The original article was published in focusmalaysia.my by Wong Renn Xin and Datuk Chang Kim Loong.
Go to the link here to read from the original post.
THE collection of booking fees by developers is a common practice in Malaysia during property transaction, but many are unaware that it is actually prohibited under the Housing Development (Control and Licensing) Regulations 1989 (HDR). The HDR states:
HDR 11(2). “No person including parties acting as stakeholders shall collect any payment by whatever name called except as prescribed by the contract of sale”
This article is penned as a follow up to our earlier one in regards to the Federal Court decision on Jan 19, 2021 pertaining to Liquidated Ascertained Damages (LAD) to be calculated from collection of “booking fees”. Readers have written to us seeking better understanding of the landmark case as they are in the same dilemma and feel “short-changed” by their developers.
The Federal Court, in the case of PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Another & 6 Other Appeals [2021] 2 CLJ 441 (PJD Case) has clarified the legal position on an important point of law: – Q: Whether time should start to run from date of booking fee or date of the sale and purchase agreement for purposes of calculating late delivery?
Background
- In PJD Case, the Purchaser paid RM10,000 to their developer on Jan 16, 2013 to secure a unit in a housing development known as You Vista but the sale and purchase agreement was only signed on March 21, 2013.
- The Purchaser claimed there was a delay in the delivery of vacant possession and completion of the common facilities but the Developer resisted the claim on the following grounds: – time should start to run from the date of the SPA and not from the date when the booking fee was paid; and the common facilities were completed when the architects certified its completion and not on the date when Certificate of Practical Completion (CPC) was issued to the Purchaser.
- On June 5, 2017 the Housing Tribunal made an Award in favour of the Purchaser and held that time should start to run from the date when “booking fee” was paid and the common facilities were completed on the date when the CCC was issued to the Purchaser as the common facilities must be completed and ready to be delivered to the Purchaser at the time of delivery of vacant possession.
- The developer filed an application for Judicial Review in the High Court to quash the Tribunal’s Award. On Dec 12, 2017, the learned High Court Judge dismissed the developer’s application for Judicial Review.
- Dissatisfied with the said decision, the developer appealed to the Court of Appeal and on April 2, 2019, the Court of Appeal dismissed the developer’s appeal and affirmed the decision of the High Court. The developer, thereafter filed an appeal to the Federal Court.
HDA is a social legislation
In arriving at its landmark decision, the Federal Court applied the concept of “social legislation” when interpreting the Housing Development (Control and Licensing) Act 1966 (HDA 1966). The Chief Justice of Malaysia, Tun Tengku Maimun Tuan Mat in her judgment said:-
“In disputes between home buyers and housing developers, its significance lies in the approach taken by the Courts to tip the scales of justice in favour of the home buyers given the disparity in bargaining power between them and the housing developers.”
“A social legislation is a legal term for a specific set of laws passed by the Legislature for the purpose of regulating the relationship between a weaker class of persons and a stronger class of persons. Given that one side always has the upper hand against the other due to the inequality of bargaining power, the State is compelled to intervene to balance the scales of justice by providing certain statutory safeguards for that weaker class.”
Down memory lane vis-à-vis housing legislation
Let us take you through history on the evolution of the housing laws. It was during the tabling of the Housing Development (Control and Licensing) Bill in Parliament on March 25, 1966, the then Local Government and Housing Minister, the late Tan Sri Khaw Kai Boh, stated as follows:-
“Mr Speaker, Sir, as you are well aware, there have been repeated instances, where innocent members of the public have fallen victims of rapacious and unscrupulous persons, who pose as housing developers and obtain substantial deposits as booking fees for houses, which they not only do not intend to build but also are in no position to do so. I also have personally received a continuous stream of letters from several persons concerned that they have paid deposits for houses in housing scheme and found to their dismay that no houses were being built and that they could not recover their deposits.”
The Bill was passed, and it now known as the HDA 1966. Soon after the HDA 1966 was passed, the Minister prescribed the Housing Development (Control and Licensing) Rules 1970 (1970 Rules) which at that time allowed the developers to collect “booking fees” from purchasers provided that the amount of such fees did not exceed the statutory range of 2.5% of the purchase price. This has resulted in many problems faced by house buyers and the Minister sees fit to change the law on the collection of “booking fees”.
In 1982, the Housing Developers (Control and Licensing) Regulations 1982 (HDA 1982) was introduced and it repealed the 1970 Rules. The reason for the change can be seen in the Parliament Hansard and it reads as follows:-
“Kementerian saya sedar atas masalah-masalah yang timbul daripada kutipan wang tempahan perumahan seperti yang berlaku dalam kes-kes ini dan cadangan-cadangan sedang ditimbangkan oleh Kementerian saya untuk memperketatkan lagi undang-undang yang ada sekarang bagi mengurangkan masalah-masalah yang timbul.”
“Di antara lain, Kementerian saya akan mempertimbangkan kemungkinan di mana pihak pemaju perumahan hanya akan dibenarkan mengutip wang deposit 10% dan menandatangani perjanjian jual beli apabila mereka menjalankan projek perumahan dan tidak dibenarkan mengutip wang tempahan”.
(My ministry is aware of the problems arising from “booking fee” and we are considering our options to tighten laws to prevent problems. Among others. We are considering to allow developers to collect 10% deposit and sign S&P when the housing project starts, without collecting “booking fees”)
The statement strongly manifests the intention of Parliament to completely eradicate the practice of collecting “booking fees” by developers.
HDR 1982 imposes a strict prohibition and it was and still a criminal offence if any housing developer acted in breach of the said regulation.
In 1989, HDR 1982 was repealed and the new set of regulations: HDR 1989 came into effect. With HDR 1989, the law against the collection of “booking fees” remain unchanged. It is therefore clear that Parliament no longer saw it fit for housing developers to collect “booking fees” before signing of S&P. This has put to rest any notion that the collection of “booking fees” is still permissible.
In 2015, an amendment was made to HDR 1989 (P.U.(A) 106/2015) (2015 Amendment). There were too many cases where the developers devised several “schemes” with vested interest to circumvent the provisions of the law.
It was therefore necessary to introduce the amendment ie HDR 11(2) stated in our synopsis above, to further protect the interests of house buyers and prohibit all parties including stakeholders from collecting the “booking fees”. HDR 13(1) also increased the penalties for offenders to a fine not exceeding RM50,000 or to a term of imprisonment not exceeding five years or to both. – Aug 29, 2021.
This article is jointly written by Wong Renn Xin, one of the legal advisers of the National House Buyers Association (HBA) and Datuk Chang Kim Loong, the honorary secretary-general of HBA.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.