WEEK 4-BUYING PORPERTIES FROM NON-DEVELOPER.pptx

Lecture about conveyancing law

1. BUYING FROM ‘NON-HOUSING DEVELOPER’ Chapter 4 Conveyancing Practice and Procedure in West Malaysia Lainah Yow Oi Lin

2. BUYING COMMERCIAL PROPERTY SHOP-OFFICE OFFICE LOT SOVO SOFO FACTORY WAREHOUSE SHOPPING MALL

3. SMALL OFFICE HOME OFFICE SMALL OFFICE VIRTUAL OFFICE

4. Residential v Commercial Category of land Building (Residential) Building ( Commercial) Building ( Commercial) Type Flat/Apartment/Condominium Serviced Apartment/SOHO SOVO/SOFO/SOLO Use of Building For dwelling only Serviced Apartment is For dwelling only Soho can be used for dwelling/commercial purpose Development may comprise commercial components such as retails units, offices and hotel SOVO/SOFO/SOLO not designated for dwelling Development may comprise commercial components such as retails units, offices and hotel Note : Approved business only Utility rates, taxes and fees Assessment fees and utility charges are at domestic rates Entitled to once in a lifetime RPGT exemption Assessment fees and utility charges are at the commercial rates (higher than the domestic rate) Convert the electricity tariff to residential rate (subject to approval) Entitled to once in a lifetime RPGT exemption Assessment fees and utility charges are at the commercial rates (higher than the domestic rate) Not entitled to the Once in a lifetime RPGT exemption Legal Protection &SPA Under the jurisdiction of HDA Use the standard SPA regulated under HDA Homebuyer can bring disputes to the Tribunal for Homebuyer Claims Claim for defective workmanship from the Developer during the 24 months of defect liability period Under the jurisdiction of HDA (depends on state guidelines) Use the standard SPA regulated under HDA Homebuyer can bring disputes in the Tribunal for Homebuyer Claims Claim for defective workmanship from the Developer during the 24 months of defect liability period Do not come Under the jurisdiction of HDA. No statutory SPA-based on agreement between parties Can not bring disputes to the Tribunal for Homebuyer Claims Can bring disputes to the Strata Management Tribunal Dispute will be settled in the courts or other mediums agreed by parties Density Lower density Higher density Higher density

5. There are however some charges that differ from purchasing residential properties, as detailed below: Utility Bills : Utility bills charges are higher in commercial developments as compared to residential homes. For example, the electricity bills for commercial developments are usually 30% higher than for residential developments. The rates for electricity can be viewed on the Tenaga Nasional website. Assessment Fees : Charged twice per year, the assessment fees for commercial developments are higher than that of residential developments at approximately 2.5 times the typical commercial rates. Quit Rent : Charged once per year is the Quit Rent of a property. These fees are also generally 2.5 times higher than that of Residential rates. Internet Rates : Service providers also usually charge commercial developments higher rates for their services. For example, TMNet charges almost double the usual rates to commercial properties as compared to residential properties. While the minimum package for residential properties are RM168 per month, the minimum package for commercial developments are RM295 per month as of June 2017. Astro Packages : Even cable TV has commercial rates. Astro charges almost double the residential rates for commercial developments.

6. SURE COMMERCE SDN. BHD V SOON CHIN CHYE & ANOR [2022] 1LNS 660 The defendant was the developer of Jazz Hotel and Commercial suites known as the Jazz Suites. The plaintiffs were the purchasers of Suites. The Plaintiffs brought the action claiming for liquidated ascertained damages for late delivery of vacant possession and common facilities. The main issues in this case is whether the HDA was applicable and the determination of date of the delivery of vacant possession. The defendant claimed that the suites is not a housing accommodation because the Approved Planning Permission and Building Plans described the development as commercial development. The Deed of mutual covenant also described the development as commercial suite and commercial space. The assessment tax, water rate and sewerage are chargeable according to commercial rates. The type of the loan offered (housing loan) can not be a determinative factor whether the development was residential or commercial.

7. Regulates by law of contract Subject to the terms and conditions as agreed by the parties

8. POSSIBLE IMPLICATIONS FROM THE ABSENCE OF A SEPECIFIC STATUTES GOVERNING COMMERCIAL PROPERTY Limited government power to monitor and control the supply of commercial properties in the market Limited government power to ensure that only financially sound developer in the market Limited government power to control conduct of the developers in dealing with the commercial property purchasers There is no specific statutory protection to purchasers of commercial property

