Be forewarned: Do not sign your rights away

“The developer says I must sign the letter to collect the keys.”

How often do we hear that from house buyers? Too often. How often do house buyers know what to do when faced with such dilemma when taking vacant possession? Not often enough. Do you know the entire content of the letter that you are asked to sign? Not really. Are the content too confusing and legalistic? Ehh Conclusion: Guess there is too much pride to admit that they are ignorant. The worst affected ones are the nave and unwary first-time house buyers.

When completion of a house is delayed, the developer must pay compensation or liquidated damages, commonly referred to as LAD (liquidated ascertained damages) to the house buyer. This LAD is calculated at 10% per annum on the purchase price for the period of delay in handing over the house.

Developers (unscrupulous ones) are known to have resorted to various ways and means to avoid paying LAD and these include misleading house buyers into signing waiver letters before handing over the keys to the house buyers. Some even resort to refusing to hand over the house keys unless the house buyers sign such waiver letters. What are house buyers to do?

First of all, house buyers must know their rights, benefits and entitlement. Secondly, they must not sign their rights away.

The developer must hand over the keys to the house buyers when the house is completed and ready for delivery of vacant possession. Buyers will be asked to sign a letter when collecting their keys. What house buyers must know is that this letter for collection of keys should contain nothing more than an acknowledgement by the buyer that he has collected the keys and a confirmation as to how many sets of keys are given. This letter must not contain any terms or conditions that the buyer waives LAD or other rights, benefits and entitlement under the sale and purchase agreement (SPA) or that the buyer will not make any claim whatsoever against the developer.

HD Act and its governing regulations

Under the Housing Development (Control and Licensing) Regulations 1989 (HDR) [which are regulations made under the Housing Development (Control and Licensing) Act 1966 (HDA)], the sale and purchase agreement (SPA) for any housing accommodation sold by a housing developer must be in the format prescribed under the HDR. This SPA, unlike any other contract of sale, contains provisions which cannot be changed at all unless such changes have been sanctioned by the Controller of Housing at the Housing and Local Government Ministry (MOH). In other words, this SPA is a statutory contract and all the provisions in this SPA are statutory requirements which must be strictly complied with.

One of the provisions of the SPA gives the house buyer a right to be paid LAD immediately by the developer in the event of delay in the completion of the housing accommodation. It is found in Clause 22(2) of Schedule G and the corresponding Clause 25(2) of Schedule H - Sale & Purchase Agreement.

Can this statutory right be waived by the house buyer? According to the Federal Court, the answer lies in the overall purpose of the legislations and whether this purpose would be defeated by permitting waiver and contracting out.

There is no shortage of cases whereby the Courts of Law have decided that the housing legislations are a social legislation, the main purpose of which is to protect the interest of house buyers. And, according to the Federal Court, the protection given to house buyers under the HDA and HDR is not just a private right but a matter of public interest. Such court decisions have even received affirmation and endorsement by Parliament in 2007 when it amended the long title to the HDA to read as “An Act to provide for ... the protection of the interest of purchasers... ”

If statutory rights given to house buyers could be waived by them individually, surely the good and commendable intention of parliament to provide the much-needed protection for house buyers (and indeed the whole purpose of the housing legislations) would be defeated and eroded.

The conclusion is therefore clear and simple. Waiver letters are not worth the paper they are written on. They cannot be held against the house buyers and must be declared null and void. Developers must be made to stop trying to wriggle their way out of paying LAD. They must accept that the only way they can escape liability to pay LAD is for them to secure a certificate from the Controller of Housing extending the delivery date.

Word of caution

House buyers are strongly cautioned not to sign waiver letters to avoid possible undesired delay(s) or outcome in their claims and unnecessary legal battles with unscrupulous developers who will raise whatever issues possible to avoid or simply delay the legitimate claims from the house buyers.

“But what can I do if the letter contains a waiver? I don't have a choice. I want my keys and the developer says I must sign then only can give me the keys.”

Sign “Under Protest” is one way. The house buyer can write a note on the letter that he does not agree to waive LAD, or that he does not agree to waive his rights, or that it is “Without Prejudice” to his/ her rights under the SPA. Alternatively, he can delete the offending words or sentences.

If the developer refuses to give the keys unless the house buyer signs without adding or deleting anything from the letter, the house buyer are constrained to sign and collect the keys but should immediately after that write to the developer to state that he was not given a choice but was “arm-twisted” and that he does not agree to waive LAD or other rights. A complaint should be immediately lodged with the Enforcement Division of the Housing Ministry (www.kpkt.gov.my ) and a claim can be filed at the Housing Tribunal, both of which should be done expeditiously.

Tribunal for Home Buyer Claims: www.kpkt.gov.my Portal TTPR)

The Tribunal for Home Buyer Claims, commonly known as the Housing Tribunal, is empowered to deal with house buyers' claims against developers and can give awards up to RM50,000. Its awards can be enforced against developers just like a judgment from a Court of Law. In addition, non-compliance of its awards is an offence and the defiant developer can be prosecuted.

Even though its head office is in Putrajaya, the Housing Tribunal has branches in Johor Baru, Seberang Prai as well as Kuala Terengganu. It conducts court hearings, not just in Putrajaya and its branches, but also many other localities for the convenience of house buyers. The filing fee is RM10 and no lawyers are required. It has been set up for the benefit of house buyers. It is cheap, fast and easy, so make use of it.

Even though I take the view that a waiver of rights and benefits under the SPA by any house buyer is void and cannot be enforced, house buyers are strongly advised to avoid signing any such waiver letter to avoid undesired outcome to their claims.

House buyers are cautioned to exercise prudence when dealing with such shrewd and unscrupulous housing developers who have no principles. Avoid buying property from those developers who have such unprincipled track record.

Chang Kim Loong is the honorary secretary-general of the National House Buyers Association (www.hba.org.my), a non-profit, non-governmental organisation manned by volunteers. He is also a councillor at the Municipal Council of Subang Jaya. - By CHANG KIM LOONG (The Star)