Rights of House Owners against damages by Developer Q5

Q.
A housing project was completed by the Syarikat Mewah Berhad. A few of the house purchasers intended to claim damages from Syarikat Mewah Berhad because the water tank installed inside their houses had collapsed and caused damage to their belongings.

You are to advise the purchasers on their rights.

(20 marks, 2014 Q5)

A.
There is element of tort in this case, as there is damage of belongings of house buyers. However, the water tank is a defect, claimable under defect liability. Between, the possibility to claim under Tort - for pure economic losses, is a subject of legal argument. See Singapore Court of Appeal decision in the mid 1990's here.

See Defect Liability Period here. If it is beyond the 18 months period, owners can still file the claim to Housing Tribunal. However, the claimable amount is RM25,000 or less.

The claim of defects upon collection of keys from developer is under the Sales and Purchase Agreement, in its Defect Liability Clause.

The pre-determined “Defect Liability Clause” in the sale and purchase agreement (SPA) states that the developer is required to repair and make good, at its own cost and expenses, any defects, shrinkage or other faults that become apparent within a period of 18 or 24 calendar months (whichever is applicable) after the delivery of vacant possession and which can be attributed to defective workmanship, materials or a failure to construct the property in accordance with the plan and description appended to the SPA within 30 days of having received written notice from the purchaser.

The second part of the clause states that the purchaser shall, at any time after the expiry of the 30-day notice, notify the developer of the cost of repairing and make good of the said defects by giving the developer a grace period of 14 days.

Essentially, the following is what a buyer has to do if he finds defects in his new home:

a) List all defects in writing; take pictures of them, if possible.

b) Make sure the developer receives the defects list either by registered post or by delivery by hand with acknowledgement of receipt.

If the developer is responsive, he will do rectification work 30 days from the date of receipt. The buyer should go through the list of defects with the developer to discuss the rectification work schedule. He must also be prepared to spend time or appoint someone to be around for the appointed contractors to do their work.

If the developer is unresponsive, get a detailed quotation from a reputable independent contractor for the cost of repairing and making good the defects. Give the developer a second notice and the stipulated 14-day grace period to do the rectification work. The buyer may recover the cost (any sum) of the repair from the developer’s stakeholder lawyer after giving written notification to withhold release of the stakeholder sum the 5% of the purchase price as stated in the SPA.

Appoint a building inspector, where necessary

Although the law provides a 18- or 24-month warranty (whichever is applicable) for owners to refer defects to the developers, buyers do not know what to look out for as they don’t have the expertise to suss out or foresee inconspicuous defects.

Besides the legal steps, buyers should band together. Contact neighbours who have similar difficulties in getting defects rectified. You may have more in common than you think. There is power in numbers, and you can share tasks to lighten the load. The main objective is to convince the developer that you are serious in getting the defects rectified properly.

The affected buyers can collectively lodge a complaint with the Enforcement Division of the National Housing Department, Urban Wellbeing, Housing and Local Government Ministry, with the view that it will intervene and subsequently convene a meeting with all the parties concerned. Details of the said Enforcement Division is as follows:

Pengarah,
Bahagian Penguatkuasaan,
Jabatan Perumahan Negara,
Kementerian Perumahan dan Kerajaan Tempatan,
Aras 30, No. 51, Persiaran Perdana,
Presint 4, Pusat Pentadbiran Kerajaan Persekutuan,
62100 Putrajaya.
Tel No: 603-8891 4410
email: enforcement@kpkt.gov.my