KUALA LUMPUR: Tang and Ng (not their real names) entered into separate sale and purchase agreements last month, paying 10% as deposit to buy a house each in Petaling Jaya and Puchong.
The properties were priced at RM1.8 million and RM900,000. Tang paid RM180,000 while Ng paid RM90,000.
However, both instructed their lawyer this week to discontinue the agreements due to uncertainty following the Covid-19 outbreak.
R Kengadharan says this may be because they want to use the cash to buy other properties at cheaper prices.
He said Tang was to have taken a bank loan amounting to 40% of the house price to pay for the house while Ng was to have paid cash to acquire the property.
“The terms and conditions of the property sales allow the vendors (sellers) to forfeit the deposit but I am trying to get at least 50% of the amount back through negotiation,” he told FMT.
Kengadharan said there were several other house buyers who were prepared to forego their deposits as they could use the money to buy choice properties at a lower price during the crisis.
“I know of people who are cash-rich who will buy such properties and sell them at premium value to recoup their losses from forfeiting the deposit amounts,” he added.
With prices going down, Kengadharan believes those with cash will enter the property market so as to make money when the economy improves later.
Property valuer Huan Cheng Kee said it was common for property prices to take a beating following any economic or financial crisis, and for those with cash to buy properties.
He said not only would demand for residential homes be affected, commercial and retail properties too would suffer the impact of the pandemic as some people would likely lose their jobs when employers wind up their operations or cut costs.
“Our property market had already been weak since January and Covid-19 has made it worse.
“The question is, how long and how deep will the problem be,” said Huan who has been in the industry for about 40 years.
Lawyer T Gunaseelan said he expected many disputes over breach of agreements in the purchase of properties to end in court in the months to come.
“Sellers will go for specific performance in compelling buyers to honour the agreements to acquire properties if there is no forfeiture clause,” he said.
He said parties might also use a “force majeure” clause to keep from performing their side of the bargain unless the agreements contain an exemption clause in the form of a suspension, waiver or termination of the contract.
Force majeure means that a party to a contract is prevented from fulfilling his or her obligations due to unforeseeable circumstances.
“It will also be interesting to observe the attitude of the courts in settling commercial disputes,” he added.