Abandoned Housing Projects in Malaysia
Q. Are abandoned housing projects a big concern in Malaysia?
A. Yes, and as a matter of fact, the concern is a global one.
Q. How bad is the situation in Malaysia?
A. The Deputy Minister of the Housing and Local Government Ministry, Datuk Aiman Atirah Sabu in the Dewan Rakyat on March 25, 2024 said his ministry has recorded 117 abandoned projects with a total of 30,840 houses as at January 31, with 81 projects involving units priced RM300,000 and below. He further added that these 81 projects involve 23,031 houses and 12,565 buyers. Datuk Aiman further said main factors behind this was the Covid-19 epidemic which affected economic growth and the financial position of buyers as well as high-priced houses but low demand and other factors include projects in unstrategic areas without good facilities and buyers being denied bank loans.
Q. What can a purchaser of a residential home do if a housing project is abandoned in Malaysia?
A. If this happens, the purchaser should consult a lawyer, who will then take assist in terminating the sale and purchase agreement. This can be done if:
a) the developer refuses to carry out/delays/suspends/ceases work for a continuous period of six months or more after the execution of the sale and purchase agreement;
(b) the purchaser has obtained the written consent from the end financier; and
(c) the Controller has certified that the licensed housing developer has refused to carry out/delays/suspends/ceases work for a continuous period of six months or more after the execution of the sale and purchase agreement.
If a purchaser terminates his sale and purchase agreement for these reasons, the developer must refund the purchaser in full within 30 days and free of any interest!
Q. What can a purchaser of a commercial property do if that project is commercial in nature?
A. Lawyers will assist in applying for specific performance or rescission of the sale and purchase agreement.
Q. Are there criminal penalties for abandoning a housing project?
A. A developer can be prosecuted and charged for abandoning their project. Basically, housing developers who abandon their projects will be fined anywhere between RM250,000 to RM500,000, or face imprisonment for up to three years, or both!
Q. Is there a checklist I can refer to which will help me see what must be done?
A. Checklist when buying a property from a developer to avoid the risk of buying abandoned projects.
1. Track the developer’s record
Google the developer, find its other projects, read what its clients say on forums. Make sure the developer has a good track record. Further, check with the Ministry of Housing and Local Government as to whether the developer is blacklisted. The most reliable platform for this purpose is the Jabatan Perumahan Negara Platform on the Ministry of Housing and Local Government’s (KPKT) website.
Generally, blacklisted developers are not allowed to operate as their license would have been revoked. However, there are many blacklisted developers out there operating without a license and it is an offence under the Housing Development Act 1966. In such cases, the purchasers who have purchased properties from a blacklisted and unlicensed Developer can opt to revoke their SPA or lodge a complaint to the Housing Claims Tribunal.
2. Opt for completed property than the ones under construction
The build then sell house delivery system is a system where a purchaser may opt to pay a down-payment of 10% and pay nothing until the full completion of the project. However, the downside of this system is that the purchaser is confined to limited unit/ choices to purchase as the purchaser only buys at the end stage.
The build then sell option is still unpopular in Malaysia and is not available for all housing projects.
3. Conduct a check on the land title
If the purchaser has details of the land where a potential development would be built (title number, title type, mukim/pekan/bandar, district, and state), he can conduct a land search. A land search can reveal some details such as the landowner, type of title, status of title (freehold or leasehold), current registered owners, restrictions in interest and current encumbrances.
4. Review your legal documents carefully
The crucial document a purchaser would have to sign when buying a property is the sale and purchase agreement. It is important for the purchaser to read and understand the clauses stipulated in the sale and purchase agreement. The safest way would be to appoint a lawyer who can help protect the purchaser’s interest.
Sale and purchase agreements are statutory agreements regulated under the Housing Development Regulations 1989 and the agreement protects the purchaser by ensuring the developer/seller cannot change the terms and conditions to their benefit. Any amendment to the sale and purchase agreement (for example, for an extension of time to deliver vacant possession) can only be done with the Minister of of Housing and Local Government’s approval. However, it is always advisable for purchaser to read the terms of the sale and purchase agreement with a fine-tooth comb to ensure the developer does not deceive the purchaser.
If you have any questions or concerns about how to initiate the process and protect your rights as homeowners, please do not hesitate to contact our lawyers at Low & Partners.