Tay Partners

InsiderTAPS (5 March 2021)

Caveat Emptor! – The New Scope and Powers of Homebuyers’ Tribunal

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The introduction of the Tribunal for Homebuyer Claims (Tribunal) in 2002 was a much celebrated measure by the Parliament to better protect the interests of homebuyers. The Tribunal was established to simplify the process for homebuyers in seeking legal recourse against developers who may have breached certain terms of the sale and purchase agreement (SPA).

After almost 20 years since the establishment of the Tribunal, the Federal Court in a recent landmark case, Country Garden Danga Bay Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor had the opportunity to explore the scope of the Tribunal’s jurisdiction and powers. In this case, a housing developer filed an appeal to the Federal Court against the Tribunal’s decision to award RM50,000 to a purchaser. The purchaser’s main claim in the Tribunal was that he was given a wrong unit which allegedly did not correspond with the display model at the developer’s showroom.

We discuss below two key takeaways from the decision of the Federal Court.

The importance of the SPA

One of the most important decision of the Federal Court in the above case is that the Tribunal is only empowered to hear claims that are based on the express terms of the SPA.

In Malaysia, the SPA for a housing accommodation from a developer is prescribed under the statute and no homebuyer or developer is allowed to contract out from that statutory SPA. The statutory terms must be reflected in the actual SPA signed by the parties, and the developer will commonly include additional terms such as the floor plan and the features of the actual unit.

In reality, this may not seem as straightforward. Often when promoting a housing development project, the developer would rely on additional materials such as brochures, display models and show houses. Some of the displayed features may be solely for illustration or aesthetic purposes and were never meant to be part of the unit itself.

This is where the SPA comes into place. It is very important for every homebuyer to look at the SPA carefully before signing it, so as to ensure that all of the features they expect in the unit are included in the SPA itself. In the event that the accommodation units do not comply with the SPA, the homebuyers will be able to file their claim against the developers with the Tribunal.

One cannot have the cake and eat it

Say a homebuyer had purchased a housing accommodation, and after three years, the developer is finally ready to hand over vacant possession to the homebuyer. The homebuyer then inspected the unit, signed a form to confirm that they have accepted vacant possession, and proceeded to renovate the unit to suit their liking. Can the homebuyer subsequently file a claim against the developer that they have been given the wrong unit or the unit does not comply with the SPA?

This was one of the questions posed by the developer in the above case. After considering the conduct of the homebuyer, the Federal Court decided that the homebuyer had accepted the unit and therefore could no longer bring or estopped from bringing a claim against the developer for allegedly giving him a wrong unit.

This case bears an important lesson for all homebuyers and developers. Any complaints regarding the unit must be made at the earliest stage possible and homebuyers must assert their rights sooner rather than later. Before accepting vacant possession, it is crucial for homebuyers to thoroughly inspect their units and ensure that they have received everything they were promised in the SPA. If the homebuyer decides to accept vacant possession and exercises rights of ownership despite the unit being non-compliant with the SPA, the homebuyer cannot later on turn around and claim for rescission of the SPA. This is not limited to cases where homebuyers renovated the unit, but may also include other conduct such as staying in the unit, leasing the unit or gifting the unit to someone else.

Although the Tribunal was meant to provide homebuyers with a better access to justice, this does not mean that the Tribunal is free to act as it pleases or the interest of the developer is completely disregarded. The Federal Court has made it clear that the Tribunal ought to act within the limits of its jurisdiction and homebuyers ought to be vigilant in enforcing their rights against the developers.

Leonard Yeoh is a partner and Nurul Qarirah, an associate with the law firm, Tay & Partners.



Leonard Yeoh
Partner
T: +603 2050 1973
M: 012-321 6893
leonard.yeoh@taypartners.com.my

Nurul Qarirah
Associate
nurul.qarirah@taypartners.com.my