9. Unfair terms contained in sale and purchase agreement Hong Leong Bank Bhd v Tan Siew Nam & Anor [2014] 5 MLJ 34 The Respondents entered into a sale and purchase agreement ("the Agreement") to purchase a shop lot ("the lot") from a Developer. The Respondents obtained a loan from the Appellant to partially finance their purchase of the lot, and signed a loan agreement cum deed of assignment ("LACA") with the Appellant. The Respondents were made to understand that the master title to the land on which the lot erected ("the land") had not yet been issued. The Agreement contained a clause that permitted the Developer to charge the master title of the property as a security for a loan. Unknown to the Respondents, the master title had been issued and the Developer had charged the same to a Bank ("PBB") as security for a loan. Subsequently, the Developer defaulted in servicing the loan. As a result, PBB obtained an order for sale of the land. The Appellant sought to intervene in the foreclosure proceedings at the High Court to obtain an order excluding the property from the order for sale. The High Court ordered the liquidators of the Developer to sell the entire development scheme to new purchasers and use the proceeds therefrom to pay off the third party's debt and secure the release of the Respondents' property. Meanwhile, the Appellant terminated the LACA with the Respondents and sued them in the High Court for all monies due. The Respondents counterclaimed. The High Court found in favour of the Respondents and allowed the counterclaim, holding that the LACA had been frustrated and void in light of the order for sale obtained by PBB. This order for sale, in the Court's view, had caused the loss of the property as security and made it impossible for the Appellant to reassign the property to the Respondents. On appeal, the Court of Appeal held that neither the Agreement nor the LACA was frustrated. By virtue of clause 5.34 of the Agreement, the Respondents consented to the Developer charging the master title in favour of PBB. If the Developer failed to exclude the lot from the charge and was unable to transfer the same to the Respondents free of encumbrances, the Respondents had a claim against the Developer for breach of contract.

10. Claim for Defect Liability Kris Heavy Engineering & Construction Sdn Bhd v Mah Sing Properties Sdn Bhd [2011] MLJU 1448 The Purchaser ("the Plaintiff") purchased two shop lots from the Defendant. The Plaintiff then lodged a series of complaints with the Defendant regarding defects in the construction of the property . Some of these complaints were lodged after the defect liability period had expired, which according to the Sale and Purchase Agreement was 6 months from the date of delivery of vacant possession. The Plaintiff then initiated an action to rescind the Agreement. The Learned Judge held, inter alia , that while the Agreement could not be rescinded, the Defendant was liable for the defects and ordered that rectification works be undertaken by the Defendant.

11. Misrepresentation in advertisements to induce the purchaser in entering into the sale and purchase agreement Kuthubul Zaman @ Kuthubul Jaman bin S.N.S Bukhari and Anor vs TJB Development Sdn Bhd and Anor [2009] MLJU 1586 In this case, the parties had entered into a Sale and Purchase Agreement ("the Agreement") for two office units ("the Units"). In entering into the Agreement, the Appellants relied on the brochure issued by the First Defendant which showed that the Units would be served by two access roads when completed. In addition, the First Respondent made oral representations to the Appellant that both the access roads would be constructed and completed by the First Respondent. When the Appellants took possession of the Unit, it was found that there was only one access road servicing the property. The Appellants initiated an action in the Sessions Court suing the Respondent for negligent misrepresentation. The Sessions Court gave judgment for the Appellants for breach of contract rather than negligent misrepresentation. On appeal, the High Court reversed the decision as it found that the Learned Sessions Court Judge decided on an unpleaded issue. Aggrieved, the Appellants appealed to the Court of Appeal. The Court of Appeal allowed the appeal and ordered the developer to pay RM201,000.00 being the difference in the market price of the Units resulting from the absence of the other connecting road to the property.

12. Imposition of extra condition in the subsale apart from the existing terms stipulated in the principal sale and purchase agreement Lee Ming Chong Sdn Bhd v Prudential Properties Sdn . Bhd [2012] 8 MLJ 1 Plaintiff purchased from defendant, which is the developer, an office lot in  Imbi Plaza under a sale and purchase agreement in 1992. The plaintiff had paid the full purchase price of RM434,720 to defendant. In February 2001, plaintiff intended and sold the property to a sub-purchaser for RM700,000. The sub-purchaser had paid to plaintiff the deposit of RM70,000.   However, the strata title had yet been issued by the defendant. Since the title had not been issued, plaintiff then sought defendant’s consent to execute the sub-sale of the property. However, defendant imposed four additional conditions instead of only three, on plaintiff in the sub-sale as stipulated in Section 4.09 of the principal sale and purchase agreement. The defendant also imposed other conditions before consenting to the sub-sale including the payment of the arrears of the service charge.   As the defendant's consent was not obtained within the requisite period in the sale and purchase agreement, the said sub-purchaser had terminated the agreement between him and the plaintiff in June 2001.  Plaintiff then sued defendant for unreasonably withholding his consent to the sub-sale, causing plaintiff loss of profit. . 

