Overcome common pitfalls in buying property

Buying a property comes with fairly common problems. Avoid a nightmare by handling them correctly. Learn the best action one should take.

1. Property defects

The property is delivered with defects, in poor condition or with shoddy workmanship to the buyer by the developer.

This may include deviation from proper materials, poor quality materials, uneven surfaces, leaky plumbing, structural defects or a sinking foundation.

Cause: Often because of unscrupulous or inexperienced contractors and/or developers.

Occurrence: 13% of reported issues by home buyers.

What to do

• Submit a property defect list for the developer to make good in a timely manner. Mark defects with detachable stickers and provide additional information if necessary.

• In the event of an unsatisfactory rectification by the developer, hire a contractor and file a Home Buyer’s Tribunal claim (up to RM50,000) or take court action for costs incurred. Always buy property from developers with a good reputation for build quality.

Deadlines

• File a tribunal claim even if the Defect Liability Period (DLP) has expired within 12 months.

• File a court action as long as it is within six years from Vacant Possession (VP).

What not to do

• Thrash one’s own unit (or get someone to thrash the unit) as the defect claim will be void.

• Act like a thug threatening people, demanding monetary compensation, and showing malicious intent.

• Use spray paint to mark defects.

• File a complaint with the wrong authority/party resulting in a waste of time and effort.

• Do nothing as a “victim” as it is a long, tiring process and not expect any results.

• Doing nothing once the Defect Liability Period (DLP) is over.

2. Late delivery

The developer fails to complete the property (completion) and hand over the keys (vacant possession). The duration is calculated from the Sales & Purchase Agreement (SPA) date.

The period for handing over keys is 24 months for landed property and 36 months for subdivided property (ie condominium).

This can be extended to 48 months for residential strata property provided the units are sold with the approval of the Housing and Local Government (KPKT).

Cause: Developer unable to complete project on time due to cash flow/financial difficulties or failing to obtain Certificate of Completion and Compliance (CCC).

Occurrence: 12% of reported issues by home buyers.

What to do

• Request the developer to pay Liquidated and Ascertained Damages (LAD) calculated at 10% per annum of purchase price based on delayed period.

• File a claim with the Home buyers Tribunal.

• Report to Real Estate and Housing Developer Association Malaysia (REHDA) if developer member refuses to pay LAD.

What not to do

• Be ignorant of LAD if development hand-over is delayed.

• Sign away or waive the right to LAD or to accept a reduced LAD payment.

• Waive the LAD if the project completion has been extended to 48 months if the buyer’s SPA states completion in 36 months.

3. Abandoned development

Developer abandons housing project leaving home buyers in the lurch having to still service the housing loan instalment, being saddled with the property loan and yet having no place to stay/rent out.

Cause: Developer abandons project

Occurrence: 19% of reported issues by home buyers.

What to do

• Perform due diligence on developer including blacklist status, track record, and whether development is subject to Housing Development Act (HDA).

• Terminate the SPA if construction is delayed/suspended/ceased for a continuous period of 6 months by getting Housing Controller certification and written consent from end financier (i.e. bank).

• Get back a full 100% refund for anything paid (without interest) within 30 days else the developer can be fined.

• Hope that the abandoned project is selected for government intervention (eg Selangor’s Abandoned Projects Revival Fund aka Tepat) especially if the project was near completion, or for the project to be resumed by a private developer (eg Penang’s Queensbay Mall).

What not to do

• Blame the buyer for buying a property that has become abandoned.

• Avoid buying property in Selangor because it has the highest rate of abandoned projects.

This article first appeared in https://mypf.my

MyPF is on a mission to help simplify and grow Malaysians’ personal finances through financial education.