles (Amendment) Act 2007 where any alienated
land having two or more buildings held as one lot under final title shall be capable of being
subdivided into land parcels and be issued with strata titles.

Adjustment of the Purchase Price
There will be an adjustment of the purchase price if there is a difference in area of the parcel in
excess of 2%. This is to further minimize the error as to the description of the area of the parcel by
the developer.

Payment of service charges
There is a new provision for the service charge to be paid into a Building Maintenance
Account established under the BCPA. Additionally, the time limit to pay the service charge is now
fourteen (14) days from the date of receipt of the developers written notice and the interest
chargeable by the developer on the unpaid service charge shall not be more than 10%.
Housing Development (Control and Licensing) (Amendment) Regulations 2007 3
Housing Development (Control and Licensing) (Amendment) Regulations 2007 4

Payment of sinking fund
There is a new provision for all funds accumulated in the sinking fund opened prior to the
establishment of the sinking fund under the BCPA to be transferred into the sinking fund under
the BCPA.

Payment of insurance
The time limit to pay insurance premium is now fourteen (14) days from the date of receipt of the
developers written notice and the interest chargeable by the developer on the unpaid insurance
premium shall not be more than 10%.

Completion of common facilities
There is a new provision for the developers architect to certify the date of completion of the
common facilities. Additionally, a new sub clause has been inserted to state that any cause of
action to claim liquidated damages by the purchaser under this clause shall accrue on the date
the developer completes the common facilities.

Amendment to the Third Schedule (item 4)
When the purchaser takes vacant possession of the parcel, 2.5% of the purchase price shall be
released to the developers solicitors to be held by them as stakeholders for payment to the
developer within twenty-one (21) working days after the receipt by the purchaser of the written
confirmation of the developers submission to and acceptance by the relevant authority of the
application for subdivision of the building or land.



CYNTHIA CHAN
REAL ESTATE PRACTICE GROUP

For further information on the Housing Development (Control and Licensing) (Amendment)
Regulations 2007, please contact

Sar Sau Yee
sysar@shearndelamore.com

See Guat Har
guat@shearndelamore.com



1
The Regulations have been gazetted vide gazette notification P.U (A) 395.
2
Paragraph (1) provides that every contract of sale for the sale and purchase of a housing accommodation together with the
subdivisional portion of land appurtenant thereto shall be in the form prescribed in Schedule G (Schedule G Agreement)
and where the contract of sale is for the sale and purchase of a housing accommodation in the form of a parcel of a building
or land intended for subdivision into parcels, as the case may be, it shall be in the form prescribed in Schedule H (Schedule H
Agreement).
3
The developer is not entitled to charge interest on the late payment of any installment if the delay is due to any one or more
of the following: (1) the relevant progressive claim notice from the developer is incomplete or it not supported by the relevant
architects or engineers certificate; (2) the chargee of the property, if any delays or fails to issue and deliver a redemption
statement and undertaking letter to the purchaser or the purchasers financier; and (3) where the property is encumbered and
the purchasers financier refuses to release the relevant portion of the loan equivalent to the progressive payment is
insufficient to settle the full redemption sum payable in respect of the property.