13. Lee Ming Chong Sdn Bhd v Prudential Properties Sdn . Bhd [2012] 8 MLJ 1 ISSUE: i ) whether the defendant or developer has a right to impose the condition of the payment of arrears of service charge before consenting to the sub-sale by the plaintiff or purchaser;  (ii) whether the imposition of condition above was reasonable in the circumstances of the case; and   (iii) whether the loss suffered was the difference between the current purchase price in the sub sale and the original purchase price.  HELD: The developer did not spell clearly the conditions in the principle SPA. Thus any ambiguity must be resolved in favour of the weaker party not having the power to negotiate the terms of a standard form principal SPA. Had the developer applied for strata titles timeously, the purchaser would not have this problem since the principal SPA was signed in 1992.

14. CHRISTOPHER WEN JINN, HO V BERJAYA TIMES SQUARE SDN. BHD [2011]1 LNS 754 The Applicant is the registered owner of a parcel of commercial premises located on the 3 rd floor of Berjaya Times Square. The SPA allows the Appellant to sell his parcel but with the consent from developer and subject to an administrative fee up to 1% of the purchase price. The Appellant claimed that the parcel is governed by the HDA thus consent from the developer is not required. Held: The Appellant is not the occupant of residential premises at all. He is contractually prevented from using the premises for residential purposes. It cannot be the statutory interpretation to include commercial premises within the scope of protection. The Appellant is not within the category of ‘weak party’ to a contract. No element of victimization , oppression, harshness, unconscionable conduct or even unfairness in the imposition of the administrative charge under Clause 28.

15. KAB Corporation Sdn . Bhd & Anor v Master Platform Sdn . Bhd. [2019] 1 LNS 975 The appellant (KAB) is the owner of an office unit in a commercial building situated on the Respondent’s land The Respondent had management rights over the building. Strata titles for the units had not been issued. In 2005, the company of KAB applied for an additional loan of RM6.5 million from a bank, as security of a third-party assignment ( Impiana ). However, as condition for its assignment, the Respondent required payment of RM65,000.00 as their administrative fee equivalent to 1% of such facility amount.  The appellant, KAB Corporation/ Impiana  took legal action against Master Platform and contended that the administrative fee imposed was unreasonable and excessive while the latter claimed that such fee imposed in pursuant to its contractual right under clause 16.07 of  Menara   Promet  House Rules.   The sessions court declared that the administrative fee charged by the respondent was illegal and ordered it to be returned with interest. The respondent was also ordered to pay RM25,000 in exemplary damages. On the respondent’s appeal, the High Court set aside the sessions court’s orders. This is the appeal by the appellant against the decision of the High Court. 

16. KAB Corporation Sdn . Bhd & Anor v Master Platform Sdn . Bhd. [2019] 1 LNS 975 ISSUE: Whether the respondent has a right to impose the condition of the payment of the administrative fee before consenting to the third-party assignment by the appellant.  Whether the imposition of condition of the administrative fee of 1% was reasonable in the circumstances per the case.  The court view that the respondent had exercised its discretion unreasonably when it imposed the flat 1 % rate for the administrative fee. The flat fee rate of 1% imposed regardless of the value of the property or loan facility was arbitrary, unreasonable and unfair. The necessity of applying the Respondent’s consent was only administrative expediency since the appellant had paid the full purchase price and had no continuing obligations under the SPA. It is the duty of the Respondent to maintain the records until the strata title is issued. It was decided that a nominal administrative fee of RM500.00 is fair and reasonable.

17. S ection 22(d ) HDA The absence of statutory provision regulating the conduct of developer allows the developer to impose extra conditions on the purchaser at sub-sale transaction such as requirements to obtain developers consent subject to payment of certain amount of administrative fees. The requirement to obtain developers consent may also delay the completion period of the sales and purchase transaction. For the sales of residential property such requirements are no longer applicable through section 22(d) which removes the requirement to obtain consent from the developer to sale assignment in a sub-sale property without individual property only notice of the assignment is required to be given to the housing developer at or after the completion of the sales and purchase between the vendor assignor and the new purchaser of the housing accommodation. It is an offence under the HDA to impose conditions to obtain consent from the developer.

18. SECTION 22 D(ASSIGNMENT) Effects of Section 22D : Only notice of assignment is required to be given to the Housing Developer at or after the completion of the sale and purchase between the Vendor assignor and the new purchaser Consent of the Developer is not required The notice shall be accompanied by the documents and payments set out in s 22(2) (a), (b) and (c) Administrative fee for the issuance of confirmation shall not exceed RM50 s. 22(D) (4) The Assignment will be effective from the date of the receipt of notice by the housing developer Any developer who requires consent/impose any condition/ fail or refuse to provide any confirmation shall be guilty of an offence (Fine not less than RM50,000 and not more than RM100,000 or imprisonment 3 years not exceeding or both)